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The Best Way to Invest $1000

written by: Tim Plaehn•edited by: Jason C. Chavis•updated: 6/28/2011

You can start a profitable investment program with $1,000. In this article pick up some ideas on the best way to invest $1,000 and make plans for starting your own investment portfolio.

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    Investment Considerations for $1,000

    You have saved up or received a thousand bucks and you want to know what is the best way to invest $1,000. If you want the $1,000 to be the start of your investment portfolio, you should be considering investments that will provide long term growth of your investment. It is not really possible for a new investor to turn $1,000 into a large sum of money in a short time. On the other hand, starting an investment program with $1,000 and adding to it over a period of years could turn this nest egg into many thousands of dollars, if not hundreds of thousands.

    Your major decision should be whether you can accept the ups and downs of the stock market--the ups are easy, its the downs that are tough to handle--or if you want your initial investment to be secure and grow with interest. If you are not approaching retirement age, strongly consider putting the money in a stock market or stock and bond oriented investment.

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    Options to Invest $1,000

    With $1,000 to invest you can select from several different investment paths with a wide range of options in those paths. The best way to invest $1,000 is also dependent on your risk tolerance and goals. Here are some choices for the investment:

    Mutual Funds: A mutual fund investment should be high on the list of someone looking to invest $1,000. Many mutual funds allow initial investments of that amount or less. A fund offers professional asset management, the abiltiy to reinvest any dividends and capital gains and the possibility to add to the investment in the future. This article lists some of the top fund lists from the major financial magazines.

    Stocks: If you want to lean about stock investing, start with your $1,000 in a discount brokerage account. Discount brokers charge $5 to $7 to buy stocks. Learn how to research stocks, do your own research and buy some shares of a couple of stocks you have selected. The risk of losses from buying just a couple of stocks is greater than the diversified portfolio of a mutual fund, but you also might select a stock that increases your investment many times. A $1,000 investment in Apple, Inc., stock symbol AAPL, in late 1997 would be worth over $55,000 by the middle of 2010.

    U.S. Savings Bonds: Series EE savings bonds are guaranteed by the U.S. government, pay competitive rates of interest and can be purchased in amounts from $25 to $5,000. The interest earning on savings bonds is exempt from income tax until the bonds are cashed in. A bond must be owned for at least a year before it can be redeemed and for 5 years to avoid an interest penalty. Series EE bonds are guaranteed to at least double in value in 20 years. Savings bonds can be purchased at banks or online through the Treasury Direct website.

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    Resources

    Investopedia: Start Investing With Only $1,000: http://www.investopedia.com/articles/basics/06/invest1000.asp

    Motley Fool: No-Load Index Funds: http://www.fool.com/mutualfunds/indexfunds/table01.htm