Good Ways to Invest Your Money

So you have a great job, sweet apartment and a cool partner. Next you need to find a few good ways to invest your hard-earned cash. Sure, that new car looks really great, but you want investments that appreciate in value, offer you long-term growth opportunities and fit your busy lifestyle. A few key investment decisions can have you on the path to a better financial future.

Exchange Traded Funds

Exchange traded funds, or ETFs, look like index mutual funds, trade like stocks and have low transaction fees. Some ETFs allow you to buy as little as one share to start an investment account. Your best bet is to invest in a mixture of different ETFs that invest in foreign and domestic financial instruments. This diversifies your portfolio and hedges your hard earned dollars from experiencing too much lose should one sector of the market decline. 

The Drip

Many companies offer dividend reinvestment plans (DRP) also known as Drips. Drips allow investors to invest small amounts of cash on a regular basis. For example, if you skip your daily latte for a week, you could invest that $20 in a dividend reinvestment plan. Some companies offer these plans for free. The key to investing in a Drip is consistency. It doesn’t matter how much you invest, but that you do it on a regular basis.

Certificates of Deposit

Let’s face it, everything can’t be as fast-paced as your lifestyle. CDs represent a safe, slow and steady method of investing. When you put your money in a CD it sits and it collects interest. The longer you let it sit, the more interest it collects. CDs don’t pay the highest interest rates in the world but they do provide a high-level of investment security. All banks require a minimum deposit to open a CD, but that minimum deposit ranges from $1 to $500 or more. The FDIC insures certificates of deposit up to $100,000.

The Best Way to Invest 1,000 Dollars

If you have saved $1,000 for investing, you have a lot of good choices. That amount is enough to start making you some money, and it just happens to be the minimum amount required for many types of investments. In other words, you’re ready to do some research to find the best investment for you and start learning how to earn money with your money.

Indexed Exchange-Traded Fund

Investors can buy shares of an ETF just like they would a stock. The difference is an ETF is like a mutual fund in that it invests in hundreds of stocks. Investors don’t have to go through an application process like they would for a mutual fund. According to MSN Money, an investor should consider an indexed ETF. Indexed means the ETF buys all the stocks that are in an index such as the S&P 500. Your $1,000 is invested in many stocks instead of one. This provides diversity. If one stock goes down, the others may make up for it.

Mutual Funds

“U.S. News & World Report” recommends that investors put their $1,000 in a mutual fund. It particularly likes all-stock-market funds. These funds spread investments across all available stocks. That means if the markets go up, so will the $1,000 invested in it. Of course, the opposite is also true, but as Bankrate.com points out, there’s never been a 15-year period where stocks lost money on average.

TIPS

Investors who want to protect their money may invest in Treasury Inflation-Protected Securities. These are bonds issued by the government that have a special feature. In addition to the interest they pay, they go up in value every six months to match inflation. If investors think an inflationary period is coming, TIPS can be a way to protect an investment. The minimum purchase is $100, so an investor with $1,000 can get 10 of these.

Certificate of Deposit

An investor who wants to stay away from the stock market and bonds may buy a CD through a bank. The Federal Deposit Insurance Corporation insures CDs for up to $250,000 because they count a CD as a bank deposit. Shopping around can pay off. Banks compete for customers’ business and offer a variety of interest rates based on how long the investor is willing to leave the money in the bank. The longer the term, the higher the interest rate.

Real Estate

Investors don’t need a big down payment and lots of real estate expertise to get into the real estate market. ETFs and mutual funds both specialize in real estate. They tend to buy shares in real estate investment trusts. An investor may expect a dividend plus rising share prices as the real estate market goes up. Naturally, if the market goes down this investment could drop as well. Investors must use their own judgment, but this is a quick way to get into real estate for only $1,000.

The Best Ways to Safely Invest Money

So, you’re thinking about ways to make money on all that hard-earned cash you’ve been saving, but not quite ready to take a walk on the wild side of high risk investments. Don’t stress. While "low-risk" is usually synonymous with "low return," there are several ways to safely invest your money.

Dropping that extra money into an interest-bearing savings account is one of the safest ways to invest your money. Savings account terms vary from bank to bank, so you should do a little research to see who offers the highest interest rates for the amount of money you're planning to put away. Some will offer higher returns with higher minimum balances, although the interest rates for savings accounts are generally lower than other types of investments. With a savings account you can access the money at any time, and it is federally insured.

A certificate of deposit, or CD, is similar to an interest-bearing savings account, but with a higher interest return, and penalties for withdrawing your money prior to the term of the deposit. In other words, if you invest in a CD, you won’t be able to access the money early without either paying a penalty, or forfeiting a portion of the interest you have earned. You purchase a CD from a bank or investment firm for a period that can range from six months to a year or more, after which time you are paid back the principal, plus all the accrued interest.

Treasury bills, commonly referred to as T-bills, are a safe investment, but typically offer very little return. To invest in treasury bills, you basically purchase bills at a discounted rate, and hold onto them until they mature to their actual value. In other words, you can buy $1,000 for $990, then be paid $1,000 once the bill matures. Bills can be purchased through brokerage firms, or online through the U.S. Department of Treasury’s Bureau of Public Debt’s financial services company, Treasury Direct.

Money market funds are a safer version of mutual funds, and are an ideal investment option for first-time investors. To understand how they work, you first need to understand what a mutual fund is. When an investment firm pools together money from several investors, to invest the large sum into stocks and other securities, it is known as a mutual fund. When the investors direct the money to be invested in a money market fund, the investment firm is required to invest in low-risk securities, such as government securities and certificates of deposit. Dividends are usually lower, as with any low-risk investment, but you are far less likely to lose your principal investment with a money market fund.