Smart Ways To Invest $2,500 Today

If you have $2,500 to invest, there are a few options to consider.

Firstly, you should assess your goals and time horizon. If you need the money within five years, investing heavily in stocks may not be the best option due to their volatile nature. In this case, government-backed bonds or a savings account could be a safer choice.

However, if you're looking for higher returns and have a longer time horizon, investing in stocks or exchange-traded funds (ETFs) could be a good choice. Stocks like Exelixis, Mastercard, and Berkshire Hathaway have been recommended by some sources.

Additionally, you could consider investing in precious metals or real estate investment trusts (REITs).

It's important to remember that investing comes with risks and to do your own research before committing your money.

Stocks

If you have $2,500 to invest in stocks, here are some ideas to consider:

Exelixis (EXEL)

Exelixis is a cancer-drug developer whose lead drug, Cabometyx, has shown promising results in treating renal cell carcinoma and advanced hepatocellular carcinoma. The drug is expected to bring in more than $1 billion in annual recurring sales by 2021. Exelixis also has strong cash flow, generating over $400 million in free cash flow over the past 12 months.

Wheaton Precious Metals (WPM)

Wheaton Precious Metals is a precious-metal streaming company, which means it provides upfront capital to mining companies in exchange for a percentage of their output. This business model allows Wheaton to benefit from the increase in the spot prices of precious metals without being responsible for the day-to-day operations of mining. With gold prices on the rise, Wheaton is well-positioned to benefit.

Mastercard (MA)

Mastercard is a payment-processing giant that has returned 209% over the past five years. The payment processing space is difficult to disrupt due to significant barriers to entry, and Mastercard has established itself as the second-largest player in the US market. The company benefits from the consumption-dependent nature of the US GDP and does not take on the risks associated with lending.

Berkshire Hathaway (BRK.A, BRK.B)

Buying Berkshire Hathaway stock means investing with Warren Buffett, one of the most successful investors of all time. Berkshire has outperformed the benchmark S&P 500 over the long term, delivering an aggregate return that outpaces the S&P 5000 by more than 2,740,000% since 1964. The company is currently trading at a significant discount, making it an attractive investment opportunity.

Ping Identity (PING)

Ping Identity is a cybersecurity company that uses artificial intelligence and machine learning to secure enterprise clouds. With the need for cloud security growing due to the increase in remote work, Ping Identity is well-positioned to benefit. The company is already profitable and is expected to grow by 15%-20% annually.

Bonds

There are many types of bonds, from government bonds to municipal bonds. Treasury bonds, also known as T-bonds, are issued by the US government and are considered risk-free. Municipal bonds are issued by cities, towns, or states to raise money for public projects such as schools, roads, and hospitals. The interest earned from municipal bonds is tax-free, while interest from corporate bonds is taxable.

When investing in bonds, it is important to know when the bonds mature, what the bond's rating is, the track record of the bond issuer, and your own tolerance for risk. Bonds with lower credit ratings usually offer higher yields to compensate for the higher levels of risk.

However, there are also risks associated with investing in bonds, such as interest rate risk, inflation risk, credit risk, and liquidity risk. It is important to understand these risks and to diversify your investments to manage them.

Real estate

One option is to invest in a real estate investment trust (REIT). REITs are companies that sell shares in their various real estate investments. By law, REITs must pay 90% of their taxable income as dividends to shareholders. This makes them a good option for investors looking for income-producing rental properties. Some of the biggest publicly-traded REITs include Public Storage, Health Care REIT Inc., and Equity Residential.

Another option for investing in real estate with a limited budget is to consider crowdfunding platforms. These platforms pool money from multiple investors to buy commercial real estate properties such as shopping centres or office buildings. Investors then receive quarterly distributions and own a small piece of the property. However, investing in commercial real estate also carries risks, as demand for these properties can decrease significantly during a recession.

If you're looking for a more hands-on approach, you could consider a low down payment purchase. On some platforms, you can find single-family or small multi-family investment properties that require an initial investment of $20,000 or less. You can also explore options like seller carryback, where the owner provides financing by carrying back the note for the buyer, or fixing-and-flipping properties.

Keep in mind that investing in real estate requires careful consideration of your goals, time horizon, circumstances, and risk tolerance. It's important to assess these factors before making any investment decisions.

Exchange-traded funds (ETFs)

• Offer instant diversification, whether across the broad market, asset classes, market sectors, or specific industries.
• Are accessible and flexible. They can be bought and sold anytime during a trading session, and you can also short sell them and buy on margin.
• Have low fees. The expense ratios of most ETFs are lower than those of the average mutual fund. The average expense ratio for an index ETF was 0.16% in 2022.
• Are highly liquid. Popular ETFs can be sold easily and at a narrower bid-ask spread.
• Are tax-efficient. Because of their passive management, ETFs usually have fewer capital gains, which means investors may pay less in taxes.

There are two main types of ETFs:

• Passive ETFs: These aim to replicate the performance of a broader index, such as a diversified index like the S&P 500, or a more specific targeted sector or trend.
• Actively managed ETFs: These do not target an index of securities but have portfolio managers making decisions about which securities to include in the portfolio. Actively managed ETFs have benefits over passive ETFs but can be more expensive.

• SPDR S&P 500 (SPY): The oldest ETF that tracks the S&P 500 Index.
• IShares Russell 2000 (IWM): An ETF that tracks the Russell 2000 small-cap index.
• Invesco QQQ (QQQ) (“cubes”): An ETF that tracks the Nasdaq 100 Index, which typically contains technology stocks.
• SPDR Dow Jones Industrial Average (DIA) (“diamonds”): An ETF that represents the 30 stocks of the Dow Jones Industrial Average.

Robo-advisors

Betterment

Betterment is one of the pioneers of the robo-advisor approach to investing. It offers a powerful combination of goal-based tools, affordable management fees and no account minimum. It has a wide range of investments, including socially responsible and crypto portfolios, and offers paid access to financial advisors and excellent tax strategy. Betterment's basic service tier, Betterment Digital, charges a competitive annual fee of 0.25% of your balance, and there’s no minimum balance requirement. However, the fee to access professional advice is relatively high.

SoFi Automated Investing

SoFi Automated Investing is a great choice if you're primarily focused on limiting fees. There’s no annual advisory fee, and your portfolio is stocked with ETFs that generally charge low expense ratios. You also get access to real-life professionals. With an account minimum of just $1, there’s nothing holding you back. However, SoFi has a very limited track record as an investment firm, and your portfolio may include higher-cost SoFi ETFs.

Vanguard Digital Advisor

If you’re just starting out in your career or you want a simple tool without a ton of bells and whistles, Vanguard Digital Advisor is a good option. It offers basic services such as retirement savings and automatic rebalancing, for a low annual net advisory fee of no more than 0.20% of your managed account balance. That’s better than what you’ll find from most robo-advisors. Your portfolio will be made up of low-cost Vanguard ETFs, which typically charge among the lowest expense ratios on the market. However, Vanguard Digital Advisor has a £3,000 minimum balance requirement.

Vanguard Personal Advisor Services

Vanguard Personal Advisor Services is a robo-advisor platform with a minimum balance threshold of $50,000, which is lower than most premium services. It offers access to real-life Vanguard professionals, many of whom are certified financial planners, and all of whom are fiduciaries. Your portfolio will be made up of low-cost Vanguard funds that track broad indexes and mirror your risk tolerance.

Wealthfront

Wealthfront is the best overall robo-advisor due to its vast customization options, fee-free stock investing, low-interest rate borrowing, dynamic tax-loss harvesting, and other key features. It has an investment and money management product for any type of investor. With low fees and a low required minimum investment of $500, plus customizable automated portfolios, Wealthfront deserves the best overall robo-advisor award. It also offers a superb digital financial planner, Path, which is programmed to answer up to 10,000 questions.

Frequently asked questions