The Best Ways You Can Invest $1,000
You don’t have to be a millionaire to become an investor. In fact, most investors start out young with small amounts of money. If you are an average income earner with considerable amounts of debt in the forms of a mortgage or student loans, you probably don’t have much left at the end of the day to invest. But don’t let that deter you! Here are several reliable ways you can start investing with only $1,000:
Trade Cheap Stocks
If you want great yields and are willing to take on some risk, you can invest $1,000 or even less in penny stocks. These stocks cost $5 or less. The stocks often come from unknown companies and the values are highly speculative. Therein lie the beauty and risk of cheap stocks. You can trade these in the short-term for small gains that can compound into considerable returns.
Keep in mind that because of the speculative nature of cheap stocks, the risk is often too much for regular investors to bear. Don’t buy cheap stocks with cash you really need. Also, be aware that this asset class is rife with scams. Do your research and understand the risks before your start day trading with cheap stocks. If you do it right, the returns can be quite considerable.
Get a Certificate of Deposit
A certificate of deposit (sometimes called a fixed deposit), is one of the few “safe” investments formats. These CDs are given out by banks and financial institutions. Basically, you choose to invest a fixed amount of money in a CD for a given time period such as a year or 5 years. Over this time period, the CD accrues interest and grows. You can cash in the CD or renew it upon maturation.
Fixed deposits differ from savings accounts because you don’t have access to it to either withdraw or deposit money until maturation. Most banks allow CDs for small amounts like $1,000. CDs have higher interest rates than a savings account, but they are not lucrative as stocks. However, CDs are almost guaranteed to pay back as long as you obtain one from a bank.
Lend Your Money to Peers
Peer-to-peer lending is becoming popular as people take out microloans to pay off debt or finance small business ideas. You may have already heard of crowdfunding websites like Kickstarter or Indiegogo. Crowdfunding can be considered a form of peer-to-peer lending. It involves a small investor such as yourself acting like a bank or financial institution.
Just as you borrow money from a bank, you can lend small amounts to friends or family, while charging small interest rates as well. There are online P2P sites where you can lend to strangers on the internet. P2P lending is a business transaction. If you sign a contract, your loan will be legally protected. When you use a P2P website, the site would vet the borrowers for a small charge.
P2P lending can generate better yields than the interest you get keeping your money in a savings account. However, lending money can be risky because some people might just default on small loans. Therefore, always assess the risk versus reward before engaging in P2P lending.
Remember to always educate yourself before you dabble in any form of investment. Don’t use money from your emergency savings account to invest elsewhere. It’s best to save money in advance just for investing for better returns.