Got $1,000? Here's How You Can Turn It Into $45,000

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Many people are putting cash into certificates of deposit (CDs) these days to grow their money into a larger sum. And if you're looking for an easy way to earn some interest over, say, the next year or so, then a CD is a good bet. A 12-month, $1,000 CD at a 5% APY will earn you $50, giving you $1,050 in total.

But if you have $1,000 to your name and you're a bit more patient, you can actually grow it into $45,000.

Great results take time

If you have $1,000 you don't expect to need or use anytime soon, then investing it could mean turning it into a much bigger pile of cash. But to be clear, if you want to grow that money substantially, you need to keep it invested for a long period -- decades, in fact.

Now at first, the idea of turning $1,000 into $45,000 may not seem believable. But it's possible if you do two things:

1. Invest that $1,000 over a 40-year period
2. Generate a 10% annual return in your investment portfolio during those 40 years

That 10% annual return isn't a random figure, though. It represents the stock market's average annual return over the past 50 years. And it's important to realize that 10% return accounts for years when the stock market did great, and years when stocks tanked.

But the numbers don't lie. A $1,000 investment left to grow at 10% per year over 40 years will be worth $45,000 at the end of the day. So if you like the sound of that, then you may want to start investing your money as soon as you can.

How to invest $1,000

If you're new to investing, you may not know how to start. There are two aspects you'll have to tackle -- where to put your money, and what investments to put it into.

For the first, if you're investing for retirement, then you may want to choose an IRA over a regular brokerage account . With a brokerage account, there are no restrictions. You can access your money at any time and for any reason.

With an IRA , there are generally penalties for accessing your money before age 59 1/2, with limited exceptions. But the money you contribute to an IRA also goes in tax-free. And if you make money in your IRA year after year, you're not taxed by the IRS year after year like you are with a brokerage account.

You only pay taxes when you take your withdrawals during retirement. So if you're willing to part with your money, then investing in an IRA could be a smart move.

Now, let's tackle how to invest $1,000. You could buy a whole bunch of different stocks across a variety of market sectors. But if that's not within your comfort zone or you don't want to do the work (which is perfectly OK), then another option is to put your money into an S&P 500 ETF ( exchange-traded fund ). That way, you're essentially investing in the 500 largest publicly traded companies across the stock market.

Any time you invest money, you want to make sure your portfolio is diversified. But an S&P 500 ETF accomplishes this for you because, again, you're investing in hundreds of companies at once.

A $1,000 investment can go a long way if you give it enough time. While a lot of your friends may be taking $1,000 and using it to open CDs, a better bet for you may be to put that money to work in the stock market so you can grow it into a bigger pile of cash.

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