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How to Select Your Next Investment

Wondering how to invest 1,000? If you’re a veteran in the financial world, selecting your next investment may be as simple as placing an order with your broker and going about your day. But for those who are new, inexperienced, or unsure, the task of investing your first K may seem a bit more monumental.

That’s why is here to help. We’ve put together a list of seven tips to help you select your next investment with confidence. Whether you’re a first-time investor or a learned guru, these offer a great jumping-off point for your next foray into the stock market.


Selecting your next investment doesn’t have to be a hassle – all it takes is some foundation and a little know-how. If you’re ready to put your money into the market, consider these crucial steps:

  1. Know your goals and risk tolerance
  2. Make a plan (but leave room for change)
  3. Don’t forget to diversify – appropriately
  4. Weigh the benefits of different asset classes
  5. Watch for commissions and unexpected fees
  6. Research your investments from the top-down
  7. Don’t obsess over minute price shifts once you’re invested

1. Know your goals and risk tolerance.

Your future goals are a primary driver behind why and how long you invest. While it’s best to play the long game to maximize your reward for retirement, there’s nothing wrong with setting up accounts to pay for college or even to buy a house.

But for every goal you set, keep in mind that you need to save responsibly. For instance, if you want to buy a new car soon and can afford some loss, you may focus on aggressive growth stocks. On the other hand, a retirement portfolio should focus on slower-growing – but far less risky – investments.

Your risk tolerance plays a huge factor in your savings goals, too. If you panic every time you lose 10% in your portfolio, the stock market isn’t for you. In that case, you may want to look toward certain funds, trusts, or bonds for less volatility.

Furthermore, you’ll need to consider your investment time horizon in your goals. Typically, the closer you are to your goal – especially retirement – the more you have to lose. Thus, you should limit your risk in the event of an economy-wide crash.

2. Make a plan.

Once you know your goals and risk tolerance, you can start drafting an investment plan for your first $1,000. What this looks like will depend on your goals – no two investors will have identical plans. In fact, one investor may have multiple plans for multiple accounts.

For example, let’s say you’re a risk-averse 20-year-old. You want to open two investment accounts: one for retirement, and the other for a down payment on a new car.

In your retirement account, you decide to go with a modest blend of medium-risk stocks, ETFs, and bonds.

But your new car fund needs to see quicker growth, as you’re on a shorter time scale, so you balance higher-risk dividend-paying tech stocks against blue chip companies and ETFs.

No matter what your plan looks like, however, it’s important to leave a little wiggle room. Circumstances and timelines change – and the older you get, the less risk you should take. Thus, you’ll need to revisit your plan and rebalance your portfolio at least once a year to minimize losses.

But no matter how often you rebalance, keep in mind some investments will see losses (albeit temporary ones, in many cases). While you can mitigate the damage by setting stop-loss orders and playing the long game, volatility is still a threat. Thus, it’s best to plan for reasonable growth rather than your best-case scenario.

woman investing on smartphone

3. Consider diversification.

Diversification is one way to reduce the risk of losses of your $1,000 investment. This is the practice of spreading your money across securities, industries, and even countries to balance your portfolio.

When you select your next investment, it’s wise to consider how that security or fund will affect your diversification. Keep in mind that goal of a well-diversified portfolio is to see reasonable growth at reasonable risk, whatever that means to you.

For instance, you may balance the high volatility of tech startup stocks against blue-chips, bonds, and real estate trusts. A more conversative investor nearing retirement, however, may diversify primarily between stocks and bonds in slow-growing, low-volatility industries.

4. Select your investment assets.

One more way to diversify your portfolio is by purchasing securities of differing asset classes. These divide into two groups: traditional and alternative. The asset classes in your portfolio will determine your level of risk vs return, so it’s important to weigh your options carefully.

Traditional assets include stocks, bonds, and cash (such as CDs and savings accounts). Typically speaking:

  • Stocks are the highest-performing investments of all the asset classes when averaged over time
  • Bonds almost always beget lower returns, but they also come at significantly lower risk
  • Cash yields the lowest return and is prone to erosion due to inflation, which eats into your profits

On the other hand, alternative assets include commodities, art, real estate, currencies, derivatives, and private equity, among others. These assets often come at a much higher risk, and their level of reward varies from asset to asset.

For beginning investors, an ideal mix often includes stocks, bonds, and low-risk ETFs such as index funds. But, if you’re a specialist in 13th century paintings or have a knowledgeable financial advisor on your books, branching out can be fun. After all, you have $1,000 to play with.

5. Research your investments.

Before you decide to jump in feet-first on any investment — especially one of $1,000 — be sure you know what you’re getting into. In most cases, you’re not just purchasing an asset, you’re buying a position or ownership in the underlying company. Thus, you should look into:

  • Company leadership. Businesses with effective leadership invest in not only their balance sheets, but their employees and culture. They often experience stronger growth and forge better business relationships that businesses with high turnover and shady practices.
  • Dividends. Dividends boost investor earnings, but not every company offers them. Keep in mind that issuing or retracting dividends does not make a company a good or bad investment, but how often they make these changes is an indication of leadership and their financial prowess.
  • Debt-to-equity ratio. This number tells you how much debt a company has against the total value of shareholder equity. How much debt is appropriate varies by industry, so be sure to compare apples to apples in your research. For instance, construction and lending institutions may have more debt as a rule, while tech companies often have less.
  • P/E ratios. Simply put, ratios tell you how much an investor will pay for business earnings over the course of a year. For instance, a P/E ratio of 36.12 says that an investor will spend $36.12 per $1 in earnings. P/E ratios serve as a vital indicator of stock value and future expectations. Once again, though, be sure to compare apples to apples.
  • EPS: EPS, or earnings per share, is a dollar figure of how much each share of common stock is worth. This number is calculated after subtracting taxes and preferred stock dividends. Typically, a higher EPS leads to higher share prices; as such, this number is good for analyzing earnings estimates.

6. Keep an eye on commissions.

If you think you’re ready to select your next investment, don’t forget to check out the fees. Buying into funds can be cheaper than purchasing individual stocks upfront – but it’s still not free.

Not to mention, annual charges can eat into your growing profits over time. For instance, a 0.5% fee on $100,000 comes to $10,000 over 20 years. In the same time frame, a 1% annual fee will cost you nearly $30,000 – that’s three times the price for double the percentage.

Thus, it’s crucial to be on the lookout for investing and management fees, the cost of financial advice, and commissions on trades. Make sure you do your due diligence researching relevant pricing structures and hidden costs. If you invest $1,000, that could come with a hefty fee.

7. Once you’re in, don’t obsess.

Research shows that obsessing over your investment portfolio leads to more frequent trades and poorer returns. In fact, plenty of successful investors review their portfolios as little as once or twice per year to rebalance their risk and diversification.

Additionally, if you’re a nervous investor, it may be a good idea to avoid “stock watching,” or obsessing over the market. Slight variations, and even significant losses, are unlikely to hold in the long term. Unless you’re a day trader, the fact that Apple is down 5% this week means nothing for the value of your portfolio next year.

Furthermore, you don’t want obsessing about potential or realized losses to keep you from putting your money where your retirement is. The only way to see returns from smart investing habits is to keep investing – if you pull out, your money may be “safer,” but you’ll lose value to the corrosive effects of inflation.

Not to mention, you’ll never feel the joy of making interest on your interest on your capital.

Disclosures offers advisory services through Quantalytics Investment Advisors, LLC ("QIA"), a Registered Investment Adviser. This is solely for informational purposes. Advisory services are only offered to clients or prospective clients of QIA . Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Comments by viewers or third-party rankings and recognitions are no guarantee of future investment outcomes and do not ensure that a client or prospective client will experience a higher level of performance or results. Adviser has reasonable belief that the content posted by a Third Party does not contain untrue statements of material fact or misleading information regarding its advisory services.

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