You might think you need thousands of dollars in order to start growing your wealth through investing, but believe it or not there are many ways you can start investing even if you have as little as $1,000.
In today’s world, investment companies are realizing that those who don’t have tens of thousands of dollars laying around need to invest money and grow their wealth too.
There are certain companies that have created investment options for the average person by setting lower minimum thresholds for opening accounts, many of which you can start investing with as little as $100.
These investment options offer the ability for people with smaller amounts of cash to get involved in investing just as easily as those with more wealth do.
Is Investing $1,000 really worth it?
Don’t think a $1,000 investment can do much good for your long-term wealth? Check out the investment calculator screen shot below to see how much a $1,000 investment can add up to over time.
If you invested $1,000 today and never added another dime to the investment, leaving it alone for thirty years and earning an average interest rate of just ten percent, you would have over $17,000.
Just think about how much more your investment would grow if you added a small amount of money to it each month. Compound interest truly is the eighth wonder of the world.
If you are wondering how to get started with investing a smaller dollar amount, check out these five ways for investing $1,000.
1. Invest in Real Estate the Affordable Way
One of the more popular ways investors grow their wealth is through real estate investing. It might seem as though real estate investing isn’t feasible for those who have a minimal amount of money to invest.
After all, if you were to buy a traditional rental property, say, a single family three-bedroom home, as an investor you would need twenty percent down plus closing costs.
Add that onto any money needed for updates and repairs and you’re looking at tens of thousands of dollars just to get started.
Fortunately, there are more affordable ways to invest in real estate: through crowdfunded real estate investing.
What is Crowdfunded Real Estate Investing?
When you invest in real estate via crowdfunding, you join together with a group of other investors to fund a real estate investment project that is led and managed by an experienced real estate investment individual or team.
The crowdfunding company who screens the clients who come to it for money (i.e. the borrower) does all of the hard work for you: they screen the potential borrower, assess the profitability of the property and work out all of the loan details.
The crowdfunding company then offers its investors an opportunity to invest a portion of money toward the purchase or construction of the real estate investment property, and shares profits with those investors as the deal makes money.
Investing in crowdfunded real estate investing is truly passive income, as you as the investor don’t have to worry about managing tenants, maintaining the property or handling any legal issues that may arise.
You simply assess the investment, invest your money in deals you think are a good opportunity and wait for the real estate investment market to do its work.
Which Crowdfunding Real Estate Company Should I Use?
There are a few different crowdfunded real estate investing companies out there; how do you know which one is right for you?
One of the most popular crowdfunded real estate investing companies is Fundrise. One of the reasons it’s so popular is because Fundrise works to make real estate investing affordable for nearly everyone.
You no longer need $100,000 in cash to invest in real estate.
In fact, Fundrise has a minimum investment of $500, making investing in real estate even more affordable.
What else is there to know about Fundrise? Here are some features.
- Fundrise offers three types of investment portfolios to choose from: a supplemental income portfolio with a lower risk, a balanced portfolio with a moderate risk and a long-term growth portfolio with more varied risk but potentially higher returns.
- Fundrise charges an affordable asset management fee of 1 percent annually.
- Fundrise investments are open to any U.S. citizen over the age of 18, i.e. you don’t need to be an accredited investor to participate.
- Fundrise offers investments in commercial properties only, mostly in large cities such as Los Angeles or Chicago.
Crowdfunding real estate investing is relatively new on the scene, with Fundrise opening its doors in 2012. Here is how Fundrise has performed over the last 4 years.
Not bad returns if you ask me. Investing in real estate with Fundrise can be an affordable way for investors to potentially earn money with real estate without having to take out loans or do all of the legwork of maintaining a property.
There’s also another crowdfunding real estate investment company that is making big news on the investment world: Realty Shares.
Like Fundrise, Realty Shares helps investors invest in real estate without having to own and manage properties, but its member parameters are a little bit different than Fundrise.
Here’s what you as a potential investor need to know about Realty Shares.
- Like Fundrise, Realty Shares helps investors add real estate investments to their portfolio by offering participation in group investing with experienced real estate investment owners and managers.
- Their typical minimum investment is $5,000, however some of the investments they offer have a $1,000 minimum.
- Realty Shares offers investment deals on both commercial properties and residential properties.
- Realty Shares only allows accredited investors to participate. To become an accredited investor, you must have had income of $200k for each of the last two years (or $300k with a spouse), or a net worth of $1 million.
- Realty Shares charges a one percent annual asset management fee.
EquityMultiple is a real estate investing company backed by Mission Capital. It’s been around since 2015 and offers opportunities to invest in commercial real estate, like multifamily, office, retail, and industrial.
Here are a few things you need to know about EquityMultiple:
- Their online platform is easy to use, allowing new users to get registered in only two minutes!
- The current investment minimum is $5,000.
- Investments are pre-vetted by experienced sponsors and lenders to help protect users.
- Like Realty Shares, only accredited investors can participate.
- Fees on investments are variable, but it is free to browse and start an investment. After that, a small annual fee, usually .5% applies. EquityMultiple also receives 10% of profits after investors have received all of their initial investment back. Plus, there is also a “spread” between the interest rate being paid by the sponsor and that being given to the individual investors.
Crowdfunded real estate investing is one way you could take your $1,000 and get started in the real estate investment market without all of the hassles of owning residential or commercial real estate properties directly.
As a bonus, the money needed to get started in investing through real estate crowdfunding is significantly lower than what you would have to come up with if you were purchasing properties on your own.
Now let’s look at some other options for investing with $1,000.
2. Invest in the Stock Market
Investing in the stock market is another way you can potentially grow your $1,000 into much bigger numbers. People often worry that they don’t know enough about stock market investing to get started.
Or they might wonder how to choose a financial advisor that can help them grow their money in alignment with their life and financial goals.
The good news is that today’s stock market investing companies have made investing easier. Whereas hiring a financial advisor used to be a necessity in order to invest in the stock market, the following companies partner with investors differently.
Let’s take a look at some of today’s more popular stock market investment firms.
Ally Invest offers two different investment management paths for clients, and both come with attractive fee scales.
The first is the Ally Invest Self-Directed trading option. Ally’s self-directed plan fees are among the lowest in the industry, and offer no account minimum balance and promise no hidden fees as well.
They offer free in-depth research and market analysis tools for all types of investment strategies so you can feel more confident in your investment choices.
Those with portfolio balances under $100k will only pay $4.95 per trade, and those with balances over $100k will only pay $3.95 per trade.
The investment options with Ally Invest include:
- Mutual funds
The wide variety of options ensures there is something for everyone at Ally Invest.
Not interested in a self-directed investment plan? Not to worry: for an annual advisory fee of just 0.30%, Ally Invest will manage your portfolio for you. For the managed investment portfolio however, there is a minimum balance requirement of $2,500.
Stockpile is another investment company committed to help all levels of investors. When you open an investment account at Stockpile you can begin buying, selling and trading stock shares immediately. The cool thing is there is no minimum to open an account and you can buy fractional shares of stock for as low as $1.
Stockpile makes it easy and affordable to buy stock for yourself, or give gifts of stock to family or friends. They have thousands of different stocks, ETFs, and ADRs to choose from, and you can buy or give the exact dollar amount you want using fractional shares.
For example: if Amazon is trading at $800 per share, you don’t need to come up with $800 to get started. You can spend $80 to buy 0.1 shares of Amazon.
Stockpile allows people who are over 18 and hold a U.S. Social Security number (they are currently working on expanding outside of the United States) to open either an individual investment account or a custodial account.
A custodial account would be an account opened for a minor-aged child or grandchild, for instance. So, a custodial account would allow you to start investing for minor aged children that are important to you.
You can also give loved ones in your life a traditional gift card or e-gift card to Stockpile so they can start investing for themselves.
“What about fees?” you may be asking. With Stockpile, each trade costs just 99 cents. That makes investing with Stockpile affordable for nearly everyone.
One of the more mainstream ways people invest money in the stock market is via index funds.
Index funds are essentially baskets of stocks (i.e. a mutual fund) constructed to match a specific market index, such as the S&P 500 or the Dow Jones Industrial Average.
By constructing the fund to match a specific index with proven solid return rates, index funds help ensure an investor’s financial growth (although all investments do come with a risk of loss of principal balance).
Index fund investing is a common investment choice among many popular successful investors and are a wise consideration for many investment portfolios.
There are many investment companies that allow an investor to place their money in index funds. The most popular company for purchasing index funds is Vanguard. Here is some information about how investing with Vanguard works.
Vanguard offers index fund investing with low annual fees: 0.1% to 0.2% annual asset management fees, with most funds having an initial buy-in minimum of $3,000, although some funds have a lower buy-in minimum.
The company boasts $4 trillion dollars in global managed assets and has been in business for over forty years.
When it comes to owning index funds for investors with a wide variety of financial pictures, Vanguard is a popular choice with its low fees and low-ish minimum buy-in.
You also have the option to buy index funds through a third-party investment trading company. Some of the more popular ones are mentioned below.
Other types of Stock Market Investment Companies
Companies such as Scottrade, E-trade and Ameritrade offer to sell you index fund shares as well, however it’s important to remember that when buying index fund shares with companies such as these that you’ll pay trading fees on top of your asset management fees from the fund owner, such as Vanguard.
These types of trading companies also offer other investment purchase options – such as individual stock purchases – at an affordable trading price.
If you are looking to purchase index fund shares only, however, I recommend that you go with a direct source such as Vanguard in order to save money on fees.
Betterment is a type of investment firm that works a little bit differently than those mentioned above. Betterment focuses on offering Exchange Traded Funds (ETF).
ETFs trade kind of like stocks. They are most similar to mutual funds. There are stock ETFs and bond ETFs and Betterment offers both to client members.
ETFs often get a bad rap because many ETF fund holders charge high fees, but Betterment has helped change that.
Betterment charges an annual asset management fee of between 0.25 percent and 0.40 percent depending on whether you open their Digital account or their Premium account.
The company promises no additional fees, which means investors are left with more money in their accounts to grow wealth with. The Digital plan has no minimum balance to open an account, which means easy investing for everyone.
Motif is another type of investment firm that works a bit differently from the rest.
From their website:
“A motif is a basket of up to 30 stocks or ETFs intelligently weighted to reflect an investment theme, market insight or innovative trend. Choose from one of our professionally built motifs or design your own.”
Motif also offers individual stock trades, ETF trades and IPO trades. The Motif trade fee is $9.95, and the ETF and stock trades run $4.95 per trade.
For as little as $300 you can start investing in a Motif.
There are many options for investing in the stock market. Do your research and work to discover which option is best for you. Fees are an important consideration as they can eat up your portfolio balance quickly.
Here is some more information about why fees matter and why we recommend investment companies with fair and competitive fees.
Why Investment Fees Matter
The fee percentage a company charges its investors is an important matter because high fees can eat up your investment returns – or even losses – depending on what type of investment account you have set up and how commissions and fees are paid.
Investment advisors charge fees for certain things, such as annual asset management fees or trading commission fees.
If you are working with an investment advisor, one way to keep track of and be aware of fees is by understanding whether you are working with a fee-based advisor or a fee-only advisor.
A fee-based advisor gets paid a commission off of the products he or she sells you; some product owner companies might pay the advisor a bigger commission than others.
This can be a problem because it could tempt an advisor to recommend a product based on the commission percentage.
Fee-only advisors charge a flat annual commission fee that is the same no matter how your account performs.
While some critics claim that this could tempt an advisor to be slack about the growth of their clients’ investments (they get paid no matter how the investments perform), others claim that the lack of product-based commission frees fee-only advisors up to only recommend the products they think will best fit the client.
Which type of investor you choose is up to you, but that is a question to ask before you choose an advisor.
The investment companies mentioned above are mostly robo-investing firms. Some of the companies offer robo-investing options and traditional investing options with an assigned advisor.
Robo-investors usually offer investment funds that come with very limited fees (often between 0.10 and 1.00 percent annual fees), saving investors serious money.
The companies that offer robo-investing options can charge much lower fees and still make a profit because the investment funds they offer are largely self-run, based on calculated algorithms geared toward an investor’s investment goals.
In other words, there is some education that goes into their offerings, which can mean less research for you.
Now that we’ve talked a bit about stock market investing, let’s talk about some other ways you can invest your $1,000 for growth potential.
3. Investing in Peer-to-Peer Lending
Peer-to-peer lending is a form of investing where you as an investor loan money to people in need of loans.
In other words, instead of heading to a traditional bank, credit union or lending company for a loan, people in need of money apply at a peer-to-peer lending company for a loan, and the money loaned to them once they are approved comes directly from investors.
Here’s a more in-depth explanation of how peer-to-peer (P2P) lending works.
People needing a loan apply for that loan via the P2P lending web site.
If the P2P lending company decides the loan is a good potential risk for their investors, they offer for investors to fund part or all of the loan.
Investors are given valuable information about the potential borrower such as their credit score, important credit history information, employment information, income information and more.
The investors then decide whether or not they want to take on the risk of borrowing the applicant some of their money.
Investment returns are based on the interest rate the P2P lending company charges the borrower. The riskier the loan, the higher interest rate the borrower is charged.
The less risk involved, the lower the interest rate the borrower is charged. Investors earn a portion of the interest rate charged on the loan as their investment return.
Each month a payment is made, a portion of that money goes to the investors who funded the loan.
If all goes well, investors earn money on the loans they help fund. If the borrower defaults on the loans they take out with the P2P lending company, the investors lose the funds they contribute to the borrower’s loan.
Most P2P lending companies have different rules and regulations for investors. Today we’ll discuss one of the more popular P2P lending companies: Lending Club.
Lending Club has been pairing borrowers with investors since 2007. Investors have averaged roughly a three to six percent return on average with the company since the company’s inception.
Interestingly, the company’s B and C grade loans tend to have higher returns than the A grade loans (the least risky borrowers), likely due to those borrowers paying a higher interest rate than A grade borrowers.
If you’re looking for something a bit out of the ordinary for investing your $1,000, a P2P lending company might be the way to go for you.
In considering this investment option, I’d recommend checking out a number of P2P lending companies and researching their performance analysis data as well as a few online reviews to see what others are saying.
Knowing what you are getting into and what the risks, rules and regulations of an investment are is an important step before you put your money into any type of investment.
4. Invest in “Online” Real Estate
Wondering what online real estate is? It’s the fabulous world of blog site or web site ownership. When web site owners talk about making money via owning a web site, people often think of unicorns and fairy tales, or simply of money-making scams.
But I’ve learned firsthand that you really can make money by owning blog or web sites. My first money-making blog just recently sold for more than $10,000. Before that, it was consistently providing me with $500 a month in income on average.
Many web sites, including Well Kept Wallet, make much, much more than that in monthly income.
If you can take your $1,000, find a money-making web site to purchase and start having the income proceeds going to you instead of the former owner, you can make your $1,000 back – and more – in a relatively short time period.
How do web sites make money? In a number of ways.
One way web sites make money is through advertisements. You’ll visit a web site, for instance, and see advertisements on a sidebar or within an article published on the site.
When a visitor to the site clicks on those ads to learn more about them, the web site owner gets money. While the cash you can earn for one click is minimal, it can really add up over time.
The more visitors a site gets, the more chance of people clicking on one or more of the ads, and the more chance of an increased income.
Affiliate links are another route for investment return for a web site owner. Web sites often contain a number of links to specific products on the website.
If a site visitor clicks on those links and purchases a product, the site owner gets a commission percentage for the sale.
For instance, a five percent commission on a fifty-dollar sale means the web site owner just earned $2.50.
More visitors to the site and more affiliate links within the site means the chances of earning commissions is higher.
A third potential way web site owners make money is by posting sponsored articles. Sponsored articles are articles written with promoting a specific company in mind.
For example, an insurance company might pay a web site owner $300 to publish an article discussing the importance of having insurance.
The article will include a link to said insurance company, and when readers click on the link it sends more potential business to the company than they would have had otherwise.
It’s a win-win for both sides: the web site owner made $300, and the insurance company gets their name out in front of more potential customers.
Tips for Buying a Web Site
There are a number of ways to make sure you invest your $1,000 carefully on a web site purchase. First, it’s important to get accurate visitor numbers verified through sites such as Google Analytics or Stat Counter.
Have the site seller give you that information directly from the source. Second, get verification of what the site’s current income is.
The going rate for buying a web site generally runs between one and two times the site’s annual income. So, if a site’s net income is averaging $500 per month, a fair price to pay for the site would be somewhere between $6,000 and $12,000.
Web Sites Involve Work
It’s important for you to know that running a web site does involve work. Keeping up on maintenance for the site and adding new content is key.
Promoting the site via social media and other marketing techniques is also important as it will help you grow your readership and potentially increase commissions in the process.
Although maintaining a web site might sound a bit daunting if you’re not a techy person, platforms such as WordPress and coordinating plugins make it super easy for nearly anyone to learn how to run a web site.
5. Invest in Yourself by Paying Off Your Debt
I had to throw this one in for good measure. If you’re carrying higher interest rate consumer debt right now, one of the very best ways you can invest $1,000 is to pay off that debt.
For instance, if you have a balance of $5,000 on a credit card and the interest rate you are paying is the average rate of thirteen percent, you are essentially earning a thirteen percent rate of return by taking your $1,000 and putting it toward that credit card balance.
High interest rate consumer debt is the arch enemy of wealth-building. The compound interest you’ll pay by making just the minimum payments on that consumer debt is overwhelming.
As an example, let’s say you have a credit card balance of $10,000 and are paying the average thirteen percent interest rate on the card.
You only make the minimum payment each month, which equals two percent of the balance. In this scenario, it will take you 29 years and 5 months to pay off that card, and you’ll pay over $11,000 in interest.
Ouch. That’s a lot of money and a really long time to be paying on a credit card.
So, if you are carrying high interest rate credit card or other debt, give yourself a big leap toward debt freedom and put the money toward that high interest rate credit card balance.
Then you can start using that money you were using for your credit card payments to start growing your wealth and working toward financial freedom.
There are many ways you can turn a $1,000 nest egg into a whole lot more money by choosing a wise and calculated risk investment.
Start growing your wealth by deciding which one (or more) of these investment options best suits your investment knowledge and your risk tolerance level.
Sooner than you think, you’ll see that nest egg grow into a lot more money if you choose the right investment option.
Where would you invest your money if you had an extra $1,000 laying around right now?
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