Investing is without doubt the best way to build wealth for the long term. If you wish to retire early or just make more money out of your existing fixed income, you need to start investing today. On the flip side of all great investment strategies, there is risk. Determining the right mode of investment can turn out to be a bit of a pain. Especially considering the multitude of options are available in today’s age of information.
But hey, no worries, cause we’re about share some of the very best investment methods for your first $1000. These are low-risk investment strategies that can help you build wealth over time. You can use one or a combination of a few to start your investment habit.
But before we get into it, let’s take a quick look at some things you should consider before making any investments.
What You Need to Consider
- Make sure to thoroughly research the market you’re about to invest in.
- Look out for professional help while planning your investment strategy.
- Review your current financial condition and risk tolerance.
- Understand your investment goals and timeframes.
- Use dollar-cost averaging to create a regular investing discipline.
Related Article: Low-risk Investments and Money-Saving Tips to Boost Wealth
Smart Investment Strategies
Here are some smart investment strategies that can guarantee you solid returns with minimal risk.
1. Build a Real Estate Portfolio with REITs
Real Estate investment trusts or REITs are often considered for novice investors with little cash. For those of you who are new to investing, a REIT is an organization that holds or operates income-producing real estate properties. If you are too cash-strapped to buy properties, REITs are the best options to invest in the lucrative real estate market.
Just like stocks, REITs operate on a highly liquid system and are publicly traded. REITs shares can be easily bought on a typical stock exchange through a brokerage firm. From there onwards, you can easily buy and sell shares without worrying about vending any property.
Pros and Cons of REITs
- Real Estate investment trusts offer unparalleled tax benefits.
- They require as low as $500 to get started.
- REITs provide exceptional returns on investment.
- They provide steady dividend income along with long-term capital appreciation.
- REITs take time. It can take months or even a year to get your money out. Therefore, it’s not recommended for those looking for quick results.
- Investment in REITs requires a fair amount of knowledge about property management.
2. Open A Roth Individual Retirement Account (IRA)
This is a great example of dollar-cost investing where you invest a fixed amount at regular intervals and allow it to grow over time. Any ups and downs you witness over time will get averaged out by the periodical investments, and you can easily avoid market risks.
A Roth IRA lets you invest your after-tax or taxed dollars till your initial retirement. From there onwards, the invested money can grow tax-free. Once you’ve reached your retirement age, these funds can be withdrawn without paying any income tax. This method has proven to be successful for those looking for long-term investment.
What’s great about Roth IRA is that even though there are certain rules to withdraw the interest earnings, you can withdraw the original sum you’ve put in at any time without paying any taxes. This is what makes it an ideal investment strategy for beginners.
Pros and Cons of opening a Roth IRA
- Roth IRAs provide tax-free growth.
- Contributions can be withdrawn anytime without penalty.
- No minimum distributions are required.
- Those who don’t want the Roth IRA income can leave it to get accumulated and pass the earnings to their heirs.
- Maximum contribution limits are low.
- Contributions cannot be deducted in the first year of investment.
3. Start a High-Yield Savings Account
Not storing your spare money in a high-yield savings account is technically throwing it away. Why? Here’s why – A high-yield savings account can provide interest rates of up to 20 times as of a traditional savings account. That makes a big difference. When looking for a high-yield savings account, it is also better to look for one that doesn’t have a minimum balance requirement.
Aside from that, you also need to consider an account that doesn’t charge any additional costs like monthly fees, holding costs, etc. Therefore, opening a high-yield savings account is a really good option for those with zero knowledge of investing.
Pros and Cons of a High-Yield Saving Account
- Provides better interest rates than a traditional savings account.
- Money sitting in a high-yield savings account is always accessible.
- No monthly fees or any additional costs.
- There’s no risk of any kind.
- Interest rates, although high, keep fluctuating.
- Not every high-yield savings account bank has a physical bank location.
4. Invest in Exchange-Traded Funds (ETFs)
Exchange-Traded funds are similar to mutual funds and let you purchase many different stocks. ETFs can track and mimic the price of anything from stocks market indices to commodities or any other assets. For instance, oil ETFs and gold ETFs are examples of commodity ETFs, and S&P 500 ETF is an index ETF.
They reflect the pricing of these commodities, assets, or indices on the market. So, instead of buying physical gold, you can simply invest in a gold ETF. ETFs are also much cheaper than some other investment options like mutual funds, stocks, etc. ETFs can easily be bought through an individual retirement account.
Pros and Cons of ETFs
- ETFs are traded at a price that is updated throughout the day. Meaning that they are traded just like stocks but are less risky.
- Investment is much more diversified.
- Dividends are reinvested immediately.
- Little to no expenses or additional fees.
- Choosing the right EFT to invest in can be a little tricky and sometimes complex.
- Long-term investors may have problems due to quotidian price fluctuations.
5. Use A Robo-Adviser
A Robo-Adviser is a technically enhanced, AI-driven alternative to a traditional wealth manager. In other words, it is an automated investment service that uses computer algorithms to manage your portfolio. They are quite standard these days and are easily available.
You can have your own preferences in investing and set up the Robo-advisor accordingly. Traditional investment accounts require you to maintain high balances in the account. However, most Robo-Advisers have little to no minimum deposit which makes $1000 more than enough to get started.
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Pros and Cons of using a Robo-Adviser
- Using a Robo-Adviser is an easy way for new investors to get into the world of investing.
- There are low fees and balance requirements.
- Robo-Advisers make smarter investing decisions on your behalf.
- Robo-Advisers aren’t 100% personalized.
- Annual fees are required.
- There’s always a risk factor regarding Robo-Advisers as there are no face-to-face meetings.
6. Invest in Stocks (Especially Fractional Stocks)
Investing in stocks is considered quite risky, especially for novices, but one cannot overlook the fact that it can also lead to big-time profits. Stocks can easily be bought and sold through various IRAs and brokerage firms. Though you would need to keep proper monitoring of every fluctuation and price change, or otherwise you may end up with a loss.
When investing in stocks, try to find the ones that have low risk. Companies with a strong market cap, growth potential, etc., come under this category. Also, it is advised to start with fractional stocks first as they are less expensive than a full stock.
Pros and Cons of Investing in Stocks
- Buying and selling stocks is easy.
- There’s a possibility of building massive wealth in a short period.
- The stock market is diversified and there are a lot of options to choose from.
- Investing in stocks can be highly risky when the market is highly volatile.
- It takes time and returns are not guaranteed.
To Sum Up
Since you’ve reached the end here, you must have understood at least something about that how much a $1000 investment can turn into if put in the right direction. With a little understanding and planning, investing isn’t that hard. You just need to gain knowledge as you go.
Safe investment methods can get you started. However, you need to gain more knowledge about investing if you wish to grow your wealth rapidly and get solid returns every year.
The investment strategies we discussed here are less risky compared to others. Just make sure to keep yourself updated with the market you’re investing. Also, don’t forget to diversify your money in multiple investments. It is not a wise idea to keep all your eggs in the same basket. We wish you a happy investment!
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