How to Invest Your First $1,000

How to Invest Your First $1,000 :: Mint.com/blogSaving $1,000 is a big deal. Investing it for the first time is an even bigger one.

Once you’ve reached this milestone, you might feel excited to watch your investment grow as well as terrified you could lose it all.

But investing doesn’t have to be intimidating, and it’s not as complicated as you think.

Ready to invest your first $1,000? Here’s a guide to making it simple and rewarding.

Ask This Key Question

Before you start weighing all your investment options, start with one question: When do you plan to use the money?

That’s right, it’s not about buying up the trendiest stocks. It’s about choosing the best option based on how soon you plan to spend your money.

This is crucial due to a key factor: risk. A general rule of thumb: the sooner you plan to cash out, the less risky investment you should choose.

A strategy based on your risk tolerance and time horizon will better protect you against losses.

Let’s look at short- and long-term scenarios and options for both.

Minimize Risk for Short-Term Investing

If you’re looking to invest for a year or two with a short-term goal in mind, like a down payment on a car, you likely don’t want to risk losing money.

In this case, options other than the stock market may be best, including:

  • Certificates of Deposit. These often come with a guaranteed return over a certain term combined with very little risk of loss since the FDIC backs them.
  • Treasury Direct I Savings Bonds. These are bonds issued by the U.S. government. The current rate on these bonds is 1.18% per year, and it’s possible this will increase. They’re also considered very safe against loss.
  • GE Interest Plus. Rates for these accounts are about 1% on $1,000 invested, which is higher than many savings accounts offer today.

Short-term options are low risk but also offer lower returns.

[Related Article: What Is a Stock? (infographic)]

This is a tradeoff compared to the risk of losing a big chunk of your investment in the stock market and no longer being able to make your car down payment.

Focus on Growth for the Long Term

Long-term investing — over decades, rather than just a few years — is a whole different ballgame. The most common long-term case is saving for retirement.

When you’re young, you have a relatively long investment time-horizon increasing your ability to take risk and weather the ups and down of the market over many years.

Rather than the conservative options above which return only about 1% annually, you’re now looking to create an investment portfolio to deliver you the best long-term performance possible .

Asset allocation is the single most important decision you can make when constructing your portfolio.

[Related Article: Mint’s Top 5 Investing Tips]

Studies show that over 80% of a portfolio’s variance over time is due to its asset allocation. Typical asset allocation for a younger person saving for retirement might include just three asset classes: $600 in U.S. stocks, $200 in international stocks and $200 in bonds or equivalents.

How much to invest in each should be determined by your willingness to see your portfolio rise and fall in value as you head to retirement. Free tools like Jemstep’s Portfolio Manager can help you find an asset allocation strategy that’s custom-tailored to your needs.

Next you need to evaluate and select the vehicles that are best suited to deliver strong results. A good place to start is “pooled vehicles” like mutual funds and exchange traded funds (ETFs).

[Related Article: How to Pick ETFs]

Pooled vehicles reduce the amount of time you have to spend researching individual stocks, and help you diversify and spread the risk.

With $1,000 to invest, a good place to start is with low transaction cost index ETFs (Exchange Traded Funds) as they are tax efficient and have low operating expenses.

You can also find ETFs with no transaction fees at brokers such as Charles Schwab, Fidelity or Vanguard.

When investing for the long-term in the stock market, keep these considerations in mind:

  • Use retirement accounts for tax advantages. Investing in a Roth IRA means your money can typically be withdrawn tax free in retirement. These accounts can be created in minutes with nearly any brokerage firm like Charles Schwab or Vanguard.
  • Monitor investments, but not too closely. There’s a misconception, especially among first-time investors, that you must be actively watching the stock market constantly. This just isn’t the case. Your initial $1,000 does require some attention, but this could simply be on a monthly or yearly basis. As you invest more and your situations changes, the complexity of managing increases and you may want to use a tool  like Jemstep Portfolio Manager to help guide your investments strategy and monitor and adjust your portfolio on an ongoing basis.Investing your first $1,000 is exciting, but a realistic approach will serve you best no matter how long you plan to let your money grow.
  • Before careful of the following, especially when you’re just getting started:
  • Buying individual stocks. This often isn’t the best way to get started. Picking stocks is more complicated and often riskier, as well. With only $1,000, it’s harder to get good bang for your buck while still diversifying your holdings.
  • Funds with high expenses. Mutual funds get a lot of buzz, but if you’re not careful, they can eat away at your earnings with high expenses.
  • Too good to be true” investments. The goal isn’t to turn your $1,000 into millions. Don’t chase pipe dreams of multiplying your money many times over with risky investments or borderline scams that make unrealistic promises.

Maybe most importantly, don’t wait!

The earlier that  you invest, the more time your money can spend growing. Getting started is more important than finding the perfect fund or stock.

What is your strategy for investing your first $1,000? 

How to Invest Your First $1000” was provided by Mint.com

Mint is a free personal finance tool that brings all your financial accounts together online or on your mobile device, automatically categorizes your transactions, and helps you set budgets so you can achieve your financial goals.

5 Fast and Frugal Recipes to Kickoff the Football Season

Football Party

Planning a tailgating party on a budget requires more than a few good shopping maneuvers in your playbook.

Assuming you’ll want to watch the game rather than be stuck in the kitchen, think ahead, says Paul Sidoriak of GrillingMontana.com.

“Most dishes can be prepared almost entirely in advance and finished before kickoff, often coming out better than if they were made completely on game day,” he says.

For example, boil and cook bratwursts ahead of time. “Then, on game day, re-heat in boiling beer and sauerkraut, and then finish on the grill,” Sidoriak says.

Here are 5 more suggestions for tailgating fare that’s worthy of a place on the grill:

“Sam Can” Chicken

Chef David Burke came up with this twist on beer can chicken, using the new canned Samuel Adams Boston Lager.

In a large bowl, prepare marinade of one cup soy sauce, a tablespoon chopped ginger, a tablespoon chopped garlic, a tablespoon ketchup, a teaspoon mustard, two tablespoons honey, a pinch of red pepper flakes, and the juice of a freshly squeezed lemon.

Add a three- to five-pound chicken and marinate for two hours.

Get grill hot and open beer. Remove about a tablespoon of beer from the can. Put a few holes in the top of the can. Place your chicken right side up on the can, so that it sits up straight.

Place the beer-can chicken in the middle of the grill and let cook for about one hour or until it reaches the temperature of 165 degrees.

Grilled Hanger Steak with Bacon Chimichurri

Even tailgating is better with bacon.

This steak recipe uses bacon to spice up the accompanying sauce.

Honey BBQ Pulled Chicken

LSU Tigers and New Orleans Saints devotee Chef David Guas suggests preparing this chicken ahead of time and serving it cold on buttermilk biscuits.

But it’s just as tasty hot from the grill.

Potato Dippers

Served with a trio of sauces, these potato wedges cost less than $2 per serving to prepare.

Grilled Crab Cake

Make crab cakes on the grill instead of baking to pick up great flavors from the charcoal, Sidoriak says.

In a large bowl, combine one egg and a quarter cup each of Sriracha, Worcestershire sauce, and mayonnaise. Whisk until smooth.

Fold in one can jumbo lump crab meat, taking care not to break up the crab.

In a separate bowl, mix together a half-cup Panko breadcrumbs and 12 crushed Ritz crackers. Sprinkle half the crumbs onto crab mixture and fold in.

Repeat with remaining crumbs.

Form cakes carefully and try not to over-handle. Bake at 350 until golden brown, about 20-25 minutes.

5 Fast and Frugal Recipes to Kickoff the Football Season” was provided by Mint.com.

Mint is a free personal finance tool that brings all your financial accounts together online or on your mobile device, automatically categorizes your transactions, and helps you set budgets so you can achieve your financial goals.

Frugal Foodie is a journalist based in New York City who spends her days writing about personal finance and obsessing about what she’ll have for dinner. Chat with her on Twitter through @MintFoodie.

Found Money In Your Pocket? Here’s What to Do With It!

Photo taken by Marcos André. Courtesy of Wikimedia Commons.

Photo taken by Marcos André. Courtesy of Wikimedia Commons.

Dontcha love finding forgotten cash in an old pair of pants? It doesn’t happen all the time, of course, but it’s one of those sweet and unexpected pleasures in a modern life full of credit cards, online banking and electronic reminders. Surprise! You’re $5 or $10 less poor (err richer) than you were a minute ago. ‘Here’s $20,’ Life says, ‘and have a nice day!”

Thanks, Life!

But what now? Do you just shove it into your purse or wallet and forget about it until its time to splurge on a candy bar or a magazine or some dinner you won’t remember later? Naaaah.

Let’s look at some money-smart things you could do with that bill to help get yourself started with better money habits.

Savings

It might be easy to think of that unexpected bill in your pocket as just throw-away cash to use on some little impulse purchase, but that bill is worth more than the $5, $10 or $20 printed on its front. If you instead deposited it into a high-yield savings account and kept it there, you’d realize that it could be worth a little more. In fact, in 20 years, at a high-yield savings account of 0.75% APY like those offered by ING’s Orange Bank and depending on inflation rates, that $5 could be almost $5.80, that $10 could be almost $11.50 and that $20 could be almost $23.25.

You may or may not be impressed by that, but that additional money might be better than if you had spent the bill and then been left with just $0 and a memory you’ll soon forget. Plus, you may find that you build a habit of saving small amounts until you’ve started saving really significant sums!

Stocks

You’ve probably heard people talk about the stock market before—but outside of a retirement account that you probably don’t actively manage, you might not have ever bought or sold a stock before. Why not use that extra bill to start to learn a new skill—equity investing—and test the waters a bit by buying a few shares.

One easy way to start is to sign up for some online service like Sharebuilder that doesn’t require minimums to trade. Then just do a little bit of internet research until you find a company you like that has a shares that you can buy for less than $5, $10 or $20 each. Whether the stock’s price goes up or down does not have to matter at these small sums as long as you can use the experience to learn how stock markets work. And learning how stock markets work is very important because over the long-term, equities offer one of the best possible returns for your money. In fact, the average annual return on the market is about 9.3% over many years—or about 6.2% annually when adjusted for inflation.

(Keep in mind that we warned you earlier that the typical $7 trading fees charged by companies like Sharebuilder can really add up! But for what it’s worth, Sharebuilder also gives you $50 in free money when you make your first trade. Thus, it’s easy to start, but don’t get carried away with those fees. We’ll discuss a fee-free alternative next.)

ETFs

There’s an old saying that in the long run, nobody can beat the market. That means that you shouldn’t put a lot of effort into picking one stock over another, because in the long run on average, you will have been better off just buying a tiny slice of the entire market instead of placing your bets on a few specific stocks that will make you money some years and lose you money in other years. Buying a tiny slice of the market can be achieved through buying ETFs, or exchange traded funds, that represent most or all of the stocks in the marketplace. They are a good bet, because on average, more stocks overall increase in value instead of decrease in value. By buying a slice of the whole market, you get to enjoy the benefit of the long-term average increase—without the hassle and worry of trying to parse the winners from the losers.

ETFs can also be very cheap to buy compared to full shares in specific companies, and you’ll find that many brokers like TD Ameritrade, Charles Schwab and Fidelity don’t charge any fees at all for trades on certain ETFs—making them extra affordable and easy to access if you just have a few dollars that you want to start with.

Start smart-money habits today

Well, that was an unexpected list, huh? Take it to heart though, and remember that you can start to practice smart-money habits with any amount of money and a little enthusiasm. In fact, take a look at our Seven Days to Financial Fitness Plan and start your journey to a more comfortable life today.

5 Ways to Get More Done — By Doing Less

5-Ways-to-Get-More-Done-By-Doing-LessTony Schwartz, CEO of The Energy Project, garnered national media attention this year after writing an opinion piece called “Relax! You’ll Be More Productive” for The New York Times. In it, he argues that though running ourselves ragged is par for the course in our culture, we are actually cheating ourselves of the one resource we can control: Energy. Though energy, like time, is finite, Schwartz argues that it’s a renewable resource that we can all control—by taking strategic breaks, resisting the urge to be non-stop, and ultimately, optimizing our productivity. While few would argue against a theory that advocates more sleep, vacation, and “me” time, the challenge is that it’s easier said than done. But, with some self-awareness, and strategic change in your own ideology—it can be. Here are some expert tips on how and why relaxing and doing less could be the key to boosting your productivity.

Look calm, instill confidence.

Though more responsibility presumably leads to more stress, a study of stress hormone (cortisol) levels among military leaders and corporate executives published in the Proceedings of the National Academy of Sciences of the United States of America (PNAS) confirmed the exact opposite. Compared to their subordinates, cortisol levels of such high-ranking leaders were nearly 30 percent lower. By the same token, you can help your own stress levels, and your career by taking control of how you react to high-pressure situations. Body language research by social psychologist Amy Cuddy indicates that maintaining non-verbal postures that communicate relaxation and ease (like feet up on a desk with hands behind your head) can actually boost the perception of confidence others have in you, while at the same time, lowering the cortisol levels in your body.

Clear workspace, clear mind.

Having a cluttered desk doesn’t just make you feel frantic and distracted—it can hinder your career. In a national study conducted by CareerBuilder, nearly 40% of workers reported having a negative perception of a person with a paper-strewn desk, and nearly 30% of hiring managers surveyed said it would cause a person to be passed over for promotions. The same goes for having multiple windows open on your computer screen, and keeping your email and instant messaging functioning at all times. Mary Czerwinski, one of the leading authorities in the field of “interruption science” has researched the impact of multi-tasking at companies like Microsoft. Her studies revealed that workers took 15 minutes on average to return to serious mental tasks after they stopped them to respond to incoming email messages.

Recognize that not all breaks are created equally.

You’ve probably read that getting away from your desk periodically, taking a brisk walk, or hitting the coffee shop can clear the cobwebs and boost your workday productivity, but in the May 2012 issue of Harvard Business Review, Portland State University professor Charlotte Fritz shared findings that tell a different tale. According to her research, only breaks that are in some way related to work actually boost productivity during the workday. The rest, according to Fritz, actually make you less productive because they distract you from the work at hand. Be strategic the next time you take a workday break: Take your coffee with a side of co-worker and talk about a current project, or participate in a conference call while taking a walk outdoors. To that end, Fritz also found there is a strategy to maximizing the rejuvenating power of taking vacations: Because a very long break can be counterproductive to stress management when you return to a pile of “to do’s”, you’ll benefit more from three shorter trips away from work each year than one long one.

Redefine what is worth your time.

Because our culture rewards and enables expert multi-taskers, many of us form the belief that doing “nothing” is shameful and lazy. But, Debra K, a self-described  “former chronic workaholic super human overachiever” turned author, and host and executive producer of the PBS documentary The Journey into Wellbeing®, says that all overachievers can be reformed to find more balance—but it starts with redefining what is productive, in regards to emotional payoff. Instead of trying to tackle a monstrous list of “to do’s” like errands and weekends chores, she recommends identifying what takes the least amount of work, but offers the most reward for  your effort.

Put yourself on your to-do list.

Debra K says one her “aha moments” in managing overachieving tendencies was scrutinizing her to do list—and noticing that while it was full of tasks and energy spent on building “others” business, success, happiness and well being, there was no place reserved on it for her own well-being. She says, “It was almost shocking to realize I had put myself at the bottom of my own priority list, but a big step in reducing my chaotic overworking was to move myself to the top of it.” Because making her own mental and physical wellness a priority stemmed from a place of self-care versus selfishness, she was able to feel “okay” about setting personal boundaries, and taking time to rejuvenate. Debra K also suggests literally setting a timer on your phone or computer a few times a day to remind yourself to power down, and simply, relax.