4 ways to invest your first $1,000, according to financial planners

  • If you’re investing your first $1,000 for maximum growth, try putting your cash into a Roth IRA.
  • Financial planners also recommend choosing index funds or dividend growth stocks.
  • To increase your earnings, spend that money on learning a skill that makes you more valuable.
  • Read more Personal Finance Insider stories.

A friend recently asked me a question that I wasn’t so sure I knew how to answer. They had just set aside their first chunk of cash and wanted to invest it in something. After years of paying down debt, learning sound financial advice, and sticking to a budget, this was a big goal for them.

I am still a newbie in investing. I have only been investing in stocks and funds for less than two years and recently entered into a committed relationship with my retirement account.

Instead of reciting buzzwords to my friends about popular cryptocurrencies, dividend stocks, or mutual funds, I decided to ask the pros.

Here are some tips from financial advisors on the four best ways to invest your first $1,000.

1. Choose a diversified index fund

If you want to invest in the market but don’t want to buy individual stocks, financial planner Kenny Senour recommends investing in a low-cost, highly diversified index fund.

“Fees tend to be much higher in actively managed funds, so starting with a diversified, low-cost

index fund

it can help you stretch your first $1,000 investment much further into the long term,” Senour says. $1,000.”

2. Fund a Roth IRA

While you may be eager to invest that cash in something with immediate returns that you can put to use, Senour recommends considering a Roth IRA.

“Using a Roth IRA to save for retirement can be ideal,” says Senour. “Earnings from the underlying investments in the account grow tax-free, as long as you wait until after age 59½ and the Roth IRA has been initially funded for more than five years.”

3. Go with dividend growth stocks

Keep an eye out for dividend growth stocks, which are stocks that are paying dividends and have been increasing those dividends for a significant number of years in the past. According to Jonathan P. Bednar, II, a financial planner, dividend growth stocks are a smart way to make money now or use those dividends to reinvest.

“I look for companies that have been raising their dividends for 25+ years, turn on dividend reinvestment, and let the company do the heavy lifting,” says Bednar.

4. Invest in your career

While listening to a financial expert might sound like alternative advice, Tony Grenier, a financial planner, recommends taking your first $1,000 and using the cash to enroll in a class that can increase the value of your career.

“You can sign up for data analytics or even content writing courses so you can diversify your skills and then take on newer tasks at work,” says Grenier. “You can also sign up for classes that teach you hobbies like creating crafts, which you can then sell.”

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