There are people who invest thousands upon thousands of dollars a month, whether in a brokerage account or a dedicated retirement savings plan. But what if you're on more of a budget?
You may not even have the option to invest money on a monthly basis. But what if you've gotten a modest windfall and are looking to use it wisely?
You could be sitting on $1,000 from a recent tax refund, a generous birthday gift, or the remnants of your last stimulus check. Here's how to put that money to good use.
1. Load up on low-cost ETFs
The great thing about exchange-traded funds, or ETFs, is that they don't require a lot of research. That's because they're set up to track the performance of existing market indexes, like the S&P 500. ETFs allow you to invest in a bucket of stocks with a single investment, and when the broad market does well, so do you.
2. Assemble a diverse portfolio with fractional shares
You'll often hear that having a diversified portfolio is the ticket to growing wealth. That means owning stocks across a number of different market segments.
But if you're limited to $1,000, you may not be able to buy up so many stocks -- unless, that is, you opt for fractional shares.
Fractional investing wasn't always so widely available, but more brokerages have introduced it more recently. With fractional shares, you can buy a portion of a share of stock if you can't swing its price in full.
For example, say you want to add Netflix to your portfolio. As of this writing, it's trading at around $489 a share. That may be within your $1,000 budget, but it'll also eat up half your budget, leaving you with little money to invest in other companies
If you buy fractional shares of Netflix, you'll have more of an opportunity to assemble a diverse mix of stocks. That should, in turn, allow you to dabble in different market sectors.
3. Grab some dividend stocks
The great thing about dividend stocks is that they offer you two ways to make money.
First, like all stocks, dividend stocks can grow in value. Secondly, the quarterly dividend payments you collect can be reinvested so that while you may only have $1,000 to put into stocks initially, over time, you can expand your portfolio.
Another thing to keep in mind about dividend stocks is that they offer investors some protection in the face of stock market downturns. If your portfolio value sinks during a market crash, the dividend payments you keep collecting could help offset some of that pain.
Get started today
It's a common myth that you need a lot of money to succeed at investing. The reality is that you can start building a solid portfolio even if you only have a small pile of cash at your disposal.
If you're sitting on $1,000, the best thing you can do is begin investing immediately. The sooner you start, the more opportunity you'll have to grow a lot of long-term wealth.