You'll often hear that it takes money to make money. But let's face it -- money can sometimes be in short supply. And if you only have limited funds to work with, you'll need to invest your cash wisely. If you're sitting on $1,000 only, here are three great investments to think about adding to your portfolio.
1. S&P 500 ETFs
The great thing about exchange-traded funds, or ETFs, is that they don't require a ton of research. Plus, they're an efficient way to build a portfolio that's more diverse.
It especially pays to invest your money in S&P 500 ETFs. The S&P 500 consists of the 500 largest publicly traded companies, and it's generally considered to be a broad indicator of how the stock market on a whole is performing.
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This isn't to say that the S&P 500 can't take a dive if that's what market conditions dictate. But over time, the index has historically done well and has rewarded investors who have stuck with it, which makes it a good bet when you only have limited funds to work with.
2. Dividend stocks
Dividend stocks are actually a great investment to hold onto during periods of stock market volatility. The reason? Companies with a long history of paying dividends tend to continue doing so even when their share prices decline. And so if your portfolio value drops on a whole, the dividend payments you collect during a downturn could help offset that loss -- even if it's just a loss on paper or on screen.
Of course, one great way to maximize your dividends is to set them up to automatically get reinvested. In fact, if you only have $1,000 to sink into your portfolio right now and don't expect a huge influx of cash anytime soon, dividend stocks could help you keep investing, even during periods when money gets right.
3. Fractional shares
Fractional shares allow you to invest in the stocks you want to own -- only at a fraction of the cost. If a given company is trading for $500 a share and you don't want to spend that much on a single share of stock (which is understandable if you're limited to a $1,000 investing budget), you can buy a portion of a share instead and spend, say, $125.
Fractional investing can help you assemble a wider mix of stocks when money isn't abundant. And while not every brokerage offers fractional shares, a growing number are adopting this option.
Don't let a lack of money hold you back
In the grand scheme of your investing career, $1,000 may not seem like much. But remember, just because you're starting out with $1,000 doesn't mean you won't end up with a lot more in time. In fact, the great thing about investing is the ability to turn a modest amount of money into a larger sum. And while your goal should be to continuously pump money into your brokerage account, if you're limited to $1,000 right now, you still have plenty of great choices.
