3 Smart Ways to Invest $1,000 in 2024

In 2023, I made the questionable decision to stick retirement money in a regular brokerage account. A mistake, in hindsight, and one that could cost me thousands in the long run. To avoid making another costly mistake, I've been thinking about a better way to invest.

This year has been a rocky one. According to Fed data, rates are the highest they've been since 2007, and the S&P 500 has yet to recover to all-time highs. In times like these, it's important to consider investment opportunities both timely and timeless. Here are three to ponder for 2024.

1. Invest $1,000 in an IRA

My biggest regret this year is buying stocks through a regular brokerage account. Most brokers let you invest money for retirement in IRAs, which give special tax advantages. If I could turn back the clock, I'd buy stocks through my Robinhood IRA, likely saving me from needing to pay $11,000 in capital gains taxes after retirement.

The choice of whether to invest in an IRA comes down to whether you want to use that money for retirement. If so, it's worth doing. You get tax breaks, plus all the perks of investing in the stock market. It's such a good deal, you're limited to investing $7,000 in your IRA in 2024.

The downside of investing in an IRA is you're penalized for withdrawing money early, with some exceptions. An IRA is an evergreen place to invest $1,000 for retirement -- the tax advantages remain constant, no matter how much rates change.

2. Invest $1,000 in an emergency fund

Finance gurus Suze Orman and Dave Ramsey are advocating for the emergency fund more strongly than ever before. They're onto something -- according to a SafeSecure survey, 63% of employees can't cover a $500 emergency expense.

An emergency fund is a safe, profitable place to invest in your financial security. You can keep yours in a high-yield savings account and earn interest on your money. A typical recommendation is to save three to six months' worth of expenses (or income). At that point, you can weather a lot of financial uncertainty without taking on debt.

It works by providing you with an alternative to taking out loans to pay for emergency fees like insurance deductibles, and if you were to lose your job, you could pay bills from it. It's better than borrowing money because you pay zero interest on withdrawals. Right now, an emergency fund is a smart place to invest $1,000. Think of it as a loan to future you. You lose a little now to save later, when it could be more difficult.

3. Invest $1,000 in a CD

This year, the Federal Reserve has raised interest rates, continuing a trend that began in 2022, with huge ripple effects on financial accounts. The highest-yielding accounts now offer up to 5% or higher yields instead of 0.50% yields. In other words, there's a lot more money to be made.

CD rates have also gone way up, and they're better than savings accounts in one key way: they let you lock in high interest rates. Should the Fed lower rates to pre-pandemic levels, savings account rates will probably follow…but CDs will keep raking in historically high interest until they reach term. If you stuck $1,000 in a 5-year CD with a 5% APY today, but rates drop by mid-next year, you'd still be guaranteed that 5% on the remaining four-plus years of your CD term.

The downside of a CD is similar to the downside of an IRA: you get penalized for removing money early. It's best suited for an investor with a low risk tolerance, diversified portfolio, and the power to leave a $1,000 investment alone for six months to five years.

How to choose where to invest $1,000

If my mom invested in the same places as me, she'd have a panic attack. She tolerates less risk than I do, so she chooses stabler investments. She also has a shorter time horizon than I do; it's important to her that stocks don't lose 50% of their value 10 years from now. That matters.

I, on the other hand, can afford to wait decades for the stock market to rebound. I can invest in volatile stocks and buy Bitcoin stress free. My priority is earning high returns over long periods of time, and knowing that makes it easy to choose where to invest in 2024.

I'll be investing my $1,000 in an IRA. What are your priorities? The smartest way to invest $1,000 in 2024 is likely the one that suits your personal risk tolerance and time horizon.