How To Invest 5000 Dollars – Best Way To Invest $5000 Right Now

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Ten years ago, financial experts would recommend index funds, investing in high-yield savings accounts, or opening an account with peer-to-peer money lending platforms. However, things have significantly changed over the past few years. One important point to note here is that by 2021 the world of investment is contemplating more varied ways than before. For instance, Robo-advisors, cryptocurrencies, and other modern assets platforms are now widespread. 

This guide will talk you through the best ways to invest $5000, covering a range of methods to strategically grow your financial position over time.

#1 Broker to Invest $5000 – eToro

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  • Invest in a wide range of cryptocurrencies
  • Ability to copy more experienced investors and their decisions
  • eToro crypto wallet included which makes it beginner-friendly
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How to Invest 5000 Dollars- Choose a Broker

If you want to invest money that you may not need to use for a more extended period, you must choose the best strategy. Note that some methods are likely to work better for you than others. Below are a few of the most viable places to invest your $5,000.

  • eToro – The best option to invest $5000 in the US
  • Robinhood – Diversify your investments with Fractional Shares
  • BlockFi – No Hidden Charges on Your Crypto Investments

Best Way to Invest $5000 – Overview

There are hundreds of options to invest $5000 from your home comfort. This paper narrows the option to the following list:

  • Cryptocurrency – You can opt to invest in the crypto business. 
  • Shares and Stocks – A variety of stocks are available for you to invest $5,000 in the US. 
  • Real Estate – You can generate profit from the real estate business. 
  • Roth IRA – It allows you to leverage post-tax money in retirement accounts. 
  • College Savings Accounts – It enables users to prepare for college expenses. 

Here is a complete guide for these investment options. 

How to Invest $5000 – A Quick Guide For 2021

The procedure to invest $5,000 in the stock markets is accessible in the US. In any case, you can follow these steps to place your first investments. They include:

  • Step 1: Open an eToro Account  The platform is one of the most popular and most reliable options to invest $5,000. You ought to click on Join Now to commence the account opening process.
  • Step 2: Upload ID  You can upload your ID, driver’s license or passport to verify your personal information.
  • Step 3: Deposit Funds  The account will allow you to deposit funds with bank transfers, e-wallets, and credit cards.
  • Step 4: Search Asset  You should click on the Trade Button to choose the apt assets for your investments. Popular options include commodities, crypto, ETFs, and eToro support stocks.
  • Step 5: Invest $5,000  You can then click on the Trade button and the Open Trade button to submit your investments.

67% of retail investor accounts lose money when trading CFDs with this provider.

Where to Invest $5000  – Full Broker Reviews

It would be best to opt for the best broker to reap a higher profit from the financial market. Best platforms get regulated by the FCA, provide access to various markets, and feature low fees. Also, it would be best to opt for a straightforward platform. Here is a list of reliable brokers that you can consider. 

1. eToro – The Best Option to Invest $5000

Our research concluded that eToro would be the best broker to opt for when investing in stocks with your $5000 into the financial markets. It is a top-rated trading platform with more than 20 million users and is suitable for newbies. It comes with a straightforward user interface that makes it a better option for beginners. The process to create an account, deposit your money, and place the first investment can take as little as five minutes.

Once you complete the account registration, you will access a pool of financial markets. The good thing is that the platform offers hundreds of stocks for investors looking for shares from 17 different exchanges. It covers stocks from Asia, Europe, the US, and the UK. 

etoro review

Besides, the platform also offers ETFs and index funds, which can be an excellent option for investing your $5000. Above all, the platform provides a department to buy cryptocurrency that is suitable for additional investments.

In general, it is easy to deposit money into your eToro account if you find this platform exciting and promising to give you profit on your $5000 investments. You can make instant deposits using a credit or debit card. 

Besides, this broker also supports bank transfer options and e-wallets like Skrill and PayPal. Also, FCA regulates and authorizes all eToro functions and markets. Another great tip is that FSCS will cover all your investments in terms of safety and security.

Pros

  • The social trading tools allow users to generate default investments portfolios.
  • It is ideal for beginners.
  • The platform has over 20 million users, which is promising.
  • FSCS covers the platform, and FCA regulates its operations.
  • It allows bank transfers, e-wallets, and credit cards.
  • The minimum investments on the platform are as low as $50.
  • It charges no commission and also features zero stamp duty.

Cons

  • It does not support MT5 and MT4.
  • The platform is too primary for experienced traders. 

 67% of retail investor accounts lose money when trading CFDs with this provider.

2. Robinhood – Diversify Your Investments with Fractional Shares

This platform has a moderate risk level. If you want to trade your money in ETFs or stocks, but you also want to ensure you remain more diversified, going for a fractional share could be the best idea. Generally, fractional shares mean investing a certain percentage of your total money or shares. Instead of buying a full share, going for fractional shares allows you to trade your $5,000 in several ETFs or stocks. Thus, you spread the risks.

Obtaining fractional shares allows you to own slices or fractions of renowned companies around you. Yet, the price of one share of AMZN (Amazon) stock is currently above $3,000, making it slightly a significant barrier to entry. All the same, you can invest your investment into a section of Amazon stock

Robinhood is one of the most popular modes of fractional shares investment. The reason for this is that the app is user-friendly, and the trading platform is free. Upon signing up and opening your account, you may start earning free stock worth $225. Another great check-out option is Stash. 

Pros

  • It allows you to invest your $5,000 across various ETFs and stocks.
  • This option makes it possible to trade in fractional shares using any given online brokerage company. 
  • With this method, you can invest in popular stocks without necessarily buying a whole share. 

Cons

  • Choosing a brokerage company that asks for commissions may increase the cost. 
  • Only some brokerage firms allow you to trade in fractional shares.

 67% of retail investor accounts lose money when trading CFDs with this provider.

3. BlockFi – No Hidden Charges on Your Crypto Investments

Just like the above method of investment, the risk here is also moderate. Over the past few years, the introduction of cryptocurrency in the business arena has dramatically changed things. Yet, it is not a thing for everyone. 

The BlockFi renders it possible to utilize cryptocurrency as a means of earning interest on your investment. In general, you can use cryptocurrency to attain a profit of 8.6 percent APY, with no hidden charges. 

Pros

  • It has no hidden charges
  • The platform has no call for minimum balances in your account 
  • It offers interest-earning on your crypto balances 

Cons

  • Upon exceeding the free withdrawal threshold, you will pay some fees for your subsequent withdrawals. 
  • As an investment, cryptocurrency is considered highly volatile. 

 67% of retail investor accounts lose money when trading CFDs with this provider.

Best Way to Invest 5000  – Choose an Investment

It can be an excellent option to choose the most profitable investment option for your capital. Numerous investment options are worthwhile, but here are some of the best ones to consider. 

Building a Fundrise Micro Real Estate Portfolio

Similarly, this method too has a moderate risk level. With Fundrise, you can easily incorporate a real estate portfolio into your investment. The platform does not only allow you to venture into real estate investment, but it offers one of the best and profitable means of using your $5,000. 

As such, Fundrise recorded an impressive average ROI ranging to 9.47 percent in 2019. Except if you wish to be a hands-on property owner, this mode of investment offers the best option to make use of your extra money. 

This investment platform allows you to purchase notes in various real estate ventures that get subjected to thorough scrutiny by different real estate doyens. Notably, out of all the people who apply for Fundrise loans, only 2 percent get approval. 

The first step here is to open a Fundrise account, which is more or less the same as opening and setting up a brokerage account. Here, you will need to fill in your details before choosing your suitable portfolio with your timeline and the desire for risk.  

The Starter Plan allows you to have a minimum balance of only $500 in your account. In any case, Fundrise is an ideal choice for those wishing to venture into the real estate business without necessarily becoming landlords. 

The Pros

  • You can start with a minimum balance of $500
  • The returns are incredibly high (9.47% in 2019)
  • Charges an advisory fee of only 0.15% pa

The Cons 

  • Since Fundrise does not require you to withdraw your money any time you feel, the money is not in liquid form. 
  • It can be extremely challenging to understand the rather intricate options.

Starting your Roth IRA

Roth IRA is an investment option that allows you to open and own additional accounts to the retirement accounts you already have, such as an office 401 (K). The Roth IRA account enables you to trade your post-tax money. Thus, it has no upfront tax benefits. 

Yet, the amount of money you invest in your Roth IRA account increases over time as it is tax-free. Hence, no income tax is required for withdrawals the moment you attain your retirement age. 

The Roth IRA mode of investment is limited to only those who qualify. Hence, there is no way you can benefit from this type of account if you have an extremely high income. For instance, a single filer, you are only allowed to invest fully in a Roth IRA account if your earnings are below $125,000, and the phase-out of your income commences at $125,000 and stops at $140,000. 

To get started, you will need to open a Roth IRA account with your favorite brokerage company. As of 2021, qualified applicants can invest a maximum of $6,000 throughout their Roth IRA accounts. But, people aged between 50 years and above have an investment limit of $7,000. 

This investment account is best suited for anyone wishing to save for retirement, particularly those likely to pay higher taxes. 

The Pros

  • Considering that there is no income tax levy, your investment grows tax-free, which means you won’t be charged anything on your retirement age withdrawals.
  •  You have the opportunity to withdraw your investments any time you feel like it without penalty. 
  • You have the option of choosing a suitable brokerage firm for your Roth IRA account. 

The Cons 

  • Your contributions are not tax-exempted in the initial year of investing
  • It requires relatively low contribution limits 
  • The income range caps those who are eligible for opening Roth IRA accounts 

Invest with Betterment Through Robots

The risk level of investing your $5,000 in the US varies. Thus, if you plan to venture into the stock and forex exchange market, Betterment can offer a better choice. Once you have created your Betterment account, you will deposit your first investment, draw your financial objectives, and capitalize on your risk acceptance.  

In this case, the website utilizes technology to trade your investment without necessarily spending hours comparing various options or companies. Other than researching on your own, this type of investment allows you to utilize a short and precise questionnaire to establish what you think could be a possible risk level within the market worth taking. 

The good thing with Betterment is that it helps to rebalance your portfolio as required. If your risk tolerance changes, you can easily log into your Betterment account and make adjustments to your preferences. 

The first step requires you to open a Betterment account by filling in your details, including your home address, email, phone number, banking details, and social security number.  

Betterment allows you to deposit funds into your account electronically. Once you have done that, Betterment will take charge of growing your wealth depending on the goals and timeline of your investment. 

The Pros

  • The charges are slightly low. Thus, you only have to pay 0.25 percent on your total investment balance annually. 
  • Betterment applies technology to invest your money with your preferences efficiently.
  • It can be the best investment option for beginners.

The Cons 

Since you need to pay some fees on your investment, you can easily opt for commission-free investment platforms. 

Diversify Your Investment Through ETFs

Exchange-traded Fund involves a selection of securities, including stocks, that are usually used to track indices such as the S&P 500. Considering that ETFs involve a variety of investments, they are naturally individually distinctive. 

Similar to any given stock on the market, you can easily trade your ETFs. Therefore, it implies that you can purchase a considerably smaller portion of these funds rather than making a substantial initial investment. 

The ETFs allow you to invest your $5,000 like you’d in an index or mutual fund. To begin with, you will need to open an account with a brokerage account of your choice and decide on which type of ETFs you wish to invest in. You also have an option of investing into ETFs within your retirement account, including a Roth IRA. 

The Pros

  • Typically, the ETFs come with low-cost ratios and trading charges 
  • It requires you to have a low minimum balance (or none) to get started.
  • The tax liability is much lower than the mutual funds.

The Cons

  • It comes with similar risks as in any other stock market exchange 
  • There is a wide range of ETFs; thus, it calls for in-depth research before deciding to invest your money.

Opening College Savings Accounts

Just like above, the risk level varies greatly. The best way to prepare yourself for college expenses includes opting for the 529 savings plan (College). Otherwise termed Qualified Tuition Programs, these investment plans allow you to put your after-tax money in the investment. 

After that, you can now withdraw the cash and any other investment free of charge so long as you utilize it to meet higher education expenses, including college fees, tuition, textbooks, and the like. 

This option requires you to open and set up a 529 account irrespective of your location and your children’s age. However, it is essential to find out if any tax benefits are offered in your state. 

For instance, Indiana provides a 20 percent credit advantage on the initial $5,000 of your yearly investment. If you are married, and jointly file your investment, thus $1000 from the state during taxation if you maximize this advantage. 

Foremost, make sure to research the 529 options within your state. Make comparisons based on the number of levies and investment choices if your state lacks any investment incentives within their 529. Then it would be better to opt for a college savings account. 

If you are an investor with college-oriented children, then this plan is best suited for you. Notably, you do not expect higher education costs to go down any sooner. 

The Pros

  • Your money increases over time, and you can withdraw it tax-free to pay for your children’s college fees 
  • Certain states provide tax benefits 
  • It gives you ample time to prepare for your children’s higher learning costs 

The Cons

  • The funds are meant explicitly for higher education, or else you are liable for penalization during otherwise withdrawals. 
  • Charges vary and may be extremely high. 
  • The plan may vary based on the existing investment options. 

How to Invest 5000 Dollars – Detailed Walkthrough

The procedure to invest $5,000 in the US is simple, but it involves considerable risks. In general, you ought to find a platform that is certified and offers good features. Hence, you can make the most profits out of your $5,000 investment. The procedure involves these steps:

Open an Account

The first step would be to open an account to enable you to make any investments. eToro is the best platform you can choose since it comes with a simple user interface and is certified. It also features affordable rates to ensure maximum conversions.

how to join etoro

Deposit Funds

The next step would be to deposit funds into your account. The good thing is that eToro allows payments with credit cards, bank transfers, and several e-wallets such as PayPal. Thus, it is both convenient and flexible.

Search Investments

It would be best to conduct extensive research to choose the most profitable investment options. The platform offers numerous investment options that are convenient for traders. Finally, you will press the trade button to complete the investments.

Complete Investment

An order box will appear on your screen after clicking on the ‘Trade’ button next to the asset you want to invest your money in. You will enter the amount of money you want to invest in your chosen asset.

Once you have entered the amount into the ‘Amount’ box, click on the ‘Open Trade’ button to complete your investment.

How to Invest $5000 – Conclusion

The options mentioned above represent some of the best methods of investing your $5,000. However, the prospect that better meets your requirements may vary depending on the level of your risk tolerance level, your timeline, and your investment objectives. 

Besides, it is good to note that the style you choose could make a difference. Nevertheless, some of us may prefer having somebody else invest our money on our behalf, yet we have those who want to learn more to invest in confidently. 

eToro – Best Broker to Invest $1,000

1
$50Exclusive promotion
Our score10
  • Invest in a wide range of cryptocurrencies
  • Ability to copy more experienced investors and their decisions
  • eToro crypto wallet included which makes it beginner-friendly
0% Commissionstart TradingOur score 10

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About Hillary PRO INVESTOR

Hillary is a top-rated SEO copywriter with seven years of experience in WordPress websites. He has extensive experience as a content writer, methodically identifying and executing effective search engine optimization tactics using various tricks, hacks, and tools. He has worked with top companies such as ResultsWellnessLifestyle Inc, Sorftorbits LLC, and Radio Maisha (National Station).