Best Way to Invest $1000?

If you have $1,000 to invest, your first step should be related to money management, and this means making sure that you could handle taking a loss on this amount without affecting your personal finances. Investment capital should never come from savings; if you do not have reserves at the moment, you should put $1,000 towards building a cushion that will pay for your household expenses for the next three months.

With the above in mind, you should not feel constrained by the amount you have on hand. If you are new to investing, you should feel confident that this is enough to get started. You may initially feel attracted to investing in equity securities; this is known as the siren call of Wall Street, but you should first consider commission costs that average $7 per trade. Assuming that you take 10 diversified positions, you would start your investment journey down $50. Instead of jumping headlong into stocks, here are few options for you to consider:

Roth Individual Retirement Account

It is never too early to start planning for retirement. With a Roth IRA, you will have control over your investment capital and will also build a tax-free haven for the profits you earn. You may feel confident about generating income now, but that will eventually come to an end. With a Roth IRA, you could start funding your retirement now and before it is too late.

Mutual Funds

One of the best financial decisions you can make is to let investment professionals handle your investment capital at very reasonable fees. This is something that you can accomplish today with the right mutual fund. Take, for example, the Vanguard Windsor Fund Investor Share, which has been generating excellent returns since before 1960. The best thing about mutual funds such as the Vanguard Windsor is that they are actively managed, which means that you could see your investment grow in just a few months.

Exchange-Traded Funds

These financial instruments are managed like mutual funds but they are traded like equity securities, which means that you can use them to take market positions as if they were shares of Microsoft. Not surprisingly, Vanguard ETFs are among the most reputable on Wall Street; the Vanguard S&P 500 ETF, for example, allows you to invest in the S&P 500 benchmark index and its historical rally of appreciation. As of June 2017, you could buy one Vanguard S&P 500 ETF for $223.

The Foreign Currency Exchange Market

If you are willing to do your homework and research of the forex market, you could start deriving profits from your $1,000; however, you will need to leverage your capital significantly. The forex market is extremely liquid, but it is also very risky. As an individual trader, you will be participating at the lowest investment level, which will require you to trade on margin. What this means is that you will have to clear a certain barrier when you take a forex market position before you can start taking profits.

Peer to Peer Lending

Your $1,000 could help you become a lender along with other individuals who get together to act as an alternative lender. In essence, you have an opportunity to earn interest from repayments. You will not be expected to allocate your entire capital to a single loan; the best approach is to diversify into various loans.