How to invest $1,000 right now
Doing the smart thing with $1,000 can change your life.
Not a decade from now. But right now.
Start by considering two good ideas that never go out of fashion:
Pay down high-interest credit card debt. This guarantees you'll waste less on interest charges the very next month, and the month after that, and the month after that. You'll have more money to spend on other needs. Our calculators can help you devise a plan for paying off one credit card or a bunch of credit cards.
Build up your emergency fund. Stop living paycheck to paycheck. Being more prepared for financial traumas, from major car repairs to layoffs, will make every minute of your life less stressful. If you can't cover three to six months' worth of living expenses, you don't have enough.
Got those covered?
Then use that $1,000 to try a new way of saving -- and building wealth.
With interest rates on savings accounts and CDs at record lows, there's never been a better time to consider:
Series I Savings Bonds. CD rates are so low that these government bonds have become an alternative. They're paying 1.74% right now, which is more than average six-, 12-, 24- or even 36-month certificates of deposit. Just remember that the interest rate on Series I Bonds resets every six months to reflect the current rate of inflation. Buy them online at TreasuryDirect.
No-load mutual funds. These mutual funds allow you to invest to buy shares with no commissions or transaction fees. Although many have raised their minimum initial investment amounts to $2,500 or $3,000, there are ways around that. T. Rowe Price, for example, drops its $2,500 minimum investment to $50 if you agree to make regular monthly contributions of $50 or more, or to $1,000 if you place those mutual funds in an Individual Retirement Account.
Exchange-traded funds. ETFs are similar to mutual funds in many ways. But while mutual funds must be purchased through the investment company that created them, shares in ETFs are traded on stock exchanges. That means you can buy into them through discount brokers such as E*TRADE Financial or Charles Schwab that charge less than $10 a trade.
Direct stock purchase plans. More than 400 well-known companies such as Coca Cola, McDonald's and Procter & Gamble allow you to bypass a broker and buy shares directly from them commission-free, often with a minimum investment of $100 or less.
Dividend reinvestment plans. If you already own stock, sign up to have your dividends automatically used to boost your holdings. Most of the 1,100 companies that offer dividend reinvestment plans will also allow you to kick in additional cash and buy more shares, commission free.
Indexed CDs. The return on indexed or market-linked CDs isn't fixed as it is with traditional CDs. Many are tied to a stock market index like the S&P 500, although it can also be dependent on everything from commodity prices to Treasury bill rates. If the index is higher on the maturity date than on the purchase date, you make money. If it's not, you earn nothing.
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