Mark Ting: 5 tips on how to invest $1,000

Got a cool $1,000 in your pocket and wondering what to do with it?

On the Coast's financial columnist Mark Ting, an investment advisor with HollisWealth, says there are a number of options to consider if you've come across an extra grand —- whether through a bonus, inheritance or other means.

1. Do you really have an extra grand?

I'm first going to assume that you do not have any debt to pay off. 

You have set aside some money or have access to a line of credit in case of emergencies, and you will not be needing the $1,000 for at least five years.

Good — but now you have to decide if you want to grow your investment or use the $1,000 to learn about the process of investing.

2. Some investments may not be worth the effort

If you're looking for a one-percent  return, the answer is simple: go buy a term deposit. There's no risk to your capital and you know exactly your rate of return.

If you want a higher rate of return, such as 10 per cent, there are lots of investments that have the potential to do this, so do your research.

Earning 10 per cent is a great rate of return, but if your investment is $1,000 you will only have made $100 in a year from now. All that time and effort to set up a brokerage account and the angst of monitoring it may not be worth it if you are only making $100.

You would be better served working an extra couple hours at work or forgoing a fancy meal to end up with the same result.  

3. If learning about investments, consider a discount brokerage

I would open up a discount brokerage in a tax-free savings account, and put your $1,000 in there.

But there are many, so there are some things to keep in mind: Some will have a minimum amount required, others will charge a fee if your balance is less than $5,000, and others will want you to trade three of four times a quarter (or also pay a fee).

There are discount brokerages out there that are free for people investing low amounts, and some that don't charge commissions on investments like exchange-traded funds or mutual funds. Do the research.

4. If teaching your kids to invest, don't cover their losses

It's not a good tactic for parents — who want to encourage their kids to invest money — to offer to cover their kids' losses in the beginning. Remove the safety net, because that's not realistic. Let them make their mistakes, but guide and advise them. Through that, they will learn about their own risk tolerance.

5. Make one investment, in the U.S. stock market

To keep costs down, I would make one investment. Warren Buffett talked about where his estate should invest their money after he dies, and he said the U.S. stock market. His recommendation is an exchange-traded fund or index fund  of the S&P 500, which is comprised of the 500 leading companies in the U.S. stock exchanges (Apple, Microsoft, Walmart, Johnson & Johnson and so forth).

For $1,000 you don't want to trade too much, keep it simple and cost effective.

This interview has been edited and condensed

To hear the full interview listen to the audio labelled: Mark Ting: How to invest $1000