If it’s possible to invest with $5 or $100, then you absolutely should be investing if you have at least $1,000. That’s actually an amount sufficient to consider several different investment categories. You can – and probably should – also consider investing in several at the same time.
If you’ve managed to save $1,000, don’t waste any time. Begin investing now, then use the combination of additional contributions and regular investment earnings to increase your portfolio. And as the years go by, you’ll gradually move toward the kind of financial independence most everyone craves.
With $1,000 Diversification Should be on Your Radar
One of the major advantages to investing with $1,000 or more is that you can begin to seriously diversify your holdings. As you’ll see from the descriptions of the various Investment categories available at this dollar threshold, you can easily spread $1,000 across three or four different types of investments.
For example, you can hold $200 in a real estate crowdfunding platform, $500 in a robo-advisor – where it will be professionally managed – and $300 in a self-directed investment brokerage account.
That may seem like a lot of cookie jars to spread $1,000 across. But at the same time, it will give you both a higher level of diversification, and some experience investing through different platforms – and even entirely different asset classes.
It’s not an absolute necessity that you diversify in this way. But it is an option you’ll have available.
Where Can You Invest with $1,000?
In our articles about how to invest with just $100 or even as little as $5, we included micro-investment apps. But they won’t appear in this one, mostly because they’re unnecessary. If you’ve got $1,000 or more to invest, you’re past needing micro-investing apps. They’re mostly designed for people who need to save money to invest.
Instead, we’ll focus on the following Investments:
- Investment brokers
- Real Estate crowdfunding platforms
- Fixed income securities: high yield savings accounts, certificates of deposit (CDs) and US Treasury securities
Best for: Those who can save and are ready to begin investing with very little money
Robo-advisors can work well for investors of all portfolio sizes. They’re automated, online investment platforms that create a diversified portfolio for you, manage it continuously, and do it all at a very low annual fee.
In previous articles, we’ve recommended robo-advisors that require little or no money to begin investing. Those include
- Betterment, no minimum investment, 0.25% annual management fee.
- WiseBanyan, $10 minimum to invest, no management fee in your account before you can begin investing.
- Ellevest, no minimum initial investment, 0.25% annual management fee.
- Fidelity Go., no minimum initial investment, 0.35% annual management fee.
But with at least $1,000 to invest, we can add two additional robo-advisor platforms to the list.
The first is Betterment’s major competitor,
- Wealthfront. They require a $500 minimum investment, and charge a 0.25% annual fee. One of the benefits of Wealthfront is that they can include both real estate and natural resources in your portfolio, in addition to stocks and bonds. We really like what they’re doing right now in the market – try them out!
- SoFi Wealth is another robo-advisor platform worth investigating. They require a $100 minimum investment, and charge a 0.25% annual fee. But the first $10,000 is managed free. We recommend them if you have a student loan refinanced through SoFi because if you do, the robo-advisor service is free to use.
Best for: Those looking to invest in ETFs, and ultimately self-directed investing
Just as is the case with our articles on how to invest with $100 or how to invest with as little as $5, there are plenty of investment brokers that will allow you to open an account with no money, and begin investing as you add funds.
$4.95 per trade:
Just keep in mind that free trades means a less comprehensive trading platform.
Even with $1,000 to invest with an investment broker, there are a few important points to keep in mind:
Favor exchange traded funds (ETFs). There are no minimum trading amounts, and ETFs enable you to invest in a portfolio of stocks. But these are index-based funds, that invest in an entire market sector, such as the S&P 500. They’re low cost, and generally have trading fees equal to stocks.
Avoid individual stocks. While $1,000 – or even $500 – is plenty to invest in ETFs, it won’t go very far with individual stocks. You simply won’t be able to diversify among enough companies for it to make sense.
Limit trading activity. At even $4.95 per trade, you can lose a lot of money on commissions by actively trading your account. $1,000 isn’t the kind of money that would justify active trading either. Once again, at his level, it’s best to stay with ETFs.
Also, if you’re investing with an investment broker, you’ll almost certainly want to invest in some of the other categories on this list.
Real Estate Crowdfunding
Best for: Those looking to diversify some funds into real estate
With $1,000 or more, you can and should consider diversifying into real estate. Real estate crowdfunding platforms now make that possible. With just a few dollars, you can invest in a platform that invests in commercial real estate, or even very specific real estate transactions.
Two platforms to consider are Groundfloor and Rich Uncles:
Groundfloor. This platform enables you to invest in property flipping deals, just like the ones you’ve doubtlessly seen on HGTV. You can do so for as little as $10 per deal. You’re not actually participating in the flip directly. Instead, you’re buying slices of flip-related loans, called “notes”. You can spread an investment $200 across 20 different loans, at $10 per note.
Rich Uncles. This platform invests in real estate investment trusts (REITs) that invest in commercial real estate. They generally require a minimum initial investment of $500. but they have one REIT that allows you to invest with as little as $5.
Don’t invest your entire $1,000 in real estate crowdfunding, because it is fairly high risk. But a couple hundred dollars can be a nice diversification to an all-paper portfolio.
One note of caution on real estate crowdfunding: There are several real estate crowdfunding platforms that will allow you to invest with as little as $1,000. But they may require you be an accredited investor. That means you’ll have to have either an annual income of at least $200,000, a net worth at least $1 million (not including your house), or both. This probably describes the majority of real estate crowdfunding platforms. That’s why we haven’t included them in our lists.
Fixed Income Securities: High Yield Savings Accounts, Certificates of Deposit (CDs) and US Treasury Securities
Best for: Those looking diversify their portfolios by adding safe investments
With at least $1,000 to invest, you can choose to put at least some of your money into safe, fixed income investments at a bank. You can also invest in US Treasury securities, which are completely safe and highly liquid.
The idea isn’t to put your entire stash into fixed income investments. The interest rates they pay makes them unsuitable as long-term investments. However, they can serve as an important diversification to lower the risk of equity-type investments. You might consider holding $100 or $200 in these investments, while investing in other asset classes.
High yield savings accounts. At most local banks, interest on savings accounts is pathetically low. But there are online banks that pay much higher yields. For example, CIT Bank high yield savings accounts pay over 2% APY, with a minimum investment of $100.
CDs. These savings instruments typically run from three months to five years and are available at nearly all banks and credit unions. Ally Bank CDs pay well over 2% APY with no minimum investment. Capital One 360 CDs also pay well over 2% APY with no minimum investment.
(PLEASE NOTE: CDs and US Treasury securities are available through investment brokers. But they generally charge fees and have minimum investment requirements of at least $1,000. You can buy these securities free of charge and in much smaller denominations when purchased directly, such as through the institutions listed in this section.)
US Treasury Securities
These are considered the safest investments in the world, because they’re fully guaranteed by the US government. They come in three basic types:
- Bills, which are short-term securities, running from four to 52 weeks, and can be purchased in denominations of $100.
- Notes, which have terms from two to 10 years, and can be purchased in denominations of $100.
- Bonds, that have terms of 30 years, and can be purchased in denominations of $100.
“TIPS”. Treasury Inflation Protected Securities (TIPS) pay interest, and add additional principal to provide protection against inflation. However, be aware that the interest rate paid on TIPS is lower than on other Treasury securities, and the additional principal is taxable on an annual basis. You’ll have to decide if owning them is in your best interest.
All US Treasury securities are available through Treasury Direct, where they can be bought, held and sold free of charge.
Here is a list of recent yields on US Treasury securities in case you want to get an idea of what rate you should be expecting.
Fixed Income Investments vs. Robo-Advisors vs. Investment Brokers vs. Real Estate Crowdfunding
With $1,000, you’ll probably want to spread your money across several different investment categories. To help you with that diversification, we created the table below that displays both the features of each investment category, and how it can fit into your portfolio.
|Platform/Feature||Minimum investment||Fees||Automatic deposits||Fully designed portfolio||Ongoing portfolio management||Available for IRAs||Best for…|
|Robo-Advisors||$0 - $10 and up||0.25% - 0.50% per year||Yes||Yes||Yes||Yes||Those who can save and are ready to begin investing with very little money|
|Investment Brokers||$0 and up||$0 to $6.95 per trade||Generally||No, but ETFs are portfolios||No, generally self-directed||Yes||Those looking to invest in ETFs, and ultimately self-directed investing|
|Real Estate Crowdfunding||$5 - $10 and up||None for Groundfloor and Rich Uncles, but most have fees||Varies by platform||Yes, with REITs||Yes||Yes||Those looking to diversify some funds into real estate|
|Fixed Income Securities||$0 and up||Free when purchased direct from the issuer||Yes||No||No||Yes||Those looking diversify their portfolios by adding safe investments|
Invest through an IRA
With $1,000, you should also carefully consider investing your money in an individual retirement account (IRA). This can be either a traditional or Roth IRA.
Either will enable you to accumulate investment earnings on a tax deferred basis. The main differences between the two are:
- A traditional IRA has tax deductible contributions, but is fully taxable upon withdrawal.
- Roth IRA contributions are not tax deductible, but withdrawals can be taken tax-free, once you reach age 59 1/2, and have participated in the plan for at least five years.
If you’re interested in using an IRA for your investments, carefully consider whether you will need the money before retirement. Withdrawing money early can result in taxes and penalties, particularly with a traditional IRA.
Virtually any of the investments listed above can be used with a taxable account or an IRA.
But what’s most important is that if you have $1,000 available now, you should begin investing today. There are plenty of ways for you to do that, and more on the horizon as your portfolio grows. You can make that happen.
Note: This article provides tips on how to invest $1K, but the strategies provided will be equally valuable for anyone looking to invest $2,000, $5,000, or even more. If you fall outside this range, check out one of these articles for more personalized investing recommendations: