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How to Invest $1,000 Safely

By  +Follow December 25, 2013 8:00AM
Tickers Mentioned:

One of the best tips a novice investor can get is probably to simply expect moderate returns and to be happy with a lack of volatility. For those investors with a great deal of money to burn, perhaps riskier investments might make sense, but if $1,000 represents a significant chunk of the savings for you or your family, the tortoise approach to investing is probably the wisest course of action. Starry eyed dreams of massive returns is precisely what drove investors into the arms of Bernie Madoff or led them to think the sub-prime mortgage market was the way to go. So, for the investor interested in steady, slow, but most importantly safe returns, here are some simple, very broad, very general pointers that can help get you started.

Bitcoins and Highly Leverage Hedge Funds

Just kidding. Wanted to make sure you were paying attention. These would fall into the opposite category of high risk/high reward. If you have $1,000 you can afford to lose, maybe it's worth doing some research, playing a hunch, and seeing if you can make money where MF Global's (MFGLQ) Jon Corzine failed. However, more likely than not, you don't have the time, knowledge, money, or access to information that the people who play these markets professionally have, so it's probably not worth it in the long run.

Mutual Funds

Ah, here's something simple. Mutual funds are investment vehicles specifically designed for the consumer. In essence, mutual funds pool the funds of many different investors to buy a portfolio of equities, bonds, and money market instruments. Most mutual funds are typically geared towards being very low risk, providing the average small-time investor an avenue to invest their savings that will garner a better rate of return than a savings account while having lower risk for collapse. Because of the pooled money, mutual funds can feature a diversified portfolio that would be difficult to assemble for any individual investor. In fact, most have specific rules, dictated by securities laws, limiting just how much exposure they can have to any one stock or bond.

Picking a mutual fund can be tricky, but most have ample data of the fund's historical performance.

Think of a mutual fund like long-term parking for your car at the airport. It isn't necessarily the most economical place to park your car, but you can feel confident that your car won't get broken into. If you're primarily concerned in your car being where you left it when you get back, long-term parking is the way to go, and mutual funds are a relatively safe place to park your car...er, savings.


Exchange-Traded Funds are very similar to mutual funds in that they're a collection of assets pooled together to provide a chance for an investor with limited funds to diversify their portfolio. Investing in any individual stock means taking a chance on a specific company, which can be risky. Just ask anyone who put their money into JC Penney (JCP) last year. However, ETFs are a portfolio of investments designed to mimic the performance of a particular index or sector. This allows an investor to make fairly broad, fairly general bets about the economy without having to do the meticulous research required to find specific companies to invest in and also mitigates the risks of investing in individual stocks.

There are a dizzying array of ETFs available, including those that speculate on commodities futures, currencies, and specific sectors and sub-sectors (have a particularly strong feeling about the future of companies specializing in wind power? Well the First Trust ISE Global Wind Energy Index Fund ($FAN) and the PowerShares Global Wind Energy Portfolio ($PWND) are both specific to the segment!), but the casual investor should most likely avoid these specific ETFs. Broad, index-based ETFs like the SPDR S&P 500 ETF ($SPY) are fairly safe bets over a long enough period of time. The S&P 500 Index has returned 13.5 percent annually over the past 50 years against 11.8 percent for the average mutual fund. Of course, this is no guarantee. Anyone who thinks that 50 straight years of growth means that there's no chance that things can change should ask anyone who was heavily invested in home prices continuing to increase in 2007. However, betting on the S&P continuing to increase at a similar rate over a long enough period of time is still a reasonable bet.

Blue Chips with Strong Dividends

Once again, investing in specific stocks presents an extra level of risk that isn't as present in ETFs or mutual funds. Namely, you've pinned your hopes on one company rather than dozens (or hundreds) and who knows what might happen. However, there are certain massive corporations that have reached a point of relative inertia that makes it hard to see them completely collapsing. While they probably won't offer big upward moves in share value either, they are safer than companies with smaller market capitalization (a number reached by multiplying the total number of outstanding shares by the price per share) and offer a major benefit: dividends.

Dividends are how major companies with little room left to grow bolster their share price, essentially paying profits back to shareholders in cash. These companies are typically in industries with a set demand for their product and a history of performance, like food makers or telecommunications companies. Dividends are typically expressed as a "yield," which is essentially what percentage of your investment will be paid back in the form of a dividend over the course of the year (dividends are typically paid in four quarterly installments, but occationally come in the monthly or annual variety). Any dividend yield of over 5 percent is a strong return on investment, and this can further be bolstered by rising share prices over time.

What's more, dividends can also allow an investor to continue making money even if the share price drops. If you intend to hold a stock for years, as you would for a retirement account, a downturn in share value over four or five years is suddenly a lot easier to stomach if you're still making a consistent dividend income during that time. And you can hold the stock long enough that you have a much better chance of taking advantage of the upswing that's often around the corner for those who are patient.

Dividends aren't certain, companies can and have changed them, but they can offer a path to increasing returns on a longer term investment horizon for anyone willing to take on a little more risk.


No investment is completely safe, and even the lowest risk bets can ultimately prove a mistake. But any investor willing to forgo dreams of miracle stock-picking and crushing the market can find a number of simple, relatively safe investment vehicles that, with patience, can offer solid returns more often than not.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for SPY
26 Feb 15 15:55:08
RT @etffunds: Advice on Organizing Asset Allocations and Managers.. http://t.co/YWY37PcmsA $SPY #ETF #ETFs #Stocks
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26 Feb 15 15:54:07
What the Technicals Tell Us.. http://t.co/jE3LewBujA $SPY #ETF #ETFs #Stocks
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26 Feb 15 15:53:50
Feeling Mixed Up: Stocks End Mixed as Jobless Claims Jump, Core Inflation Surprisingly St.. http://t.co/7TkMu2zhRw $SPY #ETF #ETFs #Stocks
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26 Feb 15 15:53:33
Stocks are setting up for a more volatile move. Here's why... http://t.co/J9N17BGCjU $SPY #ETF #ETFs #Stocks
El Duque
26 Feb 15 15:53:16
Little change from yday... B/B 06 | above 09,12,15,17 | below 04,02,00 - $SPY opex tomorrow, max pain = 210 #ES_F http://t.co/aAXnagaLfk
Top ETF Funds
26 Feb 15 15:53:15
Why A Slowdown In Europe Could Hamper Consumer Confidence.. http://t.co/SKPOHNvTiX $SPY #ETF #ETFs #Stocks
Gennady Kupershteyn
26 Feb 15 15:51:54
As the market stalls, 147 Short #Trading Ideas to review. http://t.co/yVEdG9do2v $X $TDW $DRQ $TIF $TSLA $QIHU $SU $NGLS $BIDU $QQQ $SPY
Half Full Publishing
26 Feb 15 15:50:05
RT @etfguide: UPDATE: Stock market greed is currently at extreme levels. $VIX $IBB $QQQ $SPY http://t.co/ljQkNy3voo
26 Feb 15 15:49:19
UPDATE: Stock market greed is currently at extreme levels. $VIX $IBB $QQQ $SPY http://t.co/ljQkNy3voo
El Duque
26 Feb 15 15:47:30
RTH profile left weak high, though together with yesterday we have good balance. #ES_F $SPY #ambiguous http://t.co/cOkeM06ATS
26 Feb 15 15:46:34
RT @Blackopstocks: $VMGI Buying Frenzy Today! @GreenRusher #GreenRusher $FB $SPY $CLDX #420Stocks #MJStocks http://t.co/1Y4T8jDZhx
El Duque
26 Feb 15 15:45:04
Compare to NQ where internals improved, made higher high. #ES_F $SPY #NQ_F http://t.co/xylg7jbK5F
26 Feb 15 15:44:50
02/26/15 - Today's Market Forecast™ video can be viewed here: http://t.co/QG0IUurSb5 Discussed: $SPY $USO $UUP $TLT $XLY $GPS
El Duque
26 Feb 15 15:44:02
OK, good, day even if small range. Behaved, clean rotations. But... internals softened more today. #ES_F $SPY http://t.co/Jscgt6soXG
Scott Redler
26 Feb 15 15:42:22
Daily Recap: video and look ahead. $spy $spx $iwm $mdy $aapl $fb $twtr $lnkd $feye $uso $xle $jpm http://t.co/y1fr7GHqs5
26 Feb 15 15:33:42
RT @Mastertrader777: Looks like time to short $SPY big time. lol, but what do I know? http://t.co/C72C4enrnm
Al Sabogal
26 Feb 15 15:32:47
@kenserson I think the $SPY move is getting tired...I have a 213 px target so have been scaling out as we get close. Was 2x levered from 201
The American
26 Feb 15 15:30:57
5 Takeover Targets Hedge Funds Are Betting On - Insider Monkey $CDK $ADBE $ADSK $HUM $GRA $AAPL $MSFT $COO $JAZZ $SPY $DIA $QQQ $HDGE $TRND
Bryan Sims
26 Feb 15 15:29:30
RT @justindirico1: Marex Spectron Ethanol Report http://t.co/32CEehIzWK #biofuels #rins #ethanol $USO $SPY $CL_F $ZC_f
26 Feb 15 15:28:36
GDP v. $SPX Returns http://t.co/tmrEsa9oy5 $SPY $ES_F
26 Feb 15 15:26:05
$RESN big fail.. $SPy $INDU $IWM
Alexander WJ
26 Feb 15 15:20:31
major money holders are staying out of any action in the majority of ETFs today... $0 in block trades $SPY $XLK $XLY $IBB $SMH
Don McNeill
26 Feb 15 15:16:26
#ES_F Advance Decline $SPY $TNX $SPX pause or Fade? Broke below but closed within Rising Wedge. Daily Charts http://t.co/F8gZ4tjw4u
Don McNeill
26 Feb 15 15:16:02
#ES_F $SPY $TNX $SPX internals med-Pos. S/T losing momentum. A/D, AD-Vol stalled. Fade but still in Positive Turf. http://t.co/bjPfK01ZCH
Lisa Diaz
26 Feb 15 15:14:39
RT @DirexionLETFs: Message: Stay nimble $SPXL $SPXS $SPY
26 Feb 15 15:13:02
RT @SJosephBurns: FYI: I exited $SPY at close. I exited all other positions this morning. I'm flat here.
C.R.E.W. Inc.
26 Feb 15 15:12:03
RT @YahooFinance: The great peaks and troughs of the S&P 500’s CAPE ratio http://t.co/I0LXjrz73Y via @scheplick $SPY http://t.co/zQM6j3VygH
Atilio Avalos
26 Feb 15 15:11:44
RT @DougKass: Coming up on RealMoneyPro shortly - Why I want to go "all in" short now and what is preventing me from doing so. $SPY
Alex Chalekian, CEP®
26 Feb 15 15:10:02
RT @Lake_Avenue: Lake Avenue Market Close Update: #DJIA -10.15 #NASDAQ +20.75 #SP500 -3.12 #stocks #economy #markets #wallstreet $DIA…
26 Feb 15 15:09:20
@GdaytoYou I'm usually with yah on some things, but I got some puts today on $SPY .. What is your thoughts?
Atilio Avalos
26 Feb 15 15:08:38
RT @SJosephBurns: 10 Signs of a Coming Reversal http://t.co/zn3X4IIQs5 via @sjosephburns $SPY $QQQ $IWM $DIA
26 Feb 15 15:07:50
RT @SJosephBurns: FYI: I exited $SPY at close. I exited all other positions this morning. I'm flat here.
George Maniere
26 Feb 15 15:05:40
RT @SJosephBurns: FYI: I exited $SPY at close. I exited all other positions this morning. I'm flat here. Congrats! Well Played.
Bostjan Berginc
26 Feb 15 15:05:40
RT @JLyonsFundMgmt: ICYMI>ChOTD-2/26/15 The S&P 500-VIX Standoff - Part 2 $SPY $VIX Post: http://t.co/OROIZV17uV http://t.co/4OCtVaajtD
Lake Ave Financial
26 Feb 15 15:05:35
Lake Avenue Market Close Update: #DJIA -10.15 #NASDAQ +20.75 #SP500 -3.12 #stocks #economy #markets #wallstreet $DIA $QQQ $SPY $SPX
Jack Trader
26 Feb 15 15:05:17
$SPY January Durable Goods Came In Better Than Expected [Dow Jones Industrial ... http://t.co/3jGFTGhxrT
Clair Voight
26 Feb 15 15:05:12
$SPY Trade of the Day: SPDR S&P 500 ETF (SPY) http://t.co/RmvwGMjq85
Direxion LETFs
26 Feb 15 15:05:11
Message: Stay nimble $SPXL $SPXS $SPY
Michael Hurt
26 Feb 15 15:04:57
RT @SJosephBurns: FYI: I exited $SPY at close. I exited all other positions this morning. I'm flat here.
David Settle
26 Feb 15 15:03:23
02/26/15 - Today's Market Forecast™ video can be viewed here: http://t.co/WnEFhLNg6h $SPY $USO $UUP $TLT $XLY $GPS
26 Feb 15 15:03:18
New $SPY alerts have recently been posted. Check them out now. http://t.co/aZqJnGH8XJ
Andres Gallo
26 Feb 15 15:03:15
RT @philstockworld: #Japan Raids #Pension Funds to Goose Markets: $EWJ $AAPL $SPY #CentralBankManipulation -- http://t.co/W1S94BGS6i http:/…
26 Feb 15 15:03:13
RT @philstockworld: #Japan Raids #Pension Funds to Goose Markets: $EWJ $AAPL $SPY #CentralBankManipulation -- http://t.co/W1S94BGS6i http:/…
Jennifer Fairfax
26 Feb 15 15:03:07
RT @philstockworld: #Japan Raids #Pension Funds to Goose Markets: $EWJ $AAPL $SPY #CentralBankManipulation -- http://t.co/W1S94BGS6i http:/…
Ron DeLegge
26 Feb 15 15:02:01
Volatility Sleeps, Risk Doesn't http://t.co/VRqX4HjU5V $VIX $VXX $VIXY $SPY $QQQ $DIA
Jim Hanlin
26 Feb 15 15:01:54
RT @philstockworld: #Japan Raids #Pension Funds to Goose Markets: $EWJ $AAPL $SPY #CentralBankManipulation -- http://t.co/W1S94BGS6i http:/…
Brandon Lagao
26 Feb 15 15:01:45
RT @philstockworld: #Japan Raids #Pension Funds to Goose Markets: $EWJ $AAPL $SPY #CentralBankManipulation -- http://t.co/W1S94BGS6i http:/…
Robert Walker
26 Feb 15 15:01:34
RT @SeekingAlpha: SPY - Ready To Roar http://t.co/lu81xaF21h $VXX $SPY
Planning Pod
26 Feb 15 15:00:51
RT @philstockworld: #Japan Raids #Pension Funds to Goose Markets: $EWJ $AAPL $SPY #CentralBankManipulation -- http://t.co/W1S94BGS6i http:/…
26 Feb 15 15:00:50
RT @philstockworld: #Japan Raids #Pension Funds to Goose Markets: $EWJ $AAPL $SPY #CentralBankManipulation -- http://t.co/W1S94BGS6i http:/…
By  +Follow December 25, 2013 8:00AM



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