How to Invest $1,000

Investing even small amounts consistently pays off over time.
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If you have money left over at the end of the month, count yourself fortunate. It means you're not living paycheck to paycheck. But it does bring up the question of what to do with that extra money. You have four basic options: You can spend it, save it, invest it or give it away. If you choose to invest it, learning the "how" of investing is at least as important as deciding what to invest in, regardless of whether you have $1,000 or $10,000 to invest.

Step 1

Determine what you want your $1,000 investment to do for you. The U.S. Securities and Exchange Commission refers to this as defining your goals. There is no one-size-fits-all approach when it comes to investment goals. Yours are unique to you, and what might be a completely appropriate goal for your brother or your next-door neighbor might be completely wrong for you. Things to consider when defining your investment goals include how long you can afford to leave your money invested, how much risk you are comfortable taking with your investments, what kind of return you need your money to earn and how your investment will affect your taxes.

Step 2

Research what kind of investments you can buy with $1,000. Some investments require more than $1,000 for their initial buy-in, so if you only have $1,000 to invest you can scratch those products off your list. Consider how much it costs to buy a particular investment product and how much it might cost to sell or redeem it later on. For example, you'll pay a commission when you buy and sell stocks. Your bank might not charge anything if you put your money into a certificate of deposit, but if you have to break it early you might get hit with an early withdrawal penalty. Some mutual funds have a sales load, while others don't.

Step 3

Assemble a team of financial professionals to assist you with your investment game plan. These pros might include your local banker, stock broker, insurance agent, tax accountant or financial adviser. You probably won't need all of these individuals for every investment decision you make, but when you need to make a decision it's good to be able to turn to someone you trust with your money. Regardless of what kind of financial professional you need, the SEC recommends that before signing up for their services you ask a lot of questions. Ask about their qualifications, training, experience and fees. Make sure they understand your goals and have your best interest at heart. When it comes time for investing that $1,000 they can help you with the "what to invest in."

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