- If you are starting the journey of investing, a thousand dollars can be just the right amount to begin with.
- There are ample options out there, each of which suit different types of investors based on their available surplus funds, risk appetite, age, etc.
- If you are someone looking to make your money work hard for you, here are some options you can explore with a thousand extra dollars.
It might not seem like a lot of money to some, but if you are starting the journey of investing, a thousand dollars can be just the right amount to begin with.
Now that you have decided to take on the responsibility of investing for your or your family’s future, the next step would be to ascertain the best possible route to take.
Where should I invest a 1,000 dollars?
There are ample options out there, each of which suit different types of investors based on their available surplus funds, risk appetite, age, etc.
If you are someone looking to make your money work hard for you, here are some options you can explore with a thousand extra dollars.
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- Registered retirement savings plan (RRSP)
An RRSP, as many may know, is a retirement-centric account that is sponsored by the government.
It is known to come with significant tax benefits, such as not needing to shell out capital gain taxes on the income you make from your RRSP, tax deductibility, etc.
Another factor that can encourage investors to explore RRSP is that some companies/institutions offer group RRSP to their employees with matching contributions.
- Tax-Free Savings Account (TFSA)
If RRSP does not interest you as you will be required to pay taxes during withdrawal, you can take a look at TFSA.
This government-sponsored retirement account not only expands tax-free, but is also exempt from taxes when you withdraw it, making it a little more flexible.
Additionally, you can also re-invest your funds in a TFSA a year after you withdraw it.
- Guaranteed Investment Certificate (GIC)
A GIC, which is a type of fixed income, can help you put away your surplus funds for a specific amount of time, at the end of which you will get back your capital along with an interest amount.
The investment time period can vary from a few months to several years. But note that the longer you invest for in a GIC, the more the interest rate would be.
However, investors should keep in mind that GICs can come with some restrictions. For instance, choosing to withdraw your money before the term ends can lead to losing out on earning any interest.
To skirt this issue, some investors choose to hold multiple GICs with different term periods, hence giving them the opportunity to enjoy long term benefits in some cases while leaving them with the option to withdraw sooner with the rest.
- Non-registered retirement account
In case you have already used your RRSP and TFSA accounts to their maximum capacity or are simply looking for a different option, you can choose to explore the option of a non-registered retirement account.
While you will still enjoy the benefits from earnings gains with a non-registered retirement account, you will be required to list your capital gains when you are filing your taxes at the end of the year. This account will also not extend the same tax benefits as a TFSA or an RRSP.
However, with a taxable brokerage account, you will have the choice to explore investment options in stocks, exchange-traded funds (ETFs), etc.
An investor, nonetheless, should ideally research on the trading fees and commissions of different brokerage platforms before deciding on one.
If you are not ready to invest your surplus 1,000 dollars as it may require locking it away for a long period of time, you still can keep it safe for emergencies in an easily accessible account, such as a high-interest savings account (HISA).
A savings account may not give you all the benefits of the other options mentioned above, but it will still keep your money safe for emergencies.
At the end of the day, it’s all about saving your excess money for future use.