How to Invest $5,000 in 2022 | Best Business Ideas and Strategies

how-to-invest-$5000
how-to-invest-$5000

Becoming a good investor starts with understanding how investment works, and how to invest your money wisely regardless of the amount. Whether it is $1,000 or $5,000, your ability to make the right investment decision guarantees your wealth creation.

So, if you have a spare $5,000, there are several opportunities that you can invest your money to generate maximum returns.

This article talks about these opportunities in details as well as reasons why you should seek to invest your money.

Continue reading to learn more.

Why You Shouldn’t Keep Your $5,000 at the Bank

Banks are financial institutions built to help you store your money. They promise you maximum security for your money, and in some cases say that they’d give you an interest over your money if saved for a long time.

Also, they use competitions and prize-winning programs as incentives to make you keep your money for a long time. And most times, it works.

Here’s what happens beneath all that.

Banks use our money to make additional profits for themselves. They give out these cash as loans and keep the interests they bring to themselves. So, its safe to say that they sell us a mirage.

Because we don’t receive the interests from the money. And this somehow makes us feel cheated.

But then again, the bank isn’t a charity organization. It’s a business. And one thing that’s consistent with businesses is that they are established as a source of income. The banks are not left out, as they have to make income for themselves.

This is why experts advise that a better alternative to leaving your $5k in the bank is to invest your money through advice websites or follow the strategies that will be discussed shortly.

READ ALSO: How to Invest $50k and Get the Best ROI | 2022 Expert Guide

How to Invest $5000

Below are viable ways on how to invest $5,000 to make money. These strategies include;

#1. Online Trading

Online trading is one of the simplest and fastest systems that shows how to invest $5,000 to make good money. To trade, you need to set up a brokerage account.

Online brokerages are investment platforms that offer wealth-creation products like self-directed trading accounts, automated investing accounts, and retirement savings accounts.

So, if you’d like to invest $5,000 without going for large minimum accout size requirements, most brokerage allow you get started for free.

However, you can run into more fees for mutual fund investments, options contracts, and certain retirement accounts. 

#2. Choose an Investment Company

There are a lot of investment companies that help you put your capital into good use. And their interest rates are fair depending on the time frame of your investment especially if you’re investing about $5,000.

Putting your money into an investment company guarantees safety due to the number of professionals that are available in this industry. You wouldn’t have to be worried about losing your money quickly, even though it’s possible as investments are all about risks.

The only demerit with a number of investment companies is the charges they take for helping you build great returns on your investment.

READ ALSO: How to Invest in Oil With Little Money

#3. Securities

Investing your $5,000 into securities like stock, ETFs, Bonds and Mutual Funds is a great way to make more money.

Stocks: Stocks are available on most exchanges and represent shares, or portions, of ownership within companies. They are also known as equities and are offered for a number of reasons. 

ETFs: When you invest your $5,000 into ETFs, it means you are placing your money into a fund that invests in variety of stocks, bonds, commodities, and other investments.

ETFs are similar to stocks since they both trade on stock exchanges. However, they are less risky than stocks since they are a blend of different securities.

Bonds: Bonds are debt securities that corporations and governments issue out to raise money for certain time-sensitive projects.

In other words, bond investments are like loans, where you are the lender, and the government or corporation becomes the borrower. Once your bond has matured, you’ll get back the face value of your initial investment plus interest. 

Mutual Funds: Mutual funds are managed by companies that pool money from multiple investors to invest in stocks, bonds, and other securities. So when you invest in mutual funds, you’re purchasing a small share of ownership in that fund, which gives you rights to the profit it produces.

#4. Peer to Peer Lending

Another option to invest your $5,000 is by peer-to-peer lending. Peer to Peer lending is simply a system wherein you lend money to your peers and demand an interest after a period of time.

Unlike other investment channels, peer-to-peer lending gives you a strong guarantee of your capital. And if you have disciplined and honest peers, you’re sure that your money will come in quickly and safely as well.

If you don’t have any folks around who need $5,000, you can find peer organizations around that can use your money to fund some of their projects, and are willing to pay the interests you want.

READ ALSO: How To Invest in a Bear Market in 2022 | Easy Step-by-Step Guide

#5. Real Estate

Real estate is another viable option where you can invest your $5,000. You have three options when investing in real estate: Buy real estate properties on your own, invest through real estate investment funds, or grow your money through real estate crowdfunding investment platforms.

Alternatively, Real Estate Investment Trusts (REITS) can be a great choice if you don’t want to buy and flip properties on your own.

REITs are companies that own and manage income-generating real estate assets. And like stocks, you can buy and sell REITs on most exchanges, although some are still privately traded.

#6. Open an IRA

You should consider opening an IRA if you want to invest your $5,000. Whether you opt for a Roth IRA or a traditional IRA depends on your income.

Bear in mind that in order to be eligible for a Roth IRA, your annual income must be less than $139,000. Traditional IRAs do not have salary limits.

Your contributions to a traditional IRA are tax-deductible in the year you make them, and you’ll pay taxes on withdrawals based on your income at that time. Roth IRA contributions aren’t tax-deductible, but you won’t pay taxes when you make withdrawals.

In addition to the tax benefits, an IRA is an excellent way to enhance your retirement income, in addition to any other income streams you might have.

#7. Start a 529 College Savings Plan

Starting a 529 College savings plan is ideal if you have children or plan to have children who you’ll fund their college education.

A 529 savings plan offers tax-deferred growth of your funds, plus tax-free withdrawals when those funds are used for education-related expenses.

This makes it a good option to invest $5,000 especially when you consider the average cost for tuition at a public and private university.

#8. Fund your 401(k)

If you’ve not though about your retirement funds, now is a good time to do so. Fund your 401(k) account.

Although you can’t drop the $5,000 directly into the account, the funds are taken directly from your paycheck, you can use the extra cash in your bank account to increase your contribution.

This is a good strategy if you have an employer match 401(k) account. Hence, it’s important you contribute the maximum amount necessary to take advantage of your employer’s match.

READ ALSO: How to Invest in Gold in 2022 | Sure Things You Must Know

#9. Work with a Robo advisor or financial advisor

If you’re unsure of what to do with your $5,000, you may want to consider working with a robo advisor. In other words, placing your money in the hands of a robo advisor to take the decisions for you.

A Robo advisor digitally manages your portfolio based on a set of algorithms. Additionally, they offer rebalances and tax-loss harvesting, among other functions. While some Robo advisors still offer human advisors, they are better as investment managers.

Conversely, financial advisors offer top-notch advice on what the best option for your money is. Whether it’s investing, retirement planning, estate planning, or anything else.

Of course, you’d pay for these services, but the value they provide is incomparable.

#10. Invest in Gold

Another option to consider investing your $5,000 in is in the Gold market. According to Market Insider, the price of gold sits at $1,810 per troy ounce.

This is above the projected $1,700 price which clearly means that the market has great prospects.

Now you don’t need to spend all the money on purchasing gold, you can buy some amount, and then watch it multiply within a few weeks or months.

Bottom Line

There are several ways to invest your $5,000. With these options, you are sure to generate more income while focusing on several other income-producing opportunities.

So, instead of keeping your money in the bank, consider investing it.

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