What is the best way to invest $5k?

1 min readLast updated March 28, 2024by Unbiased team

This article takes you through the best ways to invest $5,000, your investment options, and why it's always wise to seek professional investment advice.

Summary 

  • Before you make an investment decision, you need to determine your financial goals and the level of risk you’re willing to take.  

  • Clearing any debt and building an emergency fund should also be front of mind before you start investing.  

  • Increasing your contributions, within the set limits, to your retirement accounts, such as your 401(k) or individual retirement account (IRA), is a wise way to invest $5,000. 

  • Speaking to an investment advisor is the best way to help you grow your money.  

What are my investment goals? 

Understanding your investment goals and what you want to achieve in the short and long-term is key to making good investment decisions.  

It all starts with what you want your money to achieve. 

Do you want to buy a new home? Perhaps you’re dreaming of a beachside retirement? Or maybe you want to put some money away for your family after you’ve gone.  

If you’re unsure about your goals or how to achieve them, it’s best to get expert advice. 

A financial advisor will review your circumstances and work with you to create a personalized plan with carefully picked products and services to achieve your financial goals. 

Unbiased can match you with an SEC-regulated financial advisor perfectly suited to your unique needs. Get started now.  

What is my investment risk tolerance? 

Investing is all about risk and reward.  

The higher the risk, the greater the reward or losses you could incur.  

Fortunately, there are different investment options for the various levels of risk, with safe investment options available for those who have a lower risk tolerance.  

All investments pose some level of risk, but what investments you choose will be determined by the amount of risk you’re willing to take. 

Here, you need to be honest with yourself and your investment advisor and decide if you want to invest conservatively, moderately, or aggressively. 

What do I need to do before investing? 

Before you start making any investments, you need to build your foundations.  

Clearing any outstanding debt and building your emergency fund should be at the top of your list: 

  • Settle any outstanding debts: If you have outstanding debt, you’ll never truly be able to enjoy any potential investment returns. Using your $5,000 to remove this burden ensures your investment gains won’t be overshadowed.  

  • Build an emergency fund: Life is full of unexpected twists and turns, and it’s wise to be ready for them. An unexpected expense or a sudden loss of income can happen at any time. An emergency fund acts as a safety net when things go wrong. Generally speaking, your fund should cover three to six months of expenses.  

Putting money towards both outstanding debt and your emergency fund gives you some peace of mind and allows you to make confident investment decisions, knowing you have some protection.  

Where to invest $5k right now 

There are multiple options open to you if you want to invest $5,000 right now.    

However, it’s worth remembering that there is no one-size-fits-all approach to investing, and what works for one person might not work for you.  

Before making any big investment decisions, it’s best to get expert advice. A financial advisor can review your circumstances and goals and put a personalized investment plan in place.  

This tailormade investment strategy will align with your preferences, financial goals, and risk tolerance and put you in a better position to see the outcomes you desire.  

Here are three different ways to invest $5,000 right now:  

1. Choose a high-yield savings account 

If you have short-term goals, a high-yield savings account could be a good option for you.  

High-yield savings accounts generally offer higher interest rates than standard accounts. 

They also have low monthly fees and can be accessed fairly easily, so if you want to remove money on short notice, you can.  

This might also be the perfect destination for your emergency fund.  

High-yield savings accounts are good for those with a lower risk tolerance, as deposits up to $250,000 are federally insured. 

2. Contribute towards your retirement 

It’s never too early or too late to start planning for your retirement.  

A Roth IRA is one of the most popular ways to save for retirement, so if you have $5,000 to invest, contributing to or opening a Roth IRA is a good option.  

As Roth IRA contributions are post-tax dollars, all contributions, earnings, and withdrawals are tax-free, enabling you to build a substantial nest egg.  

The annual IRA contribution limit is $7,000 in 2024 or $8,000 if you’re aged 50 or over, and you have the choice to either invest some or all of your $5,000.  

3. Consider real estate 

While you may struggle to buy or flip a property, you can enter the real estate investment world with $5,000 through real estate investment trusts (REITs). 

Real estate investment trusts, or REITs, are companies that own, operate, or finance income-generating real estate. 

These properties can range from office and apartment buildings to hotels, warehouses and even hospitals.  

As well as paying high dividend yields, as regulators require them to do so, REITs also allow you to diversify your investment portfolio, making them an interesting investment option. 

Get expert investment advice 

Whether you have $5k or $50k, understanding your financial goals and your available options will help you make confident investment decisions.  

The best way to invest $5k will depend on your personal circumstances, plan for the future, and financial security.  

To make informed decisions tailored to your unique circumstances and goals, it’s always wise to seek expert advice. A financial advisor can work with you to develop a robust investment strategy and help you meet your financial goals. 

Let Unbiased match you with an SEC-regulated financial advisor.  

Get started now.   

Writers

Unbiased team

Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.