Many of those apps and online accounts will still do the job as your account balance grows. But having a little more to start with — in the ballpark of $1,000 — opens up even more options for people looking to launch investment portfolios. Some of these programs will use algorithms or software to help you figure out how to invest the cash. Other programs will be a better fit for people who don’t need any investing guidance at all.
Before diving in, consumers should keep in mind that investing is typically a long-term game. Once that money is at risk in stocks and bonds, it can be lost. So money needed to pay bills or to cover emergencies should be kept in cash.
That said, here is an overview of the ways you can invest if you’re starting with $1,000 or less.
Boost your retirement savings. Start by contributing as much as possible to any retirement account you might have through your job, such as a 401(k) plan. Those accounts can come with more benefits, including matching contributions from your employer. They also allow you to save a good amount: up to $18,000 a year, or as much as $24,000 a year if you’re age 50 and up.
For people who don’t have a retirement plan at work or who want to save in addition to those accounts, $1,000 is enough to open an Individual Retirement Account. There are different kinds of IRAs to consider. In a traditional IRA, savings can grow there tax deferred until it is withdrawn in retirement, but people who need to withdraw the money earlier than that may have to pay a penalty.
Savers who want more flexibility in terms of when they can use their savings might look into a Roth IRA, which is funded with after-tax dollars and offers tax-free income in retirement. Unlike a traditional IRA, people can withdraw the cash they’ve contributed to a Roth IRA at any time without paying a penalty. And after the account has been open for at least five years, savers can also withdraw some of their investment gains penalty-free if they meet certain requirements, such as using part of the money to pay for their first home.
Another option to consider is a myRA, a type of Roth IRA account with no minimum account balance and in which savings are backed by the Treasury Department. Each type of IRA comes with unique income requirements determining who is eligible to contribute. But they have this in common: Workers can invest up to $5,500 a year into all of their IRAs combined, or $6,500 if they’re age 50 and up.
Open a DIY brokerage account: Brokerage firms such as E*Trade and Charles Schwab offer IRAs. But they also offer more general brokerage accounts for people who want to invest for other goals or who are just looking to own stocks for different companies. You can open a brokerage account with E*Trade if you have $500 and you can open an account with Charles Schwab if you have at least $1,000 (though the minimum is waived if you contribute $100 monthly). If you have less cash to start with, you can look into Robinhood, an investing app targeting small-time investors that doesn’t charge trading fees.
You won’t get much investing guidance with the most basic brokerage accounts, which are targeted to more self-directed investors who want to figure it out on their own. If you’re new to investing, it might be best to keep it simple by investing in a mutual fund or exchange traded fund, which minimize risk by investing in a basket of stocks and bonds. (That way, if one of the companies you invest in drops dramatically it won’t have a huge effect on your portfolio.)
Some of these firms offer more services to people with bigger account balances. For example, E*Trade customers who have between $10,000 and $25,000 in their accounts can receive recommendations for which ETFs to invest in and how much to allocate to each fund. But it is on them to manage the accounts. Schwab customers with at least $5,000 invested can use an online tool for help creating their portfolios, while those with more than $25,000 can get more personalized guidance from a Schwab consultant.
It’s important to keep a tab on fees. Charles Schwab charges $8.95 per stock trade. E*Trade customers also pay by trade, with a fee of $9.99 for each trade of a stock or ETF. Those costs might be fine for people who don’t make many changes to their accounts, but they can add up for those making multiple trades each month.
Use a roboadviser: People who want the help of a computer program when it comes to managing their money can use an online money management firm, typically known as a roboadviser. Generally speaking, investors using these services can be pointed to a personalized portfolio made up of stocks and ETFs after they answer some questions about their goals and risk tolerance. In some cases, the portfolios will be adjusted automatically, but in others, it’s up to the investor to update the account. Some of the firms let investors personalize their accounts to avoid specific companies or sectors.
Some of these programs, such as the smartphone apps Acorns and Stash, let people get started with contributions as small as $5. Others, such as Wealthfront, require a minimum of $500. Betterment, another competitor, doesn’t have a minimum balance but people with less than an $10,000 in their accounts need to contribute at least $100 a month to avoid higher fees. The fee structure varies from one company to the next. (You can see a more detailed breakdown of the differences between some of the companies here.)
With most of these investing options, including IRAs and roboadvisers, investors putting money into mutual funds and ETFs also need to think about management fees charged by the fund firms in addition to any maintenance fees charged by the brokerage firms, says Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority (Finra). Typically, the fees are structured a percentage of what you have invested. So if the fund charges an expense ratio of 0.25 percent, that adds up to about $25 for every $10,000 invested. If you’re trying to decide between funds, it can help to compare them using an online tool from Finra that shows what you might pay in fees with one fund versus the other. “A 1-percent difference in fund costs can add up to thousands of dollars over the years,” Walsh says.