One common investing myth is that you need a lot of money to get started.
This is sometimes true. Financial planners and investment advisors often require clients to have a relatively sizable amount of money to invest in order to work with them. Similarly, popular financial management software like Personal Capital requires $100,000 to use their wealth management service.
However, while some investments require significant capital, you can still begin investing with small amounts of money. In fact, a range of investment options becomes available once you hit the $1,000 mark. If you can save up this amount of money, you can begin a fruitful investing journey and grow your wealth for years to come.
The Best Ways to Invest $1,000
There isn’t a correct formula for how to invest $1,000. Ultimately, you should consider several factors when selecting your investment method, such as:
- How active of an investor you want to be
- Your level of risk tolerance
- How long you want to invest your money
Different investment time horizons, risks, and levels of involvement influence what investing method suits your goals and personality. If you’re unsure how to answer these questions, start by setting your long-term financial goals so you can start planning your investing strategy with an end in mind.
1. Use a Robo-Advisor
If you want to invest $1,000 as passively as possible, using a robo-advisor is your best option.
Robo-advisors automate your investing strategy by investing your money into assets that match your long-term goals and risk tolerance. Typically, robo-advisors invest in various stocks, bonds, and exchange-traded funds (ETFs). Many leading robo-advisors also offer features like portfolio rebalancing, dividend reinvesting, and even tax-loss harvesting.
Robo-advisors aren’t the same as financial planners. With a financial planner, you get tailored financial advice, which typically covers topics beyond just investing, such as budgeting and estate planning.
In contrast, robo-advisors use algorithms to choose the best investments for you; they aren’t there to talk about funding your child’s education or specific financial questions you have.
However, unlike many human advisors, many robo-advisors have funding requirements under $1,000. In fact, some robo-advisors have a $0 account minimum. This makes them beginner-friendly and ideal if you want to invest $1,000 or even less.
Several leading robo-advisors include:
- SoFi Invest. A $1 minimum investment requirement; no annual advisory fees; account options include individual and joint investment accounts, traditional and Roth IRAs, and simplified employee pension (SEP) IRAs.
- Betterment. No minimum investment requirement; pay 0.25% in annual fees for accounts under $100,000; upgrade to Betterment’s premium plan, which includes financial advice for 0.40% in annual fees; account options are the same as SoFi Invest plus you can invest with a 401(k) or trust account.
- Wealthfront. A $500 minimum investment requirement; pay 0.25% in annual advisory fees; account options are the same as Betterment plus you can invest with a 529 College Savings Plan.
- Ellevest. No minimum investment requirement; pay $1-, $5-, or $9 per month depending on the plan you select; designed by women to help other women build wealth; account options are the same as SoFI invest with the exception of joint accounts.
Betterment and Wealthfront provide tax-loss harvesting and have more account options than both SoFi Invest and Ellevest.
Betterment’s premium plan provides unlimited call and email support with Betterment’s certified financial planners. However, you need a $100,000 account minimum to upgrade to Betterment premium, so keep that in mind for a long-term goal.
If you want to avoid account management fees, SoFi Invest is for you. Similarly, Ellevest’s monthly pricing structure can be cheaper than paying a percentage fee depending on your portfolio size.
Ultimately, you should choose a robo-advisor that has the account type you’re looking for and is as low-cost as possible. Tax-loss harvesting is a useful feature for higher net worth individuals. But for investing $1,000, any leading robo-advisor can help get you started with wealth building.
2. Invest With an Online Brokerage Account
If you prefer DIY investing and don’t want to pay robo-advisor fees, you’re in luck. The past few years have seen a rise in online stock brokers you can use to buy individual stocks and ETFs to create your own portfolio.
Plus, many stockbrokers don’t charge commissions on stocks or ETFs, meaning your trades don’t cut into your starting investment.
Some online stock brokers you can use to begin investing include:
- Stash Invest. No minimum account requirement; plans range from $1 to $9 per month; invest in fractional shares of stocks and ETFs for as little as $0.01; use other features like a stock-back rewards card, personal finance advice, retirement planning help, and Stash banking.
- Robinhood. No minimum account requirement; commission-free cash trades for stocks, ETFs, and options; includes alternative investments like cryptocurrency or precious metal securities.
- Webull. No minimum account requirement; commission-free trading; longer trading windows than platforms like Stash; more comprehensive stock market research tools than platforms like Robinhood.
- TD Ameritrade. No minimum investment requirement; commission-free trading; low-cost options trading; variety of research tools to suit novice and experienced investors alike.
- J.P. Morgan. A $1 account minimum; commission-free stock and ETF trading; options, fixed-income investments, and mutual funds are also available; a robo-advisor option is also available with a 0.35% annual advisory fee.
Like choosing a robo-advisor, finding the right online stock broker takes some research. For starters, check what account opening bonuses are available for the stockbrokers you’re considering. Investing platforms are willing to pay for your business, so you’ll often find that platforms award free stocks or cash bonuses for opening and funding a new account.
For example, Webull usually runs a free stock account opening bonus that gives you up to four free stocks with a potential value of over $3,000. Similarly, Stash has a $5 account opening bonus.
You should also consider how frequently you want to trade and whether investing in fractional shares is important. Fractional shares let you invest with a small amount of money, so you can still invest in expensive stocks like Amazon or Alphabet (Google) without buying entire shares that may cost more than $1,000 apiece.
If fractional shares are important, try Stash or Robinhood. If you’re looking for more stock research tools, Webull, TD Ameritrade, and J.P. Morgan are excellent options for beginner and experienced investors alike.
3. A High-Yield Savings Account and Emergency Fund
Although it might not seem as exciting as investing in the stock market, putting your money to work in a high-yield savings account is one of the smartest money moves you can make if you haven’t built your savings yet.
Putting money aside to start building an emergency fund helps protect you from unexpected expenses. A general rule of thumb is that you should have at least six months of expenses put aside to cover sudden emergencies like losing your job, car repairs, or medical expenses.
Although $1,000 isn’t enough to get there, it’s a strong start for your emergency fund and can help get you out of tricky financial situations down the line.
If you’re looking for a competitive high-yield savings account, one option is the CIT Savings Builder. This account offers a competitive annual percentage yield (APY) and only requires $100 to fund an account. Furthermore, you unlock the highest possible APY if you deposit at least $100 per month, which is manageable if you put a portion of your paycheck aside.
Putting $1,000 into a savings account won’t rapidly accelerate wealth building. However, it’s important to have cash on the side in case of emergencies, and $1,000 is an excellent starting point if you’re still building your emergency fund.
4. Tackle High-Interest Debt
Like putting money into a high-yield savings account, paying off debt with your $1,000 isn’t investing in the traditional sense. But, if you can use that money to chip away at high-interest debt, the amount of money you save in the long run on interest payments can be worth it.
Figuring out whether you should invest or pay off debt isn’t always straightforward. However, one efficient strategy is to aggressively pay off debt with the highest interest rate in order to free up more money for investing in the future. This is known as the debt snowball method.
Likely, this means putting your $1,000 and any extra cash you have toward debts like credit card debt, auto loans, or payday loans. As you eliminate your worst categories of debt, your investing options become more flexible.
For example, if you have a fairly low interest rate on your student loans or a low mortgage rate, it sometimes makes sense to make those minimum payments and to put any extra income into investments. However, this can only be done once you clear up your most costly debt.
This plan to invest $1,000 might seem disappointing because you aren’t putting the money to work in the market. But, if your $1,000 helps you become debt-free faster, this is certainly money well-spent.
5. Invest in Real Estate
Although it might surprise you, another way to invest $1,000 is to invest in real estate.
Investing in real estate used to be prohibitively expensive. You generally need serious capital to buy a rental property. Plus, many crowdfunding websites are only open to accredited investors, which requires having a net worth of at least $1 million, an annual income of $200,000, or an annual income of $300,000 for married couples.
However, you can still invest in real estate with $1,000 or less thanks to real estate investment trusts (REITs). REITs only invest in income-generating properties through purchasing real estate, providing loans, or buying preexisting mortgage contracts. REITs are also required to pay at least 90% of profit back to shareholders in dividends.
Ultimately, this 90% requirement means REITs are an excellent way to diversify your portfolio with real estate and to earn dividends. Plus, you can start investing in real estate with companies like DiversyFund with just $500.
DiversyFund is a newer player in the REIT market and is similar to companies like Fundrise. With DiversyFund, you invest in a growth REIT that invests in cash-flowing apartment buildings. This multifamily real estate investment strategy has a $500 investment minimum and is available to all U.S. residents who are 18 or older.
DiversyFund states that the goal of this fund is long-term appreciation from renovation and repositioning of multifamily properties the fund invests in. In other words, DiversyFund acquires undervalued real estate developments, renovates them, and eventually sells them for profit.
As an investor, you don’t pay management fees, which is different than most REITs. However, because DiversyFund is the developer of their properties, they charge between 2% to 8% in development fees to pay for renovations.
According to DiversyFund, 2017 investors saw average annualized returns of 18%, and 2018 investors saw average annualized returns of 17.3%. This is strong albeit limited historical performance, but Diversyfund ultimately makes real estate investing more accessible for new investors.
Check out our DiversyFund review for more information.
6. Peer-to-Peer Lending
If investing in the stock market or real estate isn’t appealing, another option for investing $1,000 is to use peer-to-peer (P2P) lending.
P2P lending, also called person-to-person lending, involves lending money to individuals or business owners, almost as though you were a bank underwriting a loan. In exchange for loaning money, you receive interest payments. How much you earn depends on the level of risk associated with a loan and the length of the loan.
P2P lending is ideal for investors more comfortable with risk because if a borrower defaults on their payments, you lose your capital. In order to reduce risk, many P2P lending companies let you buy notes, which are shares of individual loans.
By spreading out your investment across multiple notes of different risk levels, you protect yourself from having a single borrower default and losing your entire investment.
One of the most popular P2P lending platforms you can try is Prosper. You buy notes on Prosper starting at $25. This means a $1,000 starting investment is enough to create a diversified portfolio of notes across various loans.
According to Prosper, historical returns on the platform average 5.3%. However, the level of loan risk influences annual return potential:
- AA-Bs Loans: 3.7% to 6.5% historical annual returns
- High-Risk Loans: 3.4% to 9.6% historical annual returns
- All Loans: 3.5% to 7.7% historical annual returns
Additionally, Prosper charges a 1% assessment fee for every loan since they have to vet borrowers. A $25 initial deposit is also a requirement to start investing in notes.
With $1,000, you can invest in 40 notes, which is a start for diversification. However, P2P lending still poses risks, and Prosper funds aren’t FDIC-insured. If enough of your notes default, you might lose most of your starting capital, so keep this risk in mind.
Check out our Prosper review for more information.
7. Invest in Small Businesses Through Bonds
A bond is a debt instrument that helps businesses and governments borrow money. When you buy a bond, it’s essentially an agreement that you’re funding a loan for a specific amount of time. Bonds have a fixed rate of interest payments, and once a bond term ends, the borrower pays back the entire principal.
Generally, bonds are a safe investment because the chance of a borrower like a government body defaulting on a loan is low. Municipal bonds, which are issued by states and local governments, are also relatively safe.
Finally, corporate bonds are the riskiest type of bond because they are issued to corporations, which have a higher chance to go bankrupt than cities, states, or government entities.
Despite their safety, there are several disadvantages to investing in bonds. First, bonds have a lower rate of return than stocks on average because of how safe bonds are. Plus, bonds can have long term lengths, meaning you’re locking up your money for years at a fixed rate of return.
If inflation increases, your bonds can actually lose you money. And, if you need to sell your bond before its maturation date, you typically pay a commission fee and markdown which reduces your sales price.
Bonds are still a worthwhile investment if you’re willing to accept their fixed income and don’t need your $1,000 for the course of the bond’s term.
Additionally, companies like Worthy are creating a more flexible and lucrative way to invest in bonds.
With Worthy Bonds, you can invest in bonds that help fund small businesses and nonprofits. Worthy Bonds issues bonds for as low as $10 and pays a fixed 5% annual interest rate. There aren’t any fees, and bonds have a 36-month term length.
One massive difference is you can cash out your bonds any time without paying fees or penalties. Alternatively, you can withdraw interest without selling your bonds.
A $1,000 investment with Worthy Bonds would return $50 in your first year, and you can always invest extra cash into $10 bonds.
Check out our Worthy Bonds review for more information.
8. Alternative Investments
Many investors rely on traditional investments like stocks, bonds, and ETFs to build wealth. This is largely because these securities are accessible, don’t require much starting capital, and are more easily understood thanks to research tools and analysts’ commentary.
In contrast, alternative investments are a less common, riskier investment option. However, if you accept a lower level of liquidity and more risk, alternative investments are a viable option to invest $1,000.
Investing in art is one example. Historically, you needed an immense amount of capital to buy fine art, which wasn’t accessible for beginner investors. Thankfully, with Masterworks, you can now invest in fractional interest in fine art to diversify your investment portfolio.
Masterworks sources fine art that their team believes will increase in value over the next three to 10 years. Once the team purchases a piece, Masterworks files an offering circular with the U.S. Securities & Exchange Commission (SEC) to securitize the artwork to let people invest in it. Shares in artwork are $20, and there’s a $1,000 minimum account funding requirement.
Masterworks charges a 1.5% annual fee in the form of equity, so you don’t actually incur out-of-pocket expenses for being an investor. Additionally, Masterworks takes 20% of future profits. However, although you can wait for a piece to sell to recoup your investment, you can also sell your shares on Masterworks’ secondary marketplace to exit earlier.
Artwork is just one example of alternative investments that don’t require much starting capital. Other alternative investment ideas include:
- Farmland through companies like FarmTogether
- Investing in cryptocurrencies like Bitcoin and Ethereum
- Buying musical royalties on Songvest
- Investing in fine wine through Vinovest
- Buying rights to natural resources like water or minerals
Granted, alternative investments aren’t for everyone. Typically, these investments are less liquid and more volatile than traditional securities. If you’re a cautious investor, sticking with a robo-advisor or real estate are likely better choices for investing $1,000.
9. Start an Online Business
One of the advantages of making money online is that there are usually few barriers to entry. After all, as long as you have a reliable Internet connection and computer, the online world is your oyster.
Starting an online business isn’t different. Unlike traditional brick-and-mortar businesses that have expenses like rent and employees, many online businesses require minimal startup capital and have low operational costs.
Plus, there are numerous online business ideas that cater to different skills and industries. Some popular examples include:
- Starting a blog
- Getting into freelancing work
- Offering online coaching or consulting services
- Selling handmade goods on Etsy
- Becoming a virtual assistant for other entrepreneurs
Most of these business ideas just require starting a WordPress website with an affordable host like Bluehost to showcase your portfolio and services. Other ideas like selling on Etsy can require investing in tools and materials to create products. However, the bottom line is that $1,000 is usually enough to test proof-of-concept.
Start by brainstorming business ideas that cater to your existing skills and sound enjoyable. Once you pick an idea, treat it as a side hustle outside of your main job and grow it over time. If the money you earn from your side business begins to scale, you can even consider quitting your job to go all-in on your business.
10. Buy a Course
If you’re looking for another way to invest $1,000 that’s different than investing in regular securities, putting the money toward your education is an option that has life-changing potential.
Unlike a college education, which generally costs tens of thousands of dollars, you can find affordable online courses on any subject to expand your skill set. If you feel like you’re not getting traction in the job market or want to learn a new skill for a business idea you have, online courses offer a solution.
Udemy is one affordable course platform worth trying. Thousands of courses cost under $20, and you can learn specific skills like:
- A new programming language
- Graphic design skills
- Web development
- Data analytics
There’s also a healthy range of courses for different experience levels, so beginners and experts can hone their skills on Udemy.
However, you don’t have to confine yourself to one education platform. If you’re looking for something more specific and entrepreneurial, chances are there’s a course out there.
For example, courses like $10K VA teach you how to scale a profitable virtual assistant business from home. Similarly, the Earn More Writing course helps freelance writers find more clients and increase their writing rates to accelerate their careers.
Both courses cost under $500 and also grant access to a community of other entrepreneurs where you can learn from industry experts.
Granted, purchasing a course is a different approach to investing $1,000 because you’re investing in knowledge rather than a traditional security. However, when you consider the income-generating potential of acquiring new skills, spending money on a course could be one of the most powerful investments you ever make.
At the end of the day, investing doesn’t have to be complicated or inaccessible. In fact, there are more investment options than ever before thanks to the power of technology.
Chances are your $1,000 investment won’t make or break your future by itself. However, starting to invest as early as possible is one of the best financial decisions you can make. After all, with compound interest and time on your side, your $1,000 can turn into the start of your nest egg and long-term financial security.