How to Invest 1000 Dollars (11 Best Ways in 2020)
So, you'd like to learn how to invest 1000 dollars. Well, a $1000 investment is often the start of a long and lucrative investing journey for many people.
I bet you're thinking what can I invest 1000 dollars in? And is it worth only investing 1000 dollars? But what if you're new to investing? Where do you start?
Well, in this post I'm going to show you the 11 best ways to invest 1000 dollars in 2020!
1. Invest in Stock Market Index Funds
Stock market index funds are a great way to invest your first 1000 dollars. They will provide you with consistent returns and a regular source of income, in the form of dividends.
Even investors like Warren Buffett praise index funds. Buffett once said: “A low-cost index fund is the most sensible equity investment for the great majority of investors”.
Stock market index funds purchase all the stocks that make up an index. Some well-known stock market indexes include the S&P 500 and the Dow Jones.
Index funds give you exposure to the stock market through a diversified portfolio of well-established companies.
The stock market generally provides a 10% return annually—and has for the past one-hundred years. This means your money will double roughly once every seven years on average.
This might not sound like a lot; however, your investments will grow exponentially over time—by harnessing the power of compound interest.
Investing 1000 dollars in stock market index funds is a great way to start growing your money today. This is probably the best way to invest 1000 dollars if you like the stock market.
A great way to invest in ETFs is through the Webull app. You can view our full review of Webull here.
2. Invest With a Robo-Advisor like Acorns
If you don't know much about the stock market but still want to invest money you might consider using a Robo-advisor platform.
Robo-advisors are investment companies that create software designed to automatically manage your portfolio based on certain criteria. For example, upon signing up they might ask you what your investment goals are and what your risk tolerance is.
Investing 1000 dollars with a Robo-advisor is easy, and they are popular because they have low minimums and automated portfolios.
My favorite Robo-advisor for Americans is Acorns, which you can learn more about below.
Before Investing with Acorns
But, remember that they charge fees of $1-3$ a month, which will add up if you only invest money with round-ups. You should only use Acorns if you plan to make lump sump investments on top of your round-ups.
If you'd rather invest a lump sump and forget it, I'd go with Webull instead. You can get two free stocks when you invest $100 or more with Webull here.
3. Invest In a Real Estate Investment Trust (REIT)
You don't need hundreds of thousands of dollars to start investing in real estate. In fact, you can start investing in real estate for less than $1,000!
Investing 1000 dollars in a REIT is a great way to make passive income while investing in property.
You can purchase shares in a REIT mutual fund or an Exchange-Traded Fund (ETF). Over 80 million Americans or roughly 40% of America's households own REITs.
REIT shares are priced by the market throughout the trading day, like all companies that are publicly traded.
What Drives REIT Growth?
REITs will typically increase in price when their earnings increase. Growth in REIT earnings is typically generated by higher revenues, lower costs, and opportunities to purchase assets.
Some major factors that affect REIT revenue specifically are building occupancy rates, increased rent, and property acquisitions.
Some REITs to Invest In
Here are some of the largest and most well-known REITs for you to consider:
4. Open a High-Yield Savings Account
For most people opening a savings account is the first step to take control of your finances. Savings accounts are a great way to stash cash for the short-term, and for any financial emergency that may arise.
Consider checking out CIT Bank's Savings Builder account to get started.
While savings accounts are a safe way to store money—they are anything but lucrative. The interest rates are so minuscule that you are likely losing money after adjusting for inflation, yikes!
So what do you do when you want to save money without locking it away? Consider a high-yield savings account, also referred to as a high-interest savings account.
Investing 1000 dollars in a high-yield savings account is a great idea if you want to be able to access your money quickly if you need to.
What Is a High-Yield Savings Account?
A high-yield savings account is a type of deposit account that typically pays a higher interest rate, or has a higher annual percentage yield (APY) than most savings accounts.
High-yield savings accounts offer the same security benefits that you'd expect from a normal savings account. The Federal Deposit Insurance Corporation (FDIC) secures the balance of accounts in banks or thrifts, and the National Credit Union Share Insurance Fund covers accounts at credit unions.
To open a high-yield savings account, ask the staff at your bank or credit union if they can offer you an account with a higher interest rate than your current one.
The Best High-Yield Savings Account
If they can't, shop around at your local banks, or sign up for CIT Bank here. CIT Bank has some of the highest yielding savings accounts you can find.
High-yield savings accounts are a great way to store your money with minimal risk—while obtaining a modest interest rate.
5. Purchase US Treasury Bonds
U.S Treasury bonds are a great long-term, secure investment that will provide you with an ongoing source of passive income.
Investing 1000 dollars into U.S Treasury bonds might be the right choice if you want to have some more stability in your portfolio.
Savings or Treasury bonds are issued by the United States government and are some of the safest bonds you can buy. It's highly unlikely that your loan will not be repaid.
You will typically make a 1-3% annual return when investing in US treasury bonds, but the interest rate changes regularly.
These interest rates are not exceptional; however, the level of safety involved with this investment makes it attractive to long-term investors.
Bonds are often the number one choice among investors who are looking to employ a defensive approach.
While bonds are typically safe, the type of bond you buy will influence the level of risk involved with this investment.
There are many types of bonds including, but not limited to Premium bonds, Treasury bonds, corporate bonds, and Junk bonds.
6. Open a Roth IRA
Opening a Roth IRA is a great way to invest $1000 for retirement. A Roth IRA is a type of retirement account that you fund with post-tax income. You are free to withdraw any contributions you have made (not earnings) tax-free.
You have more control over a Roth IRA than you have with an employer-sponsored retirement account.
When Should I Open a Roth IRA?
You should open your Roth IRA early when you are young and in a low tax bracket. This way, you'll be able to make contributions while paying minimal taxes.
Roth IRA Contributions
You can contribute a maximum of $6,000 to your Roth IRA ($7,000 if you are age 50 or older by the end of the current year) if you're single or the single head of a household.
This is predicated on you having a modified adjusted gross income (MAGI) of less than $122,000 annually.
“A Roth IRA can be a fantastic savings and investment vehicle because it provides tax-free growth and qualified withdrawals,” says Daniel Schutte, MBA, independent personal wealth manager, Credo Wealth Management, Denver, Colo.
How to Invest $1000 in a Roth IRA
Here is a great guide that will show you how to open a Roth IRA.
Remember to open your Roth IRA as early as possible to get the maximum benefit.
7. Try Peer-to-Peer Lending
Another great way to invest 1000 dollars is through peer-to-peer lending.
Peer-to-peer lending (P2P) is the practice of lending money to individuals or businesses through online services that will match you with a borrower.
You can expect to make a 3-7% return annually through P2P lending.
Peer-to-peer lending is a relatively new way of investing your money, with Prosper first launching in the US in 2005.
Here are some peer-to-peer lending platforms to get you started.
Upstart is one of the most popular peer-to-peer lending services available.
The founding team of Upstart consists of former google employees including Dave Girouard, (former VP of apps) and Anna Counselman, (former Manager of Global Enterprise Customer Programs).
LendingClub is another US-based peer-to-peer lending company, headquartered in San Francisco, California.
It was the first peer-to-peer lender to register its offerings as securities with the Securities and Exchange Commission. They were also the first P2P service to offer loan trading on a secondary market.
A word of warning before we move onto the next section. Borrowers can potentially default on your loan, putting you out of pocket.
Keep this in mind when considering peer-to-peer lending as a means of growing your wealth.
8. Pay Off Debt
You might find this investment strategy unusual, but hear me out.
Having debt is basically the opposite of having an investment. You are paying interest back to your lender—instead of earning it.
You can expect to earn about 7% annually through the stock market, while you could be paying back double-digit interest back to your lender!
This is why so many financial gurus like Dave Ramsey recommend paying down non-mortgage debt before investing for retirement.
And investing 1000 dollars to pay off debt could make a huge difference.
If $1000 doesn't fully wipe out your debt you should be focusing on paying it off as soon as possible.
Visit how to get out of debt with the debt snowball to learn the best way to get out of debt.
9. Invest in Your Kids' College Education
Every parent wants their student to live a successful life, and one path to success is through college.
But the fact is that college is expensive, and is showing no sign of slowing down.
Investing 1000 dollars now doesn't seem significant, but it will create a path for future investments into your kids' college fund.
The average cost for one year of college from 2015-2016 was $26,120, or $104,480 for four years! You could graduate with the same four-year degree in 1989 for $26,120.
So the average price for a four-year college degree increased by 2.6% annually throughout this period.
According to the Federal Reserve Bank of St Louis, wages only grew by 0.3% annually from 1989-2016. Meaning the average college tuition grew 8x faster than wages over the same period!
So if you want your kids to go to college and you don't have the money ready now you should consider saving for their college education.
How to Invest $1000 in a College Fund (529 College Savings Plan)
If you're looking to invest $1000 in a college fund, the 529 college savings plan is a great choice.
This plan has high contribution rates (depending on your state) and lets your money grow tax-free.
The right 529 plan will give you the option to change the beneficiary to another family member. So if your firstborn doesn't want to go to college, you can use the funds for the next in line.
10. Start a Blog
Thanks to the internet, you can launch a business with minimal capital or technical know-how.
A common and potentially lucrative side-hustle is blogging, as I will explain below.
What Is a Blog?
A blog is a type of website that publishes articles/posts regularly and reports on various topics. Blogging is a great way to generate passive income—once you have completed the initial setup and published several articles.
How to Invest 1000 Dollars to Start a Blog
You can start a blog for under $100 when using a free theme and a wordpress.com domain name. However, it's a better idea to purchase a premium theme and your domain name if you would like to build a professional site—and eventually monetize your blog.
Visit my how to start a blog post to learn how to start a successful blog of your own!
How to Monetize a Blog
Here are some ways to monetize your blog and start making money online.
You can get expect to earn roughly $10 per 1,000 views on your blog when using display ads. Your income will depend on multiple factors—including your ad network and niche—so I cannot provide a definite earnings figure.
Some bloggers make as high as $50 per 1,000 views—while others struggle to make $2 per 1,000 views when using display ads.
Display advertising earnings vary greatly from site to site.
There are many bloggers generating significant monthly income from affiliate marketing like Pat Flynn and Michelle Schroeder-Gardner.
Affiliate marketing is typically commission-based and you can expect to earn anywhere from 5% to 75% commission per sale.
Amazon Associates is a great affiliate program for beginners looking to make some affiliate income. You will typically make a 4-8% commission on product sales—and getting started only takes minutes!
Digital Product Sales
Digital product sales can be one of the most lucrative ways to make money online if you have a large, engaged audience.
Common digital products include online courses, eBooks, software, podcasts, and photos.
A sponsored post is simply a guest post that you place on your site for a fee.
Sponsored post rates vary among sites; however, there is an easy way to get a price estimate for sponsored posts—as follows: Daily pageviews /10 = sponsored post price.
Therefore, a site that receives 500 daily views can typically charge $50 for a sponsored post.
These are among the many ways to monetize a blog. If you have a passion for writing and are willing to put in the work—then blogging may be a great way to invest 1000 dollars.
Read my article on how to start a blog to learn more.
11. Start An eCommerce Business
Selling products online is a great way to exploit the size of the internet. Amazon, Etsy, and eBay are the most popular eCommerce sites and have hundreds of millions of users yearly.
It can be expensive to start an eCommerce site. And there are plenty of people who will show you how to invest 1000 dollars or more into your first site!
Selling on Amazon
Amazon FBA has a professional seller plan, which will set you back $39.99 a month and a small percentage of your sales revenue.
As part of the Amazon professional seller plan, Amazon will handle customer service, shipping, and fulfillment for Amazon.com orders.
Selling on eBay
You should create a seller account and open an eBay store when selling on eBay. The Starter Store is the cheapest option, providing you with discounts and tools for “occasional sellers” and will set you back $4.95/month.
To learn more about eBay's Subscriptions and Fees—visit the link.
Selling on Etsy
To sell on Etsy, you will need to open a shop. Then you are ready to name your shop and create your first listing.
Etsy doesn't charge monthly fees; however, you will have to pay listing and transaction fees as part of the service.
There is no shortage of options when it comes to selling products online. In the next section, I explore peer-to-peer lending.
These are some of the most lucrative ways to invest 1000 dollars—I hope there is an option that is favorable for you and your situation.
Even though $1,000 isn't a huge amount of money today, if you apply one of these strategies successfully, your mere $1,000 investment could be worth significantly more down the track.
If you have even more money to invest maybe you'd like to read our How to Invest 20k post!
Don’t forget you can get two free stocks when you invest $100 or more with Webull.