How to Invest $5,000 – 8 Helpful Ideas to Become Rich
Investing to make money easily and quickly means making the best decisions and sometimes even taking big risks. But by acting intelligently, you can make a lot of money in one of the following options:
1. Open an Account in High Yield Savings
Putting your money in any savings account is a great way to keep your money safe. Even though you won’t make a huge amount of money of interest, but still your money will keep growing without any risk of losing it.
You should opt for a savings account if you still need to do some researches about the right investment option or if you need quick access to your money and can’t afford to cover any losses in the short term.
So, now that you are sure you want to keep your valuable money in a savings account, there are some facts you need to know. Not all the savings accounts are equal, and the interest rate varies from bank to bank with an average of 0.06%.
Luckily, there is a great solution to help you earn more money with a savings account. It is highly recommended to look for an online high yield savings account as they tend to offer much better interest rate (up to 1%). This way, you will get the same federally insured account, yet with a far better return.
2. Invest in Real Estate
Real estate is a huge field that you need to exploit to make a lot of money. However, you should know how the real estate business works so that you don’t have to make investments that will bring you almost no return.
The first thing you need to know about real estate is that traditional investment isn’t for everyone. But still, there are other easier options on how to invest $5,000 in real estate.
Being a landlord is the first and the most traditional technique to generate money with real estate. It is as simple as buying a property and then finding a renter. It could be either residential or commercial.
It may be the most profitable option, but it can be the most troublesome as well. Generally, you can’t get into commercial properties with $5,000 and will be a down payment on a larger loan when getting into a rental property.
Fortunately, there is a great and simple alternative that will allow you to enrich your investment portfolio with real estate: Fundrise. It offers the opportunity to buy notes in various real estate investments that have been reviewed by real estate experts. Also, you can demand loans from Fundrise, but only 2% of the total requests get approved.
Fundrise makes real estate investment more accessible and very profitable. So, it is the right way to invest your $5,000. Moreover, in 2016, Fundrise boasted a remarkable average ROI of about 7%.
3. Invest in Others – Lending Club
Lending Club is one of the best peer-to-peer lending platforms on the market. It has served more than 2.5 million people since 2006 and will undoubtedly help you too with investing your valuable money. Since you are investing in micro-loans, your money will spread out to various borrowers, just like mutual funds.
Lending Club charges different fees for the different types of accounts. For instance, if you open a retirement account, you will need at least $5,500, but there will be no monthly fees afterward.
4. Use a robo-advisor
Swell Investing would be the right choice for you if you aren’t a hands-on investor and always want to decide which investments are the most suitable for you. Once you are done with creating a Swell Investing account, you can deposit your initial investments. Then, you can set your risk tolerance and financial goals. That’s it! Swell will handle the rest for you; making your investing much easier and just with few clicks of your mouse.
Swell helps you out with money investing without spending hours searching for different options or companies. You need to fill a questionnaire to determine your risk tolerance, and then the algorithm makes the investments for you depending on the results.
Even more, the website efficiently rebalances your portfolio. If your risk tolerance level changes, you can log in to your account and make changes. Once you are done, the service will do the necessary adjustments to your portfolio making it more effective and profitable.
5. Invest in ETFs or Mutual Funds
ETFs or mutual funds are a great way to diversify your investment portfolio. When investing in mutual funds, your money is combined with the investors’ money and then distributed based on the focus of the mutual fund. Everything is handled by the company you are investing in.
Ally Invest is an excellent place investing with mutual funds. You can open a Roth IRA account and deposit your $5,000. However, you need to do some researches before getting into action. Make sure to have an idea about their performance during the last one, three, and ten years.
On the other hand, the only downside about mutual funds is that they usually require a fairly large minimum to start investing. With your $5,000, you might only be able to invest in maximum two mutual funds.
If you are facing some difficulties with finding the right mutual funds, especially with the large deposit minimum recommendations, ETFs are a better alternative.
You can trade with ETFs just like any single stock would be, which means that you can purchase smaller pieces of these funds rather than having a big initial investment.
TD Ameritrade is the current top brokerage for ETFs in which you can invest in over 100 different ETFs without any trading fee.
6. Invest in Stocks
Stock investing is a very interesting way to turn your money into a fortune. However, it comes with some risks. Also, you need to have enough knowledge before getting into action. You don’t want to regret losing all your money within a short time! That’s why choosing the right tool will certainly make the stock investment process much easier and make the best out of your $5,000.
So, if you are looking for the right tool to start your stock trading journey, then you should opt for Ally Invest. They provide excellent all-around services for stock trading for as little as $4.95 per trade. Besides, they will help you make smarter decisions with their high-quality tools.
Alternatively, if you don’t want to be troubled with hand picking every investment, then it is recommended to use M1 Finance. This website offers the opportunity to buy groups of stocks called pie without any fees. You can simply use the already available pies, or you can set up a new pie yourself to invest your stocks. Moreover, if you want to purchase your own stock, you can buy fractional stocks’ shares. It may cost you up to $100 or more for a share. It depends on stock performance.
With your $5,000, you can’t buy more than 50 shares with traditional stock purchases. However, you can buy much more with the fractional shares (you can buy only part of a single share as well).
7. Invest in Yourself by Paying Down Your Debt
If you have debts and you have money to invest, then you should definitely pay off your debts. Think of your debt as a negative investment. The interest generated by your debt neutralizes all the interest you receive from any other investment option.
Besides, even if it feels like you are losing money, but it is entirely the opposite. Paying off all your debts can help you with saving thousands of dollars in the next years as well as making you feel completely free and independent. Then, in the coming future, you can invest the invested money. Maybe you end up with more than $5,000 the next time you want to invest.
8. Invest in your Kids through College Savings Accounts
We all know that education is costly even if there are grants and scholarships. Sure, you don’t want anyone of your child leaving the college with a huge debt behind his back.
The best method to secure your children’s education, as well as your retirement, is to open a 529 college savings plan (known as Qualified Tuition Programs). You will have the opportunity to invest the money in the plan after taxes. Also, you can withdraw the money as well as any investment growth tax-free under one condition: you use it to pay for any costs related to a college education.
The 529 plan varies between the different states. Each one has different requirements and limits. Also, in many states, you can subtract your contributions from your current state taxes.
On the other hand, Wealthsimple is a great alternative to the state’s 529 college saving plan. It makes your investments much easier in which you can achieve your savings goal with a 529 savings plan as well as other accounts.
Final Thoughts on Investing
There are various ways to start investing with $5,000. It might not be too much to invest, but taking the right investment choices now will undoubtedly yield great rewards in the future. Furthermore, make sure to do enough researches before getting into action. You don’t necessarily need to consider all the investment options listed above. Make a reasonable, but a timely decision.
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