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Updated February 4, 2021

10 Smart Ways to Invest $1,000

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$1,000 can become a lot more with investing. Here are 10+ smarter ways to spend that extra grand than on a shopping splurge.

© CreditDonkey

Shortcut: If you are really eager to start investing, check out Betterment. They have no minimum balance, low fees and good returns. It's an easy-to-use app that's great for beginners.

1. Let a Robo-Advisor Invest for You

Investing doesn't have to take up all your free time. Let a robo-advisor do the heavy lifting for you. A robo-advisor automatically manages investments for you based on your goals and risk tolerance.

You don't need a lot to get started. Betterment has no minimum required to start investing. All you have to do is tell the program your goals, and it'll select investments that will give you the best chances of reaching them.

It'll actively manage your account, rebalance your portfolio regularly, and automatically reinvest extra funds.

Or, for an even more hands-off option, Acorns invests your money by rounding up and collecting the spare change from every transaction.

2. Invest in Real Estate

Real estate is a great long-term investment. Maybe you're probably thinking… How can I invest in real estate with only $1,000??

REIT (Real Estate Investment Trust) investing is kind of like "real estate stock." A company owns a portfolio of real estate properties. You can invest in the company and get in on the profits without having to purchase real estate yourself.

One of the easiest ways to get started is with Fundrise. You only need $500 to start investing in real estate projects across the country. Dividends are paid out every quarter—and investors have earned more than $79M in net dividends already.

Fundrise

Invest in Real Estate with $500

Become real estate investor with as little as $500

3. Invest in Cryptocurrency

Bitcoin surged in 2020, but not everyone has ventured into the world of crypto. If you want a piece of the action, how do you actually get started?

Investing in crypto is similar to investing in stocks. You deposit funds into your account, then use the money to buy and sell crypto. Keep in mind though that crypto is more volatile than stocks.

There are many cryptocurrency exchanges, but BlockFi is a good option for both experienced traders and beginners. The platform allows you to buy, sell, and exchange cryptos. It also has their unique BlockFi Interest Account that lets you earn up to 8.6% APY.

Interest accrues daily and is paid monthly in the cryptocurrency of your choice. You can choose from Bitcoin, Ether, Litecoin, and more. There's also no minimum required, so you can try it without committing a lot of money.

BlockFi

Get Up to $250 Bonus

DepositCrypto Bonus
$25 - $249$15
$250 - $999$20
$1,000 - $4,999$40
$5,000 - $9,999$75
$10,000 - $19,999$150
$20,000+$250

4. Open a Roth IRA

A Roth IRA is a retirement account. It's one of the best moves you can make for your future. What's special about it is that you can withdraw the funds tax-free.

You contribute to it with money that has already been taxed, so you won't be taxed again when you take the funds out. Most importantly, if you follow all the rules[1], you won't even be taxed on the interest earned.

Tip: The key difference between a Roth IRA and traditional IRA or a 401k is that Roth contributions are made post-tax. With traditional accounts, you'd avoid paying tax now, but would have to pay normal income tax in retirement.

5. Invest in Fine Art

You should never put all your eggs in one basket. But when it comes to diversifying your portfolio, assets like fine art seem totally out of reach. After all, most people can't purchase a million-dollar painting.

In reality, you can actually break into the $1.7 trillion art market with just $1,000.

Masterworks is an investing platform that gives you access to high-end paintings from renowned artists like Andy Warhol. If you're looking for investment alternatives to stocks, this could be a great opportunity. Fine art actually outperformed the S&P 500 by 180% from 2000 to 2018.

There's usually a waitlist to get started on the platform. You can click here to skip the waitlist and join Masterworks today.

6. Invest in Gold

For thousands of years, cultures all over the world have been fascinated with gold. Gold prices tend to rise when the stock market dips. Today, it's still an attractive investment for those looking to diversify their portfolio.

To get started, you don't need a treasure chest full of gold coins and bullions. Instead, look to ETFs for a convenient way to get your gold exposure.

Gold ETFs track the price of gold and are backed by gold. You trade them just like any other ETF, so you don't have to deal with appraising, selling, or buying physical gold.

One of the best options for commission-free ETFs is Robinhood. It's a free trading app that lets you trade ETFs, stocks, options, and crypto with no minimum to start. Plus, it's much easier to keep in your wallet than a gold bar.

7. Turn to an Index Fund

Index funds are a collection of stocks. One fund can contain hundreds of different stocks, so they're a great way to automatically diversify your investments.

Each index fund is designed to track a specific market index. For example, the S&P 500 index fund tracks the 500 largest companies in America.

Because they simply track the market, there is no need for an active manager. This keeps the operating costs low. They usually have much lower fees than actively managed mutual funds.

Ally Invest

Get Up to $3,000

Expires 9/30/2021

The minimum qualifying deposit to receive a cash bonus is $10,000. Accounts will be reviewed 60 days after account opening to determine the total qualifying deposit. Corresponding cash bonus will be credited to the account within 10 business days. Once the bonus is credited to the account, the bonus and qualifying deposit (minus any trading losses) is not available for withdrawal for 300 days. If the qualifying deposit is withdrawn, the bonus may be revoked.

Deposit or TransferCash Bonus
$10,000 - $24,999$100
$25,000 - $99,999$250
$100,000 - $249,999$300
$250,000 - $499,999$600
$500,000 - $999,999$1,200
$1,000,000 - $1,999,999$2,000
$2,000,000+$3,000

ETFs (Exchange Traded Funds) are another smart choice to diversify your stock investments. Similar to index funds, they're a collection of securities that track an index. The difference is that they're traded like stocks.

8. Invest in Yourself

Spend the $1,000 to attend seminars or take classes that will enhance your professional development. Show your boss that you're ready to move ahead, or set yourself up for a better job, side gig, or even your own business.

If you have a hobby that has the potential to make money, $1,000 could help you launch a home-based business.

Capitalize on your expertise. Bill yourself as a coach or consultant. If you're an uber-organized multitasker who loves the fine details, sell yourself as a wedding or special events planner.

There's business to be had walking dogs, watering plants, and house-sitting, for example. You can't beat making extra money doing something you love.

9. Lend to Other People

If you want to help others and earn interest yourself, consider peer-to-peer lending.

Platforms like Lending Club and Prosper allow you to lend to individuals who need a loan. You earn money as they pay back the loan with interest.

Both platforms require just $25 minimum investment per loan. So with $1,000, you can invest in 40 different people and spread out the risk.

This passive investment gives you another way to diversify your investment portfolio. You'll potentially see a higher return on your investment compared to stocks and bonds.

10. Pay Down Debt

If you have credit card debt, the smartest thing to do with that $1,000 is to put it towards paying it off.

Think of it this way: Credit card interest rates are 12% - 24%. You most likely will not find an investment that can give you that kind of return. So even if you do make some money on other investments, the interest charges will completely wipe them out (and then some).

Make paying off that debt a priority before other types of investments.

If you're really drowning in credit card debt, consider a balance transfer. Find a new credit card with an intro 0% APR on balance transfers. You can then focus on paying off debt without accumulating interest.

11. Create an Emergency Fund

Do you have an emergency fund?. Close to half (41%) of us do not, as found by a CreditDonkey survey. For those who do have savings set aside, it's often not enough.

Ideally, you want six months of living expenses saved and easily accessible. Credit cards are convenient and useful, but you don't want to lean on them when a financial emergency happens. Use the $1,000 to beef up your emergency savings or start a new account.

We recommend keeping your emergency fund in an online savings account. Online banks offer much higher interest rates than brick-and-mortar banks. Your savings can grow a little bit risk-free.

Here are some of the best online savings accounts on the market:

CIT Bank
Member FDIC

CIT Bank Savings Connect - 0.50% APY

  • Earn a competitive high yield savings rate with access and convenience features of an eChecking account.
  • Earn up to 0.50% APY on Savings Connect and 0.25% APY on eChecking.
  • Savings Connect is a tiered interest rate account dependent on the account holder opening a linked qualifying eChecking concurrently and makes periodic qualifying deposits.
    • Base Tier: (0.42% APY, 0.399% Interest Rate) A minimum qualifying deposit of $200 is not deposited each month into the linked eChecking or the eChecking account is closed.
    • Upper Tier: (0.50% APY, 0.499% Interest Rate) A qualifying deposit of $200 or more is deposited into the linked eChecking account each month.
    • APY assumes a qualifying deposit of $200 or more is made to the linked eChecking account each month.
  • Minimum of $100 for both the Savings Connect and eChecking to open ($200 total).
Discover Bank
Member FDIC

Online Savings Account - Earn 0.40% APY

  • No fees
  • No minimum opening deposit
  • No minimum balance required
Axos Bank
Member FDIC

High Yield Savings - 0.61% APY

  • 0.61% APY on all balance tiers
  • No minimum balance requirements
  • No fees to open or maintain account
  • Free ATM card upon request
  • FDIC Insured

12. Invest in your children's education

You can use the $1,000 to create or add to a college savings fund. A 529 plan allows for tax-free withdrawals when used for education expenses. Use SavingForCollege.com as way to easily compare plans.

Or use the $1,000 for a year's worth of tuition for specialty classes or summer camp. You'll be setting up your young ones as college-worthy students.

Another idea is using the dough toward an educational family trip, like to Washington, D.C., Colonial Williamsburg, or a national park. You'll all learn something new and create family memories at the same time.

13. Refinance Your House

Today's low interest rates on mortgages aren't going to stay in the basement forever. They can go up, and that's likely to happen sooner, rather than later.

If you have a high-interest mortgage, $1,000 could help pay refinancing costs. A lower interest rate means more money in your pocket each month. Instead of spending the extra, put it toward savings or paying debt.

You can play around with this refinancing calculator to see how much you could save.

14. Plan Your Next Vacation

This one's a little unconventional. But travel is one of the best investments you can make in yourself. Even if a vacation isn't in the cards right now, you can still prepare for it.

When you make your everyday purchases, try using a travel credit card.

Chase Sapphire Preferred Card
Apply for Chase Sapphire Preferred Card
At Chase's Secure Site
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases within your first year of account opening.
  • Earn 2X points on dining including eligible delivery services, takeout and dining out and travel. Plus, earn 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
  • With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
  • Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
  • Get up to $60 back on an eligible Peloton Digital or All-Access Membership through 12/31/2021, and get full access to their workout library through the Peloton app, including cardio, running, strength, yoga, and more. Take classes using a phone, tablet, or TV. No fitness equipment is required.
Intro APR for PurchasesIntro APR for Balance TransferRegular APRAnnual Fee
N/AN/A
15.99% - 22.99% Variable
$95

Bottom Line

What would you do if you received $1,000 unexpectedly?

Ah, the sweet victory of having extra money lying around.

It's always fun to splurge—so feel free to spend a bit of it on a nice dinner or outfit if you'd like. But a spare $1,000 is best spent on something that lasts much longer, like your investments.

Take some time to decide which route is right for you. Remember, no two investors are alike. Make sure the investments you choose are right for your risk tolerance.

Delayed gratification might not be exciting right now, but you'll definitely feel satisfaction when you watch your money grow. As your savings start to build up, you can work your way to investing $10,000 and beyond.

Remember: All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns.

References

  1. ^ To learn more about Roth IRAs and find out if you're eligible to open an account, go to the IRS website.

Donna Tang is the head of purpose and audience at CreditDonkey, a personal finance comparison and reviews website. Write to Donna Tang at donna.tang@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. This site may be compensated through the Advertiser's affiliate programs.

Editorial Note: This content is not provided by Chase. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by Chase. This site may be compensated through the Advertiser's affiliate programs.

Read Next:


Chase Sapphire Preferred Card
Apply for Chase Sapphire Preferred Card
At Chase's Secure Site
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases within your first year of account opening.
  • Earn 2X points on dining including eligible delivery services, takeout and dining out and travel. Plus, earn 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
  • With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
  • Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
  • Get up to $60 back on an eligible Peloton Digital or All-Access Membership through 12/31/2021, and get full access to their workout library through the Peloton app, including cardio, running, strength, yoga, and more. Take classes using a phone, tablet, or TV. No fitness equipment is required.
  • Go to issuer's official application, terms, and details
Intro APR for PurchasesIntro APR for Balance TransferRegular APRAnnual Fee
N/AN/A
15.99% - 22.99% Variable
$95
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Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

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