New investors may also want to seek out a financial advisor. Some people understandably abhor the thought of paying fees as they try to make money, but the argument for using one is that a professional is probably going to be far more knowledgeable than a novice – and thus help you make far more money than what you spend in commissions or fees. Generally, you'll pay an annual percentage of your managed assets; usually, it's around 1 percent, although some advisors charge less, and some charge as high as 2 percent. If you're unsure whether a prospective advisor is qualified, you can use FINRA BrokerCheck (brokercheck.finra.org), a search engine that provides information on current and former brokers and brokerage firms registered with the Financial Industry Regulatory Authority.
But what you do with the thousand is as important as what you don't do. For a beginning investor, one of the most important goals should be to keep costs low, diversify and invest in line with your personal risk tolerance.
"It certainly wouldn't make sense for an individual just getting started to invest all in penny stocks, bitcoins or other concentrated positions. These types of investments have much higher speculative risk," Loescher says.
Nawrocki says buying individual stocks isn't a good idea unless you already have a rainy-day fund and retirement savings account. Norma Yaeger, a retired president of two stock brokerage firms, echoes that sentiment.
"Buying a single stock is gambling, and the stock market is not for gambling. It is for sound investments," Yaeger says. "Morningstar.com is a service that rates most [mutual] funds and is a good place to begin to find a good growth fund. The fund must be a no-load fund, which means no commissions charged to investor."
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You'll also want to take a look at the expense ratios, or annual expenses, on mutual funds. You're not only paying for the mutual fund; you pay the cost of operating the mutual fund, which is what the expense ratio measures. It's typically between 1 and 2 percent for actively managed funds and much lower for index mutual funds.
And if you do want to buy stocks, David Kass, a finance professor at the University of Maryland, suggests going with the tried-and-true. As of this writing, Berkshire Hathaway B (symbol: BRK.B ) shares were going for about $115. Eight shares, he says, would cost you $920, so just under our $1,000 ceiling.
"This enables the investor to become a partner with Warren Buffett, who is considered by many to be the world's greatest investor," says Kass, pointing out that Buffett's company owns 80 companies across numerous industries and has a $100 billion equity portfolio with large stakes in giant brands such as Wells Fargo, Coca-Cola and Procter & Gamble.
In any case, whether you're investing with an advisor or on your own, Yaeger is correct when she says: "The investor must do some homework."