Here are 3 Ways to Invest $5K in 2023

They all carry risk, but also, potential reward.

Thanks to inflation, a lot of people are barely sitting on enough money to pay the bills these days. But if you have spare money you don't need to put into your savings account for emergencies, then you may be eager to invest that cash and put it to work. Here are a few options to consider if you're sitting on $5,000.

1. Buy individual stocks

When you buy individual stocks, you take on a couple of risks. First, you run the risk of the broad market tanking. You also run the risk that the specific companies you've chosen will experience challenges (financial or otherwise) that result in lower stock values.

But if you're willing to spend the time researching different companies and digging into their finances, then putting $5,000 into specific stocks could be a good bet. Furthermore, if your brokerage account allows you to buy fractional shares of stocks, which many do, you can really assemble a nice, diverse mix of stocks with $5,000 to work with.

If the stocks you choose perform well, you might not only make money, but outpace the broad stock market. That's something to be proud of.

2. Invest in ETFs

ETFs, or exchange-traded funds, are funds that trade publicly. The benefit of buying them is getting to scoop up a bunch of different stocks with a single investment. That could save you a lot of time -- and stress -- as far as research goes.

Another benefit of choosing ETFs for your portfolio? Not facing hefty fees that eat away at your returns.

In a recent Charles Schwab survey, almost 60% of ETF investors cited cost as the most important factor when choosing which funds to put money into. So if you don't want to overpay, ETFs could be a good bet.

Now one drawback of ETFs is that you may not manage to beat the broad market if you stick to them. But if you're okay with that, then they're definitely a simpler way to invest. And you might take comfort in simple.

3. Put money into real estate

If you have $5,000 to invest with, you may be able to buy plenty of shares of stocks or ETFs. But you most likely can't buy a rental property with $5,000.

That's okay, though. You don't need to own actual property to invest in real estate. Instead, you could buy shares of REITs, or real estate investment trusts.

REITs are companies that own and operate portfolios of properties. They make money by leasing out space within those properties, whether it's warehousing space or space at a shopping mall.

The upside of putting money into REITs is that they're required to pay out at least 90% of their taxable income as dividends. As a result, REITs tend to pay higher dividends than your average stock. And that could leave you with more money to reinvest during the year.

If you're sitting on $5,000, whether from a year-end bonus, an inheritance, or a tax refund, it's a good idea to try to put it to good use. Investing that money in stocks, ETFs, or REITs could help you end 2023 with more money to your name. But remember -- investing is something you should plan to do over time. So even if you don't end up wealthier by the time 2023 draws to a close, there's a good chance you'll end up richer five, 10, or 20 years down the line.