We get this question from our readers quite often: what’s the best way to invest 5K today, so you can have a strong base for a future investing journey?

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It’s a great question to ask for any beginner investor who wants to set themselves up for success. Assuming that these $5000 are your first significant money saved for investing, you need to make sure that they’re not lost on risky investments.

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You might be tempted to jump on investments promising you formidable return rates (over 20%) as they will give you a significant return rate to allow you to invest in even more streams in the future. But higher returns tend to come with higher risks as well.

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Considering that you are just starting your investing journey, it’s best to stick to safe waters. The best way to invest 5K as a beginner investor is to make sure you don’t lose any of it. 

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Normally, basic investment principles dictate that diversification is key. That’s true, but not if you’re just starting out, when you need to make sure you can retain your starting funds and gain a little extra on top. 

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In our opinion, beginner investors should start out their journeys with minimal risk, gradually increasing their risk tolerance in their future portfolio diversification efforts. More on this below. 

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Best Way to Invest 5K Today - Checklist Before You Begin

Before you identify the best way to invest 5K and proceed to grow your investment portfolio, make sure you are in a safe enough place to start.

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#1. Pay Off Your Debts

If you have pre-existing debts with an interest rate of over 9%, make sure you pay them off before you start investing. Otherwise, you are losing more money in the longer term than you can earn from investing $5000, no matter how well your investment is doing. 

#2. Set Aside an Emegency Fund

No point investing if you don’t have an emergency fund set aside so you can be fine if your main source of income disappears. Make sure you have enough money in this fund to be fine for at least 3 months, and only afterwards start finding the best way to invest 5K. 

#3. Make Sure You Have a Retirement Plan in Place 

Investing your $5000 shouldn’t come at the expense of having a safety net for your retirement years as well. Check in with your tax advisor (if you have one) or ask your employer to verify if they are matching your retirement contributions. 

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Just make sure you have a clear picture of what level of income you are looking at if you continue contributing at the same rate. 

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Best Way to invest 5K Today - Real Estate

Especially for people who are just starting their investing journey, it’s crucial to invest in something safe and with minimal risk, even if this means lower returns in the beginning. You don’t want to risk losing those $5000 you are starting your investing with. 

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Look for safe investments that are still giving you a healthy ROI (Return on Investment) for your initial sum. Anything above 5% ROI is great for a low risk investment. 

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But how can you tell what investing opportunity is low risk enough? To this point, there’s no safer investment like real estate. 

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Through the MetaWealth app, you can safely invest in real estate with lower amounts of money, zero waiting time, zero paperwork and zero hassle. 

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With a hypothetical investment of $5000 you would get a consistent return of 6.7% per year from the rent, and even more from asset appreciation on medium term (40% asset appreciation projected after 5 years). 

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In our opinion, this is the best way to invest 5K in an asset class that is low-risk and traditionally only accessible for people who are already wealthy. 

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But you don’t even need to invest $5000, you can start with just $100. That’s the beauty of fractionalized real estate. 

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Take charge of your future and remember that the earlier you start investing, the better it will be for your portfolio, thanks to cumulative interest. 

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Read more about cumulative interest and portfolio diversification in our in-app Learning Center and never stop learning! Financial education is one of the best kinds of wealth there is. 

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