I’m a Financial Advisor: 6 Steps To Take If You Have $1,000 To Invest

Having $1,000 might not seem like a lot to invest, but it can go quite a long way. And when you think about the fact that 28% of Americans have less than $1,000 in savings (according to a recent Forbes survey ), having that amount means you’re already ahead of the game.

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But how exactly should you get started with investing $1,000? While there’s no one-size-fits-all answer, there are a few steps you can take.

Here are some things you can do if you have $1,000 to invest, according to Saundra Curry, a certified financial instructor and co-founder of BHC Holdings LLC , and Samuel Shinn, a wealth advisor at BMC Wealth Management . As with anything else when it comes to your own money, take any tips or suggestions with a grain of salt .

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Set Clear Financial Goals

Before anything else, set a financial goal or two. These can be short- or long-term goals.

“Define what you want to achieve with this investment,” said Shinn. “Are you saving for retirement, a specific purchase or simply looking to grow your wealth? Knowing your goals will help guide your investment choices.”

You may also want to set a timeline. Say, for example, you want to turn that $1,000 into $5,000. Ask yourself how soon you want to achieve that goal. If it’s going to take a while — say, a few years, assuming no additional investments — you can always start with smaller goals to keep you motivated.

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Get Started

One of the most important things you can do is to simply get started. The sooner you start investing, the sooner you can take advantage of the time on your side — and compounding interest. Plus, once you start investing, it tends to become easier to keep doing it. This, in turn, can help you build a decent nest egg over time.

“Taking the first step and getting started is key,” said Shinn. But keep things simple. “Start with a simple strategy…Once you have built a strong base, consider diversifying or trying alternative strategies. Of course, consult with a professional prior to making investment decisions.”

One strategy is to invest in low-cost ETFs or index funds.

“Consider low-cost, diversified investment options like ETFs (Exchange-Traded Funds) or index funds,” said Shinn. “These provide exposure to a broad range of assets, spreading risk across different sectors and companies.”

Think About Your Risk Tolerance

Everyone has their own risk tolerance. Yours might be different based on individual circumstances — like income or age. Whatever the case, knowing how much risk you can handle is important as you get started investing. Along with that, try not to make any drastic or sudden changes to your investments based on external factors.

“Whatever you invest in, make sure you are comfortable using the investment strategy of buying and holding,” said Curry. “Don’t be a day trader. If you chase the market, constantly selling your investments and buying new ones, you will impact your growth.”

Choose Investments With Minimal to No Fees

Curry suggested opening an investment account that doesn’t require a minimum opening balance or charge for trades or transactions. Again, index funds or exchange-traded funds are options to consider since they’re generally inexpensive and diversified, meaning you won’t have to deal with as much volatility.

You’ll probably still want to diversify, though.

“Invest in a combination of funds and stocks. Investing in funds allows you to follow the performance of the underlying stocks (if they do well, you do well). However, you don’t own a piece of the company,” said Curry.

“Individual stocks allow you to become an owner of a company, i.e., a stockholder,” Curry continued. “You are able to experience and participate in the free market. It also gives you the opportunity to vote on issues as a shareholder as well as to attend shareholder meetings (most are virtual). Over time, the right stocks outperform funds. However, there are no guarantees.”

And if you can’t afford to buy a full share, Curry suggested opening an account with an investment management firm that lets you purchase fractional shares instead. Charles Schwab and Robinhood are two such options, but be sure to do your research.

Reinvest

Investing that $1,000 is an important step, but so is reinvesting those dividends to grow your portfolio.

“After you choose your investments, be sure to invest your dividends,” said Curry. “This is an easy way to purchase fractional shares with the extra money and enhances the compounding effect.”

Stay Committed

That first thousand dollars can get you started, but you’re going to need to keep investing if you want to build true financial stability or even wealth.

“Once you’ve made your investment, resist the urge to make frequent changes based on market fluctuations,” said Shinn. “Stay focused on your long-term goals and consider contributing more regularly as your financial situation improves.”

Remember that any investment comes with its own risks. Some investments have higher risks than others, of course, but you’ll still want to be strategic with how you allocate your money. It’s OK if it takes some time to find the strategy — or strategies — that work best for you. Just get started and stay committed for the long haul.

You can also monitor your investments, but this isn’t something you should need to do every day.

“Wherever you open your investment account, download the app on your phone to monitor the performance,” said Curry. “There is no need to watch your investments every day. Investing is long term.”

This article originally appeared on GOBankingRates.com : I’m a Financial Advisor: 6 Steps To Take If You Have $1,000 To Invest