How to Invest $1,000

Daniel Penzing
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Nine ways you can grow your money.

A lot of people have, unfortunately, learned first hand how devastating it can be to have money vanish into thin air. It can be extremely tempting to hoard your money and never dip into it except for dire emergencies, but this kind of thinking can hold you back from enriching your life.

How to Invest $1,000 in 9 Steps:

Step1. It is imperative that the first thing you set aside is cash to pay for your commission. Most brokers charge 1% of the total transaction amount, which is standard. When setting aside that money, make sure that it is kept out of your wallet. It is imperative to keep it in a storable (under your bed, in a safe) cash investment.

Step 2. Set aside the money to cover the fees associated with the transaction. Many companies have minimum transaction amounts. Many brokerages also charge a fee for each transaction. Figure out how much money you need for the transaction and make sure that you include it as a part of your commission and fees. An easy way to make sure you have enough money set aside is to subtract the combined fee and commission from the cash investment that you set aside earlier.

Step 3. Once you’ve determined how much money you need to cover the transaction, you need to ensure that you have enough money to cover the fees associated with the stock you will be purchasing.

Step 4. Once you’ve determined how much money you need to cover transaction fees and the stock, you need to consider what bank fees you might generate. Many bank accounts charge a fee if you have a low balance, so make sure you build that fee into your budget as well.

Step 1: Make Sure Your Finances Are in Good Shape

Before you start investing, make sure your finances are in order. Make sure your emergency fund is strong enough that you don’t have to worry about anything coming up short. If you have an opportunity to cut your spending, try to do that.

Step 2: Start Investing Your Spare Change with Acorns

Start by choosing whether you’re going to be investing for the long term (in retirement) or the short term (in your child’s education). As a result, you’ll see a difference in the amount of money you can set aside.

To begin investing, open a free Acorns account. After your information is confirmed, Acorns will ask you to link your Barclays bank account so that your funds can start collecting.

The next step is to add your money. Simply connect your debit card and select the dollar amount you want to invest.

The Acorns app will then take it from there: making the investment for you and moving the money into a virtual account for easy access.

Acorns offers three different types of investment accounts: a traditional investment account, a Roth investment account, and a college savings plan. They also have a feature called Acorns Spend which allows you to round up your purchases to the nearest dollar and invest that additional amount.

The traditional investment and Roth accounts are Acorns Core Portfolios, the three portfolios they manage for you. For more information on the underlying ETFs, please visit the Acorns Core Portfolio Information page.

Step 3: Plan for Retirement Using Betterment

Okay, so you’ve outlined your goals – now you need to put them into action. How? By starting a security blanket nest egg and investing it.

If you plan to invest using the “new and improved” tax code (meaning you’re not investing for a college education or a new home), you should open an individual retirement account (IRA). But if you want the absolute best tax-advantaged account, you should invest using a Roth IRA instead.

The Roth IRA is incredibly valuable because the money you contribute can be withdrawn tax free at any time you choose. This is great news if you’re younger and earn a moderate-to-low income because you can use retirement savings to pay off some or all of your student loans.

But if you borrow a lot of money to start your own business, the ability to withdraw tax free funds can be a lifesaver – because the interest on your student loans is tax deductible.

To open a Roth IRA, all you have to do is fill out a few forms online and provide your bank information for where the deposits will be sent. Most banks offer their own version of a Roth IRA, and many even offer it at no cost.

Step 4: Feeling More Confident? Try M1 Finance

Step 5: Open a Traditional or Roth IRA at an Online Broker

The centerpiece of your investment strategy is your investment portfolio, and to launch your portfolio, you need to open a brokerage account. If you don’t already have a brokerage account, you can open one within minutes online. Choosing an online broker is an important decision because your broker can have a big impact on your investment returns.

Check out full broker reviews from NerdWallet and ask friends and family for their recommendations. We also have other guides that can help you choose a brokerage, including a primer on choosing a brokerage for beginners and a guide on picking an online broker for IRAs.

Once you’ve found a broker, you’re ready to open an account. The type of account you use is up to you; you can use a traditional IRA or Roth IRA. Traditional IRAs provide an upfront tax break, while Roth IRAs don’t provide an immediate tax break, but instead offer tax-free growth.

Step 6: Buy U.S. Treasury Securities

While you’ll want to buy a diverse portfolio to minimize risk of losing your entire investment, you also want to make sure that you are earning a decent return on it.

The easiest way to do this is to invest in U.S. Treasury Securities.

Treasuries are the safest investment in the world, for the simple reason that the U.S. government has never defaulted on a loan. They are also a great way to invest your money because you receive a linearly decreasing rate of return as you invest.

If you want to maximise your profits, then you need to buy the bond that will reap you the largest return with the longest maturity date.

To work out which bond you should invest in, you can use the US Treasury Department’s online tool at TreasuryDirect.gov. Using the website, you will simply input information on how much money you want to invest and the time frame in which you want to earn the return. The website will then display a list of bonds that will suit your needs.

The US Department of Treasury typically releases all the new bonds in one go. So if you register on the treasury website, you should get a notification of the release time.

Once the notification is received, it is essential to be at a desktop computer because otherwise the website will become inaccessible due to the sheer numbers of people trying to access the site.

Step 7: Open a Taxable Account

You now have a 50/30/20 plan for your investments and you've decided that you are going to put your money into a Roth IRA. Now what?

With the money in a Roth IRA and its future earnings protected from taxes, it's time to decide how to invest the money. (You may also want to consider some additional college savings vehicles; we'll discuss that in another article.)

Because these investments are still quite young, it's best to take a "funds-of-funds" approach. This means putting your money into funds that invest in multiple securities, including stocks, bonds, and cash.

The possibilities are many, but we recommend a low-cost index fund over an actively managed fund. The underlying principle: Because the value of the fund will be somewhat based on the performance of the overall market, you want to invest in a fund that specializes in tracking market returns for the long haul. Some possibilities include:

Vanguard Total Stock Market Index Fund (NASDAQ: VTSMX)

Vanguard Total International Stock Fund (NASDAQ: VTIAX)

Vanguard Total Bond Market Fund (NASDAQ: VBMFX)

Step 8. Open A Bank CD

(Certificate of Deposit)

Before we get into the bank CD details, I want you to understand how a CD works. The CD’s return rate is fixed for the entire term of the CD.

This means that you know exactly how much interest you will earn on your CD over the years. This feature is very important because it gives you the power to budget for your CD. You can make a CD work for you by “CD laddering” (more information below).

For the most part, it’s very difficult to access your CD money before the maturity date without paying a hefty fee. This feature is called “penalty-free access” because you can access your money, but you need to pay a fee.

There are two main kinds of CDs: the liquid CD and the time CD. You might find it helpful to think of CDs as working like a retirement savings account. People typically want to invest in liquid assets and to avoid putting their money into anything that has a high level of risk.

Step 9. Invest in Blue-chip Art with Masterworks

Investing in classic works of art is not for everyone, but if you fancy yourself a collector and are even remotely interested in art, it’s worth pursuing.

Some investment advisers call art one of the best investment options because it is not prone to the standard market swings. It doesn’t matter when you purchase your item … as long as its popularity isn’t diminished, you stand to gain from its value.

One option is to pick up an original piece of artwork from an artist whose work you enjoy.

The most expensive option is to buy an original piece from a well known artist who is still producing work. This ensures that the piece will have a lasting value as well as being absolutely beautiful to look at.

Some pieces can go for prices in the millions. Others can go for only a few hundred dollars. The choice is yours!

Remember, the beauty of art is that it is a true investment that needs no upkeep or electricity. It is something you can purchase and have a good feeling about owning it. It’s an investment right down to the little piece of the artist’s life that’s practically frozen in time.

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