I received a message from Jason in Galveston, Texas that I’ve decided to expound upon in this post. Austin asked, “I finally saved up close to $1000 that I’m hoping to invest soon, do you have any suggestions on how I should invest it?”
Investing any sum of money should require the same amount of due diligence. Whether it’s $100 or $1 million bucks, you should only invest in businesses or securities that you absolutely understand. This means, avoid the stock tip from your brother in-law and stay far away from new trends that you only partially understand. Here are a few suggestions I have for Jason.
Pay off Debt
First and foremost, get rid of your debt. This might seem counter productive to investing, but if you carry a balance each month on a credit card you’re paying around 20% in interest. Unless you have a sure way of attaining more than a 20% return each month (in which case every hedge fund would come knocking at your door) I would take care of the consumer debt first.
Real Estate Crowdfunding
Something I’ve been very excited about that past few years has been the crowdfunding platforms available to both investors and borrowers. We’ve had the ability to crowdfund personal projects, charities, ventures, and now real estate. Real estate investments that were only traditionally available to accredited investors like me, are becoming available to the average joe. My favorite platform is Fundrise, who acts as the broker between real estate developers/investors and individual investors who can invest as little as $1000 into great projects.
Probably the most popular way for people to invest a small amount of money is in a mutual or index fund. A mutual fund is a collection of stocks, bonds, real estate, and cash that is managed by an active fund manager. Mutual funds have different risk levels and asset allocations but tend to be a sure way to build wealth overtime. Index funds, a fairly new fund but my preferred fund, is more passively managed (typically by computer software) and has lower fees than mutual funds. Mutual and index are a buy and hold investment where overtime, you’ll see your money fluctuate with the economic cycles.
Something that I think is often overlooked by investors is the importance of having precious metals/coins as a part of a portfolio. Precious metals can come in the form of bullion or coins and were much more popular in my parents and grandparents generations. Nowadays, investors see precious metals as a hedge against inflation or the go to for doomsday conspiracy theorists. Don’t discount them though, my grandparents bought silver dollars at face value that are worth hundreds of dollars today. Whether you purchase some silver dollars or have a fledgling coin collection, $1000 is a way to start.
Invest in Yourself
Investing and returns don’t necessarily come in the form on money. If you invest the time exercising you receive physical dividends. If you invest time in learning a new skill that skill will also show a return. If you have $1000, a good option is to improve yourself, and do something that will add to your skill set and make you more well rounded. Take an stock investing class, learn how to woodwork, or shoot take golf lessons. Building an empire is useless if you don’t have the physical or intellectual capacity to enjoy it.