So, you have managed to save $1,000 and you are thinking about investing it. A couple things you should consider before dropping that money into some sort of investment are…
- Where should you put the money?
- Is there something else you should do with it?
Many places won’t even allow a small $1,000 investment, but there are some avenues to explore to get that money invested properly.
Savings Accounts
Do you have all the money you need put away for emergencies and unforeseen events? If not, then putting this money into a savings account may be your best option. While you won’t make gains as fast as other investments, you will have the money on hand for life’s unforeseen events.
Pay Down Your Debts First
According to Forbes, you should pay down your debt first before investing. Money compounds both for and against you. When you have consumer debt, especially credit cards, you are paying a much higher rate of interest on those loans than you will make in the market.
Pay off all short-term debts before investing. It’s important to invest early and consistently, but not if you owe significant amounts at high rates of interest. If you have $1,000 to invest in something, the most important “return” on your money today could be eliminating extended debt payments.
Balanced Index Funds
With a cash cushion in place and debts paid off, now it’s really time to invest. If you have $1,000, open and fund an IRA at your bank, or online at a brokerage.
The least expensive and most effective way to invest a small amount is to buy a balanced index fund, such as a Vanguard LifeStrategy fund. Once you have the balance up to $25,000 or so, consider buying a portfolio of inexpensive ETFs and rebalancing that portfolio prudently over time.
Remember, investing, paying debt, and saving all go hand-in-hand, so make sure you put yourself on the right track and secure your financial future the right way.
Article Sources: Vanguard LifeStrategy fund | Forbes