At this point, a lot of people have received a $1,400 stimulus check as part of the $1.9 trillion American Rescue Plan. And if you haven't seen your money yet, don't worry -- that check could still be in the mail.
Some people will no doubt need to use their stimulus funds to pay for essential expenses, pad their savings, or dig out of unhealthy debt (like credit cards). But if your finances are in good shape -- say, your income never dropped during the pandemic and you've actually been saving more money than ever due to not commuting or traveling -- then you may have a lot more flexibility with your stimulus check. And in that case, it pays to invest your $1,400 because if you do, you might grow it into a much larger sum.
Of course, that begs the question -- what exactly should you invest in? Here are three options worth looking at.
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1. Index funds
Index funds are passively managed funds that track different market indexes. An S&P 500 index fund, for example, will aim to match the performance of the S&P 500, an index comprised of the 500 largest publicly traded companies by market capitalization.
The benefit of investing in index funds is that you get instant diversification in your portfolio. Index funds are also a good choice for investors who are nervous about handpicking stocks or don't have the capacity to research companies one by one. While index funds won't help you beat the broad market's performance, you can still do quite well by investing in them.
2. Dividend stocks
The great thing about dividend stocks is that they allow you to make money in two ways. First, like all stocks, dividend stocks have the potential to appreciate in value over time. You might buy shares of a dividend-paying company at $100 apiece right now, only to have those shares soar to $200 a pop through the years.
Secondly, dividend stocks generally pay you quarterly just for holding them in your portfolio, and that extra money is cash you can then reinvest for added growth.
3. Real estate
If you're sitting on a $1,400 stimulus check, you may be thinking that buying real estate with it is out of the question. After all, how far is $1,400 going to get you as a down payment on an income property?
But remember, you don't have to buy physical properties to invest in real estate. Instead, you can look at buying real estate investment trusts (REITs). Publicly traded REITs are similar to stocks in that you can buy them on an exchange and hold them in an ordinary brokerage account.
Of course, choosing the right REIT is crucial, and there are some REITs that are a more stable bet than others right now. Mall REITs, for example, are somewhat of a risky prospect due to the record number of retailers that have grappled with revenue losses during the pandemic. (If stores close, malls lose out on rental income.)
But given that many consumers have adopted online shopping habits during the pandemic and digital sales have picked up over the past year, industrial REITs may be a more lucrative bet. Those include properties like warehouses and distribution centers.
Put your $1,400 to work
It's not every day that you get an extra $1,400 you didn't specifically have to earn. If you're sitting on your stimulus check (or awaiting one), be sure to put that money to good use. All of these investment options could help you grow that sum into an even larger total -- and improve your financial picture on a long-term basis.
