One of the biggest mistakes that novice investors make is thinking that they have to have a lot of money in the bank for them to even consider investing in the first place.
Nothing could be farther from the truth. In fact, you can begin a successful investing career with as little as $1,000, as long as you know where to start and what to do.
Of course, that raises the question of how you can go about investing your first $1,000 so that you have the best chances of seeing a return that may be able to benefit you and your family. There are a number of ways that you can go about it.
Consider The Long Term
Don’t go into investing feeling as though you need to make a quick profit from your $1,000. Doing this may lead to you making hasty decisions that don’t actually benefit you in the long run.
You should always have a plan of action. Consider all of the options that are open to you in terms of how they may pay off in the future, instead of what they may be able to provide to you right now.
A good index fund can help you to track the latest developments in the market and will provide you with a diverse portfolio that is centered around ensuring your money is invested in areas that are most likely to see success based on the information that is currently available.
Best of all, there are a number of services available that remove a lot of the heavy lifting for you. Robo Advisers can help when it comes to deciding where to invest, and there are also a number of companies who can provide similar services for small fees. The advantage of an index mutual fund is that it provides a broad exposure to the markets, while also lowering your operating expenses and ensuring a lower portfolio turnover.
A Retirement Fund
As mentioned, you should always be looking towards the future when it comes to investing. While taking the risk with stocks and bonds may help you to see large returns, a good retirement fund will allow you to collect interest on your investment that could help in giving you a comfortable financial future.
With the retirement fund opened and a good chunk of money invested in it, you can focus on building your wealth and saving regularly with a view to taking control of your financial future.
Consider Paying Off Debt
Paying off your debts can be seen as an investment because it allows you to clear some of the obstacles that may be holding you back from exploring other options.
Think of it like this. The interest that you pay on your debts is money that you could invest elsewhere. Instead, it just goes into the pockets of the people who hold the debt and is lost forever. By dedicating your $1,000 to that debt you can pay it off quicker, which means the money you save on interest payments can then be invested in something that may directly benefit you.
Don’t Be Afraid to Experiment
Starting small with $1,000 also gives you room to experiment and find your way around the world of investment. In the grand scheme of things, it is not a huge sum of money as long as your $1,000 is separate from the money you need to maintain your lifestyle.
As such, you can try a few different things with the money. Invest in a few shares of your favorite company while also considering other options, like a mutual fund. Hopefully you will see a return. However, if you don’t you will still have learned valuable lessons about what works for you and what doesn’t, which means you are better informed in terms of how to use any other money you have to invest in the future.
Don’t Put All Your Eggs In One Basket
Committing all of your $1,000 to a single investment or idea limits the potential for learning from the choices you make and could put you in line to quickly lose your money if that single investment goes south.
Your aim should be to use that money to build experience and try other things. In doing so you also build diversity into your portfolio, which lowers the risk of you losing it all in one fell swoop.
Always Do Your Research
Even with a sum as relatively low as $1,000, you should get yourself into the habit of doing your research before investing into anything. Read up on the structure of any mutual funds you are considering, compare different retirement funds if that is a route you are interested in and make sure you have a solid understanding of any companies you invest in and the industries that are a part of.
As you get deeper into investing and start to gain a larger income, you will find that this research proves invaluable when it comes to lowering risk. That first $1,000 will shape the choices you make in the future.
Not every investment you make needs to be for an exciting opportunity that brings something brand new to the industry. There is a lot to be said for investing in “boring” areas that offer little risk, as they will be most likely to generate steady income.
Playing it safe is nothing to be ashamed of and doing so may help you to make more from your $1,000 that you can use to take a few risks.