investing

How to Invest $1,000: 3 Investment Strategies to Grow Your Dough

Janine Perri

WealthFit Contributor

So you just received a holiday bonus. Or an end-of-year client project that netted a nice profit. Or you’ve already built up your emergency fund and you need an action plan for additional savings in the new year. If you earned an extra $1,000 from any of these scenarios, what would you do with it?

It’s a common myth that you need to be “rich” or have a finance degree to be successful at investing. But that isn’t the case.

With the proper knowledge, anyone can invest wisely. The only difference is that only some people choose to learn how.

It’s tempting to take the easy route and put that extra $1,000 into your savings account. That’s what’s expected of you.

The average savings account interest rate is 0.08% APY—and some of the country’s largest banks pay as little as 0.01% interest. Even if you luck out and get a savings account with a 0.1% interest rate, in 40 years you will have earned . . . $41. Yikes.

That’s nothing.

High-yield accounts, also known as Certificates of Deposit (CDs), earn interest rates around 1-3%, but this isn’t the best strategy either.

It’s fine if you know you’ll need access to the money within a specified time frame (like a down payment three years from now), but it’s not too lucrative as a long-term strategy. After 40 years, you’ll only have doubled your money. While that might sound like a lot, it really isn’t.

What you need to recognize in each of the options listed above is that you’re not even keeping pace with inflation.

You might as well be losing money.

So, what’s a better idea?

Here’s one: create a diversified portfolio of investments—ideally ones that require little maintenance but yield handsome dividends.

If you are looking to invest $1,000 outside the traditional stock market (which yields an average rate of return of 9%, but still has volatility), consider one of the following strategies.  

Peer-to-Peer Lending/Microloans

Many people lack the resources or the credit to apply for a loan from a bank. Others need smaller amounts of money known as microloans.

This market gap led to the proliferation of peer-to-peer (P2P) lending platforms, such as LendingClub.com and Prosper.com, which connect potential borrowers with potential investors (like you).

Peer-to-peer lending runs almost exclusively online. Borrowers benefit from a simplified loan application process and more lenient credit requirements. Investors benefit from lower overhead costs than what they’d pay at traditional banks—which puts higher returns in their pockets.

Investors can browse a variety of loans listed on P2P platforms and choose what to invest in based on 3 things:

  1. The total amount of the loan
  2. What it’s being used for, and
  3. What rating it is assigned (similar to ratings used for stocks and bonds).

Like with Kickstarter, investors can also check on how much of the loan has already been funded and then buy shares with just the click of a mouse.

According to Prosper.com, the historical average return on the platform is 5.5%, with a range of returns from 3.4 to 9.8%.  As with other investments, yield can be greater than 25% if you are willing to take on more risk.

A lower loan rating means there is a higher risk of default, but also a higher chance of reward. At Prosper.com, lenders can invest as little as $25 per note. With a $1,000 investment, that’s 40 notes that can be diversified across different borrowers with varying levels of risk.

One final benefit of microloans? They are often used to finance entrepreneurs who would otherwise lack the resources to start up their idea. By investing in microloans, you are also helping entrepreneurs achieve their goals and funding businesses that might have the power to make a big impact on the world.

Real Estate Crowdfunding

Interested in investing in real estate but unsure if you have the necessary funds or time at your disposal?

There is a way to dip your toe in real estate investing and start making the stock market average or better in returns.

Online platforms like Fundrise, RealtyMogul, and Rich Uncles enable you to buy shares in commercial or residential real estate, similar to the crowdsourcing model described in P2P lending.

This type of investing is also known as keeping an electronic Real Estate Investment Trust (eREIT).

Compared to traditional real estate investing, through which you might purchase an entire property for much larger sums, you can build a diversified real estate portfolio with eREITs . This means that you can invest in everything from single-family homes to larger, more expensive properties like apartment complexes.

There is usually a minimum buy-in for real estate crowdfunding. At Fundrise and Rich Uncles, you can begin investing with only $500 per share. That means with $1,000, you can buy a share in two different properties to diversify your real estate portfolio.

You can review and choose which properties to invest in based on their investment ratings and projected returns. According to Fundrise, the platform’s average annualized returns in 2017 were 11.44%, but they vary depending on the level of risk.

With real estate crowdfunding, you should also determine whether you want to invest in a debt or equity offering.

Equity investment returns are based on a share of the net profits from the property (like rental income), so investing in equity offerings is often better for long-term investors.

Debt investments are based on a fixed interest return, usually from developers who are borrowing the money and paying interest back to investors. This makes it better for short-term investments.

Many properties also offer a hybrid of the two, so determine your investment goals and choose the property that works best for you and your wallet.

Turnkey rental real estate

Another passive income investment opportunity is turnkey real estate. Turnkey real estate offers the financial incentives of being a landlord—without the investor ever needing to deal with tenants or toilets.

Turnkey real estate companies such as Memphis Invest and JWB offer new or renovated properties for investors to purchase. These properties are then rented out to local tenants.

The idea behind turnkey real estate is that the properties are “move-in ready” and will quickly acquire tenants with little to no renovation work needed.

Many of these properties are located in midwestern or southern states, which tend to have lower mortgage costs than coastal states. In these areas, you will be able to find properties that will have mortgages that ask for less than $1,000 per month after the initial (higher) down payment.

Investors usually hire a management company to handle operations and many do not visit the property while tenants are living there.

Return on investment varies from property to property, but investors can safely expect decent returns. Investors who buy turnkey real estate receive a rent check every month, which should cover the mortgage and property management—and still provide a steady passive income stream.

Yourself

Remember that old adage about how if you teach a man to fish, it will feed him for a lifetime?

Learning is an investment in your biggest asset: yourself.

Equip yourself with the tools and skills you need for career, business, and investment success so that you will be better prepared to make smart decisions that will pay lifelong dividends.

If you are looking to start a business or achieve financial independence through smart investments, enroll in training courses or pursue a deeper education to fill in your knowledge gaps. Financial knowledge can help make you a better entrepreneur and investor.

Whether you are a novice or advanced investor, any of these options is a solid alternative to traditional models of saving and investing.

Regardless of what you choose, diversify your portfolio and aim for more than the average ROI.

Share

Written By

Janine Perri

Janine Perri is a freelance writer and marketing professional with experience writing about business, marketing, education, travel, and language services.

Read more about Janine

RELATED TRAINING

 in 

INVESTING

live talk
Why You Need Education — Not "Advice" — to Invest in a Pandemic

In the midst of the economic outfall from the COVID-19 pandemic, many investors are wondering whether to buy, sell, or hold their current stock position, along with many other burning investing questions. Andy Tanner, the founder of the Cash Flow Academy and Rich Dad's Advisor on Paper Assets, explains that what sets apart those who will come out ahead versus those who lose money at a time like this boils down to one question: “do you want advice or do you want to get smarter?”

Why You Need Education — Not "Advice" — to Invest in a Pandemic

Listen Now
live talk
Why Hiring The Right Financial Advisor Is Essential

What are fee-only advisors and are they for you or not? Dustin Mathews and guest Taylor Schulte talk about staying wealthy, conflicts of interest, and having an efficient financial planner. You'll also understand what the single biggest purchase of your life is and how you are making tax decisions every single day!

Why Hiring The Right Financial Advisor Is Essential

article
6 Options Trading Strategies for 2020

Utilize these 6 options trading strategies whether the markets are bullish, bearish, stagnant or volatile.

6 Options Trading Strategies for 2020

Chris Beer

Read Now
article
How to Buy a House Without a Realtor

Follow this 8-step process to buy your dream home while avoiding paying hefty fees to a realtor. Also, learn how to find the right real estate attorney and the best inspectors.

How to Buy a House Without a Realtor

Abhi Golhar

Read Now
live talk
A Radio Ad, The Rehab & Purposefully Networking

Amy Mahjoory takes us through her journey from leaving corporate America and investing in Fortune Builders, to building her real estate empire. Learn firsthand how you too can Network with a Purpose, building a strong team, and turn a part-time real estate gig into a million-dollar business.

A Radio Ad, The Rehab & Purposefully Networking

article
Options Trading Made Simple

Learn what it means to trade options — and the strategies and tools you need to get started.

Options Trading Made Simple

Chris Beer

Read Now
live talk
Almost Going Public, Investing In Horses & Culture

From restaurant investor to horse investor, Eric Berman is the "Millionaire Matchmaker" who pairs investments, brands and influencers with their ideal audience! Listen in as he and Dustin discuss the best ways to brand a business and teach you exactly how to stay on top of digital marketing trends.

Almost Going Public, Investing In Horses & Culture

live talk
Rebounding From A Near Death Experience, Bankruptcy & The Crash

In this jam-packed talk, Dustin is joined by real estate investor and tech entrepreneur, Steve Jackson. Listen in and hear the "close calls" that finally led to the dream of having a portfolio of passive income-generating properties.

Rebounding From A Near Death Experience, Bankruptcy & The Crash

article
A Beginner’s Guide to Investing in Oil & Gas

Learn the top 6 ways to invest in oil or gas from anywhere — PLUS discover the specific tax advantages to petroleum investing.

A Beginner’s Guide to Investing in Oil & Gas

Cash Lambert

Read Now
live talk
Title Insurance Explained

If you've ever purchased a property, you've almost certainly had title insurance reducing your risk. But what happens when things go wrong? Jeff Gross, explains all in this eye-opening talk.

Title Insurance Explained

Investing 101 for Teens

Investing 101 for Teens

The Beginner’s Guide to Smart, Successful Investing

JP Servideo

Watch Now
live talk
Celebrity Deals, Pitch Tips & Angel Investing

Greg Writer is a serial entrepreneur who started trading stocks at 19 and now makes tens of thousands of dollars a month. Learn from his mistakes and successes as he talks about his experience as an Angel Investor.

Celebrity Deals, Pitch Tips & Angel Investing

article
The Simple Guide To REITs: How To Invest In Real Estate With Less Risk & Regular Returns

Thinking about investing in a Real Estate Investment Trust (REIT)? Learn what they are, how they work, and how to pick the best one for you.

The Simple Guide To REITs: How To Invest In Real Estate With Less Risk & Regular Returns

Abhi Golhar

Read Now
article
How To Take Investing Seriously & Stop Playing With Your Money

Don McDonald dispels the most common myths about investing and lays out a strategy for a balanced portfolio and consistent returns.

How To Take Investing Seriously & Stop Playing With Your Money

Don McDonald

Read Now
live talk
How To Invest In Apartment Buildings

Michael Becker of SPI Advisory, on apartment building investing: how to find properties, make deals, and create passive income from rent.

How To Invest In Apartment Buildings

The Early Retirement Blueprint

The Early Retirement Blueprint

How To Build Wealth Faster & Accelerate Your Retirement Timeline

Tom Wheelwright

Watch Now
Before You Invest

Before You Invest

The 4 Secrets to Making Smarter, Safer Investment Decisions

Andy Tanner

Watch Now
Cash Flow The Stock Market

Cash Flow The Stock Market

How to Leverage the Stock Market to Create Multiple Streams of Income

Andy Tanner

Watch Now
Stock Investing 101

Stock Investing 101

How To Invest In Stocks (Even If You Have No Money To Invest)

Andy Tanner

Watch Now
Invest Like Warren

Invest Like Warren

How To Make Money With Assets You Don't Even Own

Andy Tanner

Watch Now
Start Your Own Real Estate Investing Business

Start Your Own Real Estate Investing Business

How to Flip Houses & Buy Rental Properties for a Living

Than Merrill

Watch Now
article
From Zero to Hero: Get a Financial Education & Start Investing Right

You don’t have money—yet. Learn how to begin businesses, invest in real estate, and make your start in the stock market from scratch.

From Zero to Hero: Get a Financial Education & Start Investing Right

Andy Tanner

Read Now
article
7 Ways to Invest in Real Estate With Little Money

Any cash you put in a real estate investment is cash you can’t use elsewhere. Here are 7 ideas to get that upfront cash as low as possible.

7 Ways to Invest in Real Estate With Little Money

Justin McCormick

Read Now
Freeing Your 401(k)

Freeing Your 401(k)

How to Route Your Retirement Funds into Passive Investments

Andy Tanner

Watch Now