4 Ways to Invest $1,000 in 2024

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Investing can be a great way to beat inflation and get rich over time. Discover four ways you might use $1,000 to build wealth this year. 

If you’re starting the new year with $1,000 and plans to invest it, congratulations. Investing — buying assets that you hope will accumulate value over time — can be a great way to build wealth. And there’s no time like the present to get started.

Before we get started on ways to invest, a word about emergency funds. Investing for the long term — at least five years — means your money has more chance to grow. And having three to six months of living expenses socked away in a savings account can help you leave your investments alone. It’s a cushion. So if you, say, lose your job or face an unexpected medical bill, you are less likely to have to dip into your portfolio.

If you’re good on emergency savings and comfortable with leaving your $1,000 to bake for a good chunk of time, here are four ways you might invest $1,000 in 2024.

1. Put it in the stock market

Buying stocks is probably one of the first things that comes to mind when you think about investing. But where to start? The idea of picking individual stocks can be pretty daunting at first. I know I delayed investing for a long time because I thought I had to be the next Warren Buffett to be successful. I saw experts posting charts and analyses with all kinds of jargon and numbers — I thought I’d never be able to do it myself.

Here’s the exciting thing. You can choose to learn how to research stocks and understand company balance sheets. But you don’t have to. Many self-made millionaires didn’t pick stocks. They built their wealth by consistently investing in index funds or exchange-traded funds (ETFs). These are baskets of securities that can contain a mix of assets. For example, a fund that tracks the S&P 500 gives you a very small piece of the top 500 U.S. companies.

Over the past 30 years, the S&P 500 has generated average annual returns of over 10%. There are no guarantees and there will be years when the market falls. However, let’s assume you invested $1,000 in an S&P 500 index fund and earned a more conservative rate of 8%. The power of compound interest means your investment could be worth over $10,000 in 30 years.

2. Invest in real estate

Let’s face it, $1,000 may not get you that far if you’re trying to buy a home. If this is your dream, you could put that money toward your down payment savings. But you don’t have to buy property to invest in real estate. You might instead buy shares in a real estate investment trust (REIT).

REITs are companies that own and often manage a portfolio of income-producing properties. That might take the form of office buildings, shopping malls, warehouses, or apartments. I hold a couple of REITs in my portfolio. It’s a good way to diversify my holdings and REITs often pay attractive dividends.

As the REIT advocate group Nareit points out, REITs have to distribute at least 90% of their taxable income as shareholder dividends. As a result, it says REITs pay higher dividends than other stocks. You can buy REITs from your brokerage account, but you will need to do some research to decide which REITs you want to buy.

3. Buy gold

Gold is often viewed as a safe-haven asset that may hold its value during a recession. It can also be a good hedge against inflation, as gold prices tend to rise when living costs increase. That said, owning physical gold can be complicated as you may have to think about storage and insurance. But you might instead look to a gold ETF or mutual fund.

Bear in mind that gold is still an alternative asset class. Prices are less predictable than index funds or REITs, and you won’t benefit from dividend payments. Don’t go all in on gold (or any other asset for that matter). Experts suggest gold should make up no more than 5% of your portfolio.

4. Pay down high-interest debt

Strictly speaking, paying down debt is not an investment. That said, you won’t find many investments that pay an annual return of 20% — guaranteed. That’s the current average credit card interest rate. So if you’re carrying a credit card balance and paying two-figure interest rates, consider paying it down before you invest. Once your balance is gone, you could put the extra cash toward your investments.

How to invest your $1,000

The type of investment you buy is important, but how you invest matters too. For example, it’s worth investigating tax-advantaged accounts to find ones that suit your situation. Many Americans have a mix of brokerage accounts, IRAs, and 401(k)s.

Start by finding out if your employer has a 401(k) scheme and whether it will match your contributions. You can put ETFs, index funds, and REITs in many 401(k)s. If a 401(k) isn’t an option, look into individual retirement accounts (IRAs). Broadly speaking, a traditional IRA lets you reduce your taxable income now, whereas a Roth IRA can reduce the tax you pay in retirement.

There’s a lot to think about, but try to avoid analysis paralysis. Once you decide on the type of account or accounts that will make sense, you can build a diversified portfolio containing a mix of assets. What matters is getting started and learning along the way.

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