If you think that investing is only for the rich and for those who are well off, you’re wrong. Investing is for everyone. Of course, if you have a lot of cash, there are more investment options available for you. However, with as little as $1,000 you can start your own investment portfolio.
This article will show you how to start your investment and where to put your money to maximize your returns while minimizing costs. A journey to financial independence begins with a single investing step. Start your investment today. Don’t wait!
Should You Start Investing Now?
You want to invest in the stock market to build wealth for your future. Investing is relatively simple and painless. If you don’t plan to live paycheck to paycheck for the rest of your life, you want to start saving and investing now. Over time you will have a lot more money to fulfill your financial dream such as retirement, education and entertainment.
But before you create your first investment portfolio, there are a few things you should consider.
Make sure you tackle any high-interest debts first. Start paying off all those credit card debts before putting any of your money to work in an investment portfolio. Paying off high-interest debt first also makes sense because you’ll earn more than the stock market by getting a guaranteed return from eliminating your interest payments.
You should also take advantage of your employer’s matching contributions before starting outside investments. The match contribution is like free money, your best possible investment. No other investment can offer that.
Where to Invest with as little as $1,000?
You need to open a brokerage account from investment firms such as Fidelity, Charles Schwab and Vanguard. For your investment, you want to stay away from individual stocks as they are lacking diversification. Putting your money in Vanguard’s low-cost index funds that track market benchmarks is a smart decision.
Vanguard Target Retirement Funds have a low $1,000 minimum for opening an investment account. With Vanguard Target Retirement Funds, you get a complete portfolio in a single fund with an average expense ratio of only 0.13%, 60% lower than funds with similar holdings. When you’re paying less for your funds, more money stays in your account working for you.
Vanguard Target Retirement Funds has a date specified in its name such as Vanguard Target Retirement 2045 Fund. The funds do the rebalancing work for you by starting with allocation favoring stocks in early years of an investor’s life cycle, typically 90% stocks and 10% bonds. They become more conservative over time by shifting the asset allocations from equities toward fixed income.
Which Target Retirement Fund Fits Your Timeline?
Vanguard Target Retirement Fund is designed for you to pick the fund that corresponds to the year you expect to retire. Find out by starting with either the number of years until you expect to retire or your current age. Then select the appropriate Target Retirement Fund you believe best matches your time frame. For instance if you just start your career and have over 40 years before retirement, you might choose Vanguard Target Retirement 2055 Fund with your initial $1000. . The fund starts out with 90% of its assets allocated to domestic and international stocks and the remaining 10% in bonds.
Glide Path for Vanguard Target-Date Funds
Asset allocation—the percentage of a portfolio invested in various asset classes such as stocks, bonds, and cash investments—is the most important determinant of the return variability and long-term performance of your portfolio.
Vanguard Target-Date Funds maintain a significant level of equity exposure (90%) to age 40 because one’s human capital remains so dominant over the small balances in financial capital during the early stages of asset accumulation. After age 40, the equity allocation continues to decline until age 72 to compensate for the shifting balance between human and financial capital.
As you add more money toward your investment portfolio, eventually you would want to write up your own Investment Policy Statement with your personal investment objective and asset allocation. By then you can design your own portfolio’s glide path instead of relying on Target-Date Fund’s glide path.