Have $1,000 to Invest? Here Are 7 of the Best Places to Put It

One of the most common questions new investors ask is where they should put their money so it can grow. When you've been diligently saving, you don't want that money to go to waste.

If you have $1,000 ready to invest, that's a great starting point, and there are lots of ways you can use it. Below, you'll find seven of the best places you can put that money. No single option is right for everyone -- it's all about choosing what's right for your current financial situation.

1. Paying off debt

Many people don't think of paying off debt as an investment, but it can be. It's an especially good idea to pay down high-interest debt, such as credit card debt. Credit cards currently have an average interest rate of 21.59%, according to the Federal Reserve.

There's no investment on the planet that consistently returns anywhere near 20%. So if you have credit card debt, you'll most likely save more money by paying that down than you'd make by investing your money elsewhere.

2. An IRA

Individual retirement accounts (IRAs) help you save for retirement while saving on taxes. There are two types of IRAs:

• Traditional IRAs allow you to deduct contributions from your taxable income.
• Roth IRAs don't, but they allow you to make tax-free withdrawals in retirement.

You can buy almost any type of investment through an IRA, including stocks, bonds, and index funds. Keep in mind that you need to wait until you're at least age 59 1/2 to withdraw money from an IRA. Otherwise, you'll pay an early withdrawal penalty.

There are annual IRA contribution limits. The 2024 limit is $7,000, but if you're 50 or older, the limit goes up to $8,000. Either way, it's high enough that you could invest your entire $1,000 in an IRA if you want.

3. A taxable brokerage account

Another popular way to invest money is a taxable brokerage account. It doesn't have the tax advantages of a retirement account, but it also doesn't have any early withdrawal penalties.

It's generally recommended to fund retirement accounts first so you can save on taxes. But if you'd also like an investment account without an early withdrawal penalty, a taxable brokerage account is a good choice. To find one, check out The Ascent's guide to the best online stock brokers.

4. An index fund

Index funds are a type of investment you can purchase through a retirement account or taxable brokerage account. Each index fund aims to follow the performance of a specific market index -- a segment of the financial markets.

Index funds are popular for a few reasons:

• They make it easy to build a diversified portfolio. An index fund can invest your money across hundreds of stocks for you. For example, there are index funds that aim to track the performance of the whole U.S. stock market.
• They have low fees. Some investment funds have hefty management fees. Because index funds simply track an index, their fees tend to be very low -- sometimes under 0.1%.
• They save time. Picking stocks yourself is time-consuming. When you put your money in an index fund, there's no work required on your part.

5. A high-yield savings account

A savings account doesn't exactly scream "exciting investment opportunity!" But rates are high right now. Some of the top high-yield savings accounts are offering 5% or more.

This could be the best place for your money if you don't have much saved yet, and especially if you don't have an emergency fund. Everyone needs money for emergencies. If you get hit with a surprise expense, and all your money is invested, you'll need to find a way to get money out of that investment so you can deal with the bill. When you have an emergency fund, you can leave your investments alone.

6. Treasury securities

Treasury securities are fixed-income investments backed by the U.S. government. You purchase them for the length of time you want and earn a set interest rate. There are three types of Treasury securities:

• Treasury bills (T-bills): Ranging from four to 52 weeks.
• Treasury notes (T-notes): Available with terms of two, three, four, five, seven, or 10 years.
• Treasury bonds (T-bonds): Available with terms of 20 or 30 years.

Since interest rates are high at the moment, you can earn a solid return on Treasury securities. It's not as much as you could get by investing in the stock market, but Treasury securities don't carry any risk of losing money.

7. A CD

Certificates of deposit (CDs) are another safe option. You can get them through banks or credit unions. The best CDs offer similar rates (and sometimes a little more) than savings accounts.

What makes CDs different from savings accounts is that you can't withdraw your money any time. Each CD has a term, which is the amount of time you need to keep your money deposited to avoid an early withdrawal penalty. In exchange for doing that, the money you deposit earns a fixed interest rate. Even if interest rates drop on other banking products, your CD's rate won't.

Now that you know more about your options, you can decide on the best place to put your money. If you're young and don't have any debt, investing in an index fund is likely a smart move, either through an IRA or a taxable brokerage account. If you have credit card debt, it makes sense to pay that down first. And if eliminating your risk is most important, then savings accounts, Treasury securities, and CDs are all smart choices.