8 Ways to Invest $5000 and Make Regular Returns

8 Ways to Invest $5000 and Make Regular Returns.
Best Ways to Invest $5000: There are many ways to invest, whether you’re a new investor with a $5,000 windfall, a study ever, or a seasoned financial pro. 
9 Ways to Invest $5000 When You Don't Want to Keep it in the Bank

Yet, when you ask, there is no correct answer, “What are good ways to invest?” The best way to invest $5000 depends upon your age, risk tolerance, financial situation, and time horizon for the investment.

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Here are nine ideas to deploy your next four-figure sum:

1. Invest in Real Estate

Investing in real estate has taken on a glamorous appeal as more and more shows come out with people buying cheap, fixing up, and selling real estate investments.

Being a landlord can be the most profitable, but it can also be the most cumbersome. In most cases, $5,000 won’t allow you to get into commercial properties and will only be a down payment on a much larger loan for a rental property.

Luckily, Fundraise has made it extremely simple to add real estate to your investment portfolio. Fundraise allows you to buy notes in different real estate investments that go through scrutiny by various real estate experts, and only 2% of the people that request loans through Fundraise get approved.

2. Invest in Stocks

The idea of trading stocks can be downright terrifying for new investors, and even for some older investors. There are a few tools that you can use to simplify the process and make the most of your $5,000 investment.

One of the best ways that you can start your stock trading journey is by opening an account with Ally Invest.

They have one of the best all-around services for trading stocks. They continue to offer excellent customer service and low fees ($0 per trade). Not only that, but they will also offer several quality tools to help you make smart decisions with your money.

3. Let Robots Invest for You – Betterment

If you are not a hands-on investor that wants to play a role in deciding which investments are best for you. If you fall into this category, then Betterment is going to be the best route for you. Betterment is one of the best ways to invest $5000 and then forget about it.

Betterment makes investing your money as easy as a few clicks of your mouse. After you create a Betterment account (which will less than an hour), you can deposit your initial investments, set your financial goals, and risk tolerance. After you’ve made those decisions, Betterment will handle everything else for you.

The website uses “robo-advisors” to invest your money without you having to spend hours researching different companies or options. Instead, you take a short questionnaire to determine what you feel is an acceptable level of risk in the market and the algorithm takes that risk tolerance and makes investments for you.

4. Invest in Actively Managed Mutual Funds

There is such a wide selection of funds out there — from equities and bond funds, domestic and international funds, emerging markets, and target-date funds.

All you have to do is monitor the funds’ quarterly performance and see if you still want to be invested in the funds. One important note is that actively managed mutual funds charge fees for their services.

You can check on what each fund charges in the prospectus or on the Website. Many financial advisors suggest that you buy mutual funds with an expense ratio that is less than 1 percent.

5. Go for Index Funds

If you want to bypass the expenses with an actively managed mutual fund, then look at index funds. Again, it’s an investment vehicle that you simply have to set and let the fund do its business.

With $5000 to invest, you’re not about beating the market every day, rather just keeping up with it.

Plus, there are questions about whether portfolio fund managers can, over the long term, outperform their benchmarks, so index funds may be a good option. Take a look at Morningstar.com for a balanced view of all types of funds.

6. Invest in Yourself 

There’s not a better feeling than getting rid of all your debt. After graduating from college, I had credit card and student loan debt and I was constantly feeling the weight of having those payments every month.

Thankfully, by finding a girlfriend, who is now my wife, that also hated debt we were able to formulate a game plan to get all of my debt paid off. When I wrote that last payment to get rid of my student loans, it was one of the most freeing feelings I’ve ever experienced.

When you have $5,000 the temptation is to invest because it feels like a good decision to be making money, but I promise you have that stress from debt lingering will never go away.

7. ETFs

Exchange-traded funds (or ETFs) are similar to mutual funds in that when you purchase one share of either fund, you are buying a small slice of that investment’s holdings.

The difference between the two is how they are managed. Since there’s no active management with an ETF, you will need to be the active manager and rebalance your portfolio at least once a year (don’t overlook your mutual fund portfolios either).

The advantage of ETFs is that there are lower costs associated with these investments, as opposed to actively managed funds.

8. Invest in Others – Lending Club

What I like about Lending Club is that it reminds me of when I first started investing in mutual funds. You didn’t have to put a lot of money down and you’re able to diversify your investments.

With Lending Club since you are investing in micro-loans, not one borrower is going to get 100% of your investment. So if you had $5000 to invest, you can take solace in knowing that that money is spread out just like if it was in a mutual fund

Depending on which type of account you open you may have some fees with Lending Club. If you open a retirement account (IRA, Roth IRA, etc.) you will need a minimum deposit of $5,500 to open your account, but there are no monthly fees after that.

A Financial Advisor or Robo-Advisor

Not sure what to do with your money? Putting it in the capable hands of a financial advisor or the capable algorithms of a Robo-advisor may be the way to go.

A Robo-advisor digitally manages your investment portfolio – trading, rebalancing, tax-loss harvesting, among other functions.

It doesn’t rely on human intervention the way traditional advisors do. In fact, most Robo-advisors don’t have any human advisors whose clients can discuss their portfolios with.

A Robo-advisor offers low-cost financial counsel and typically with a low minimum investment. But a human advisor may be preferable if you need to plan for retirement or paying for a child’s education.

You can find a local financial advisor with SmartAsset’s advisor matching tool.

Bottom Line

Regardless of if you’re a new investor or a seasoned pro, it’s vital that you make the best decision for your money. Thanks to the internet, there are a bunch of different ways that you can put your money to work. Your investment portfolio is going to secure your financial security.

Take your time, do your research, and find the best place for your $5k investment. This is a great opportunity to have a lasting impact on your future or that of your family.

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