9 best ways to invest $1,000

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If you’re looking to build your fortune, investing can be one of the best places to do it. While starting with $1,000 may not sound like much in the grand scheme of things, you can grow your money over time and create a better financial future for yourself and your loved ones. In fact, it’s never been cheaper or easier to be a new investor, and you have many great ways to start.

Some of the best ways to invest $1,000 will actually allow you to quickly increase your bankroll. For example, you may be able to earn a nearly immediate 50 percent return on your money through special incentives, and then still be able to invest in high-return assets.

Here’s how to invest $1,000 and start growing your money today.

1. Buy an S&P 500 index fund

At the top of the list is buying an index fund based on the Standard & Poor’s 500 index, a collection of around 500 of America’s most successful companies. The index has returned an average of about 10 percent over time, letting you double your money in just over seven years, on average.

It’s a great pick for new investors because it offers immediate diversification — meaning reduced risk — and you’ll own some of the world’s best companies. In fact, legendary investor Warren Buffett suggests that most investors would do best by buying and holding an S&P 500 fund and adding to the position regularly.

2. Buy partial shares in 5 stocks

If you want to put a little spice in your portfolio, and have a longer investment horizon, buy a collection of five stocks that you’ve researched. You’ll need to understand what you’re investing in, however, or you’re better off going with an S&P 500 index fund. Your collection of five stocks is also likely to be quite a bit more volatile than an index fund, too, but that’s part of the price of investing in individual equities.

You won’t even have to worry about having enough money to buy full shares of each stock if you opt for one of the best brokers for fractional shares. And you should check out the best brokerage bonuses for new money, because you may be able to get a little extra something.

3. Put it in an IRA

If you’re wondering how to invest $1,000, putting your money in a retirement account offers one of the highest potential returns. You can opt for a workplace retirement account or open an IRA on your own with an online broker. 

There are two types of IRAs to choose from:

1. Traditional IRA: With a traditional IRA, you can deduct any income taxes you would otherwise pay on that $1,000 if you meet the income limits. Plus, you’ll be able to defer any taxes on your gains for decades.
2. Roth IRA: With a Roth IRA, you won’t receive a tax break on your contributions, but your money still grows tax-free. The best part? You can withdraw those funds tax-free in retirement. 

A few bonuses can also sweeten things. You can combined this strategy with an account opening bonus mentioned above. 

You may also be able to take advantage of the little-known Saver’s Credit, which offers a tax credit of up to 50 percent if you earn less than $46,000 (in 2024) and file your taxes jointly with a spouse or $23,000 as an individual. If you earn above these levels you may still qualify for credits of 10 or 20 percent, depending on your income.

That’s a huge return with no risk for you — and it’s among the best and easiest returns you’ll find.

4. Get a match in your 401(k)

If you have an employer-sponsored retirement account such as a 401(k) or 403(b), check to see if your employer matches any contributions you make to the account. For example, some companies will match 50 percent of your contributions up to 4 percent of your salary. So you could put 8 percent of your paycheck in and the company would provide an immediate 4 percent. This “free money” is some of the easiest money you’ll ever earn, so it makes sense to take advantage.

To use this strategy, you don’t simply put money into an account as you would with other strategies here. Instead, you’ll need to defer the money from your paycheck. As an added bonus, however, you can also take advantage of the Saver’s Credit here. So it’s possible, depending on your income, to generate a 100 percent return with no risk at all.

5. Have a robo-advisor invest for you

Are you worried about investing your money yourself? You can let a robo-advisor do all the heavy lifting for you. The robo-advisor can select a portfolio based on your risk tolerance and when you need the money, and it uses the same principles that a human advisor would use.

The best robo-advisors also provide calculators and other tools to help you understand how fast your money can grow, and they offer solid cash management accounts with a ton of features. Most accounts let you get started with no money, and it takes just a few minutes to open one.

6. Pay down your credit card or other loan

Of all the investments on this list, the one with the absolute safest return is paying down your debt, especially if it’s high-interest credit card debt. If you’re paying 25 or even 30 percent on your cards, that’s money that could otherwise go into your pocket. In fact, it makes sense to prioritize paying down that high-interest debt as much as you can before investing.

7. Go super safe with a high-yield savings account

If you need access to your money in less than a few years, then you don’t want to tie it up in a major investment like a stock, which could be down a lot just when you need the money. Instead, go with a super-safe option such as a high-yield savings account. These accounts are offering some of the highest returns in years, and it’s easy to find the country’s top yields.

A high-yield savings account is offered by most online banks, and you’ll have immediate access to your cash if you need it.

8. Build up a passive business

Yes, even with $1,000 you may be able to get started with a passive business, especially if you put in a lot of the “sweat equity” (that is, labor) to get it running. Find a niche you love and then set up a website, or create a course on a topic where you’re a subject matter expert. The capital demands of many passive businesses can be low if you put in the upfront work.

You have a ton of options for a passive business, such as making micro-loans through a crowdfunding platform or even investing in real estate.

9. Open a 529 account

If you or a loved one may be going to college one day, putting your money in a 529 account can help it grow while making those future education expenses more affordable. Any money withdrawn from the account and used for qualified educational expenses is tax-free. That’s an attractive prospect for parents who may have to foot the bill for a child’s education.

In addition, 2022’s SECURE Act 2.0 makes contributing to a 529 account less prohibitive. Beneficiaries of a 529 plan now have the ability to convert a lifetime total of $35,000 from a 529 plan to a Roth IRA without incurring taxes or penalties, so long as the account has been open for at least 15 years before the conversion. 

Bottom line

If you’re looking for the best way to invest money, there are several options to choose from. Investing $1,000 may be just the start for your investing career, but make it count by taking the time to understand the available options and how to really make that money work for you. You can add to your account over time and build real wealth for yourself and your family.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.