How to Invest Your First $1,000
In this video above, I show you some actual returns I’ve made off investments to give you some insight into what you may be able to expect when investing yourself.
Where to Invest $1,000
So, you’ve got some cash saved up, but don’t know exactly where you should invest it– well, this video is for you. Considering the average savings account yields .05% annually, it’s likely you’ll want to invest some money outside of your bank to grow your net worth.
Everyone is going to have different interests, goals, and risk tolerances, so you’ll really have to decide for yourself what you want to invest in, but my hope with this video is for you to see some real examples of returns you could make on different types of investments. Also, some investments are more liquid than others – meaning if you need to quickly access your money for an emergency or whatever, you don’t want all of your funds tied up in a 5-year long investment.
Disclaimer
But first, a quick disclaimer. I am not a finance professional and nothing in this video should be construed as investment advice. Investments have inherent risks and you should do your own research before investing your money. This is simply for your own entertainment.
Growth ETF
If you want to invest in the stock market, but don’t really want to pick individual stocks or really worry about managing your portfolio on a regular basis, you may want to consider putting $1,000 into an ETF.
ETFs are Exchange Traded funds, and they are essentially a collection of different investments. They are bought and sold during the day like stocks and can help you diversify your portfolio or focus some investments on different industries. For instance, this Vanguard Real Estate ETF invests heavily in real estate related stocks and funds.
At the beginning of 2020, I opened an account on M1 Finance to see what it was all about. On this platform, you can build a custom portfolio of stocks and funds or choose to follow some expert portfolios. You can get fractional shares, so even if you want to own a little piece of Amazon but don’t have a few thousand dollars for a single share, you can still partake in the stock.
When you first signup, they have you create a pie of investments you find interesting. I initially picked a few Vanguard ETFs, Apple, and Netflix.
I ended up depositing $1,000 in this account. When it came time to finalize my investments, which they call your Pie, I honestly found their simplification of everything kind of confusing. I ended up only investing in VUG – Vanguard’s Growth ETF.
I made that investment on January 29 of 2020, and now it’s January 2nd of 2021 and this account is up 34%, for a $342 dollar and 30 cent gain. This is a really great return for an ETF. If you remember the March market crash, my account did hit a low of $723.88, but I didn’t sell anything or do anything and just let it ride. The market recovered quickly. So, compared to the S&P 500 as a whole, which is up about 16% for the year, this growth ETF beat the S&P’s returns by more than double.
Since it is a growth ETF, it’s a little more on the aggressive side, but that’s one of the things I like about it. All-in-all, an ETF like this is a pretty solid way to get some decent, hands-off returns.
Fundrise
If you haven’t heard of Fundrise before, it’s essentially a REIT – a Real Estate Investment Trust, but unlike most others, this one is not traded. Fundrise invests in and owns a diversified real estate portfolio and allows the average person to invest in it. They take investor’s funds and use that to buy income-generating real estate investments like apartment complexes.
On their site, they tout that its institutional quality without the fees, due to their proprietary software. It all kind of just sounds like marketing words to lure you in, so I’ve remained skeptical.
Personally, I love real estate, but what can I do with just $1,000? Well, I decided to give Fundrise a shot. In November of 2019, I put $1,000 into a Fundrise account to see what kind of returns I could actually get.
One thing I like is that they will give you updates on what acquisitions and projects your portfolio is currently in. So, they’ll show you photos and give you a brief overview of what they are working on and where, like a multi-family development near Dallas or a Distribution facility for Pepsi.
But the most important part – my return on investment – is sitting at 11.1% overall, with 9.2% for 2020.
Now your shares of Fundrise are meant to be held more long-term – at least 5 years. If you want to cash out before that, there may be fees involved. So, it will be interesting to see how my portfolio here grows. Hopefully more and more of these real estate developments will stabilize and bring in more revenue, increasing my returns.
Individual Stocks
If you want to be a little bit more involved with the contents of your portfolio, you can always just opt to buy individual shares of companies you like. For instance, I first opened a Robinhood account in July of 2019 and my first purchase was four shares of Tesla for $228.97 for a total of $915.88.
Since Tesla underwent a 5-to-1 stock split a few months ago, those 4 shares would’ve turned into 20 shares and the $915.88 investment would be worth $14,113.40 for a 1,433% return on my money. Absolutely insane.
I even bought a 5th share in August of 2019 for $231.88, so all of those shares today would’ve been worth over $17,000.
Unfortunately, my crystal ball was broken, so I did end up selling earlier in the year. I sold 3 for $800 apiece in February and sold my remaining 2 shares in June for about $1,000 per share.
So, my initial $1,147.76 returned $3,252 in gains in less than a year.
Of course, Tesla is an exceptional example and obviously most stocks don’t perform like that, especially in such a short time.
But even a stock like Apple would’ve given you a return of 76% for 2020.
And Apple isn’t really an outlier either – tech was on fire in 2020.
AMD stock gained about 93% in 2020 and Microsoft about 39%.
If you want to invest in some of your favorite companies, you can open a brokerage account on something like Webull. But, no matter what brokerage you use, I recommend looking at a stock’s chart and identifying supply and demand zones to find a good entry.
Of course, if you’re planning on holding your shares for like 10 years, maybe the entry isn’t as important to you.
Bonds
Bonds are definitely not the most exciting way to invest $1,000, but they can be a pretty safe investment. I have an account on a site called Betterment and in 2016 I deposited $200 into an invested savings account consisting of 85% bonds and 15% stocks. About half of this portfolio are US Treasury bonds, which are a form of a government debt security, which makes it virtually risk-free since it’s backed by the US government.
Since it is a safer investment, that means the returns are more modest as well. After five years, my $200 has grown to $237. Oh, and 16 cents. It’s returned 3.5% for the year and 18.7% return after 5 years. So it’s maybe good for diversifying something like your retirement plan, but for me, I’d rather put my $1,000 somewhere else.
Crypto
Okay, maybe you don’t want to stick with boring old stocks and bonds or ETFs and you’re more interested in something like crypto. You’ve probably heard about bitcoin hitting all-time highs in 2020. It’s currently sitting at over $31,000. If you invested $1,000 into bitcoin at beginning of 2020, you’d have over $4,000 a year later for a 400% return.
Of course, the question is can it maintain this kind of growth and since it is a newer, unregulated type of investment, there is inherently more risk that goes along with it.
I bought bitcoin in March for about $6,200, but yet again, my crystal ball was on the fritz, so I ended up selling two months later for a $2400 gain.
Still a win in my book.
Yourself
This one’s a little different than the other 5, but perhaps you don’t want passive investments and would rather invest that money in yourself – whether it’s starting a side business or investing in your education.
With $1,000, you could start the following:
Computer or Smartphone Repair Business
Cleaning Business
Photography Business
Website Design
Tutoring
YouTube Channel
You can use the money to buy any equipment you need and start marketing.
Or, you could take online classes, buy software, whatever you need to do to expand your skillset to help you get a pay raise or qualify for better-paying jobs.
Conclusion
So, when it comes to investing, I’d recommend investing in something you’re interested in. I personally don’t have a solid understanding of crypto, so I tend to invest more in stocks.