Starting something new can be daunting. How do you even start? How to Invest your first $1000 | Investing for Beginners. If you have one thousand dollars saved up, how do you make that money grow? And how long will it take? There are a few specific options you have to invest that thousand dollars and it isn’t nearly as complex as you might think. In fact, we’re going to look at exactly how to distribute that money for the best results. So get out your Moleskin and start taking notes. This is going to be fun!
Invest your money in is yourself
The first and best thing to invest your money in is yourself. In order to make yourself more profitable and provide the most options, investing in your own skill development is a great first step. If you develop the right skills and knowledge you could effectively double or triple your potential earning potential. And I’m not talking about getting a degree at the local university or college. This is about targeting specific revenue-earning skills that you can develop to help you level up how much you bring in. More than any stock, bond, index fund or business, investing in your ABILITY to make money is the best way to invest your money. Of course, don’t just do it randomly. Have a game plan. Research options and find the best skills that match your interests and preferences. Even if you already have a job you love, you can still level up by pursuing a certification.
Put it towards a diversified portfolio
The second best way to invest your first $1000 is to put it towards a diversified portfolio. How? With the power of index funds and ETFs! These funds allow you to purchase an interest in thousands of companies all at once. ETFs such as VTI represent the entire stock market. Others, like VOO, represent an established segment such as the S&P 500. ETFs are great because they are passively managed. So you don’t need to do anything and the fees are quite low. Even Warren Buffett believes that index funds and exchange-traded funds (ETFs) are the ideal investments for average investors. He is so confident in this approach that in 2007, he wagered $1 million with a hedge fund manager that he would outperform any active hedge fund trader with his passively managed fund approach, and guess what?
He won! Over ten years, Buffett’s S&P 500 Index Fund generated returns of seven point one percent compounded annually. Buffett did nothing during the entire period and outperformed active traders, who only gained 2%.That’s why a great investing strategy is investing in ETFs. After ETFs, the next best place to put your $1000 is in a growth exchange-traded fund for the technology industry. A lot of the biggest and fastest growing tech firms, like Apple and Microsoft, are included in the Nasdaq 100 index. The Nasdaq 100 Index is a collection of the 100 largest and most actively traded firms in the United States. It is riskier, which is actually good for your portfolio, since there is more growth potential. Having this allocation exposes you to some of the best-performing stocks over the last ten years, such as Tesla and Amazon.
Of course, right now tech stocks are being hit hard with the ongoing recession, but that is actually a good sign for you! It means you’re able to buy all of your shares at a discount! Based on historical performance the tech industry will eventually rebound. And when it does you’ll be in a good position. Of course, you should always do your due dilligence and not just take some random YouTube video’s advice. But, technology stocks have generally done pretty well so it is likely they will continue to do so in the future. The next option for investing is through international stocks. Several firms advised placing greater attention on European markets in 2022. The present interest rate and inflation environment in the US market are causing uncertainties.
When there is uncertainty, many investors diversify their investments. And they invest in foreign markets. It can be done through ETFs like VXUS. Vanguard’s VXUS gauges the investment return of equities issued by multinational corporations. This provides exposure to markets outside of the US stock market. Finally, I would look at investing the rest of your money in a high-yield dividend exchange-traded fund, such as VYM from Vanguard or SCHD from Schwab, which is a U.S. dividend equities ETF. Even experts advise investing in value stocks with strong cash flows since they can outperform the market. In the current state of the US economy, dividend ETFs are very beneficial.
And you can never go wrong with a Roth IRA. This is for investors seeking long-term investment. If you’re buying stocks and saving for your retirement, put money into a Roth IRA. Your profits from your stocks will not be subject to taxation. But to withdraw the money, you must be of retirement age. And, believe it or not, I would also allocate a little bit of the money on your own happiness and well-being. Take 5 or 10% and buy something for yourself. Sure, you can invest it, but providing for your emotional and mental well-being is also a great investment. Maybe a quick stay-cation to a local resort? Or treat yourself to a spa day. It is entirely up to you how you spend it.
Of course, one thousand dollars isn’t enough to live off of, and you know this video wasn’t about turning that into a million dollars overnight. That’s impossible. But it is possible to use that money to invest in your future and start setting yourself up for success. The biggest barrier to investing is deciding to start. Starting is hard, but with some knowledge and strategies in place, you can make it happen! And this is just the tip of the iceberg. If you have other strategies you’d like to share, then leave them in the comments below!