First Investment: 5 Smart Ways to Invest Your First €1,000 (And Get A 100% Return)

When you think of investing, which word comes up?

If it’s your first time investing, it might be “risk”, “expensive” or “uncertainty”. It’s true that investing can have negative connotations – if you’ve seen Wolf of Wall Street, you know what we mean.

But the truth is, investing is an integral part of everyday life. If you’ve got a pension, you’re already investing!

So what if you’ve got a spare €1,000 and want to make a good return? Savings accounts will offer you a return of 0.01%, or even negative interest. Where can you go instead?

Today, we’ll explore the smartest ways to make your first investment with €1,000.

What is the best way to invest €1,000?

Here’s 5 ideas to help you make your first investment.

(And what kind of return you can expect when you invest for 5 years).

1. ETF/Index fund

Instead of buying shares in just one chosen company, index funds allow you to spread your investment across multiple stocks or bonds at once. Index funds help diversify your portfolio and spread your risk by covering an entire stock exchange.

Why invest in a group of stocks as opposed to buying shares in a single company?

The major benefit to investing in an index fund is that they typically outperform individual stocks in the long term. Because these ETFs are considered “passive”, fees are lower and you get to keep more of a profit.

Not only that, but picking individual stocks can also be a bit of a gamble; unless you’re willing to spend hours researching companies and reading the news, you don’t really know which will succeed and which will fail.

With ETFs, your money is spread across lots of different stocks. If one doesn’t perform so well, there are a dozen others that may still grow in value.

Based on historical data, €1,000 in the stock market will offer a 8% return – a lot better than the 0.01% you’ll be getting from your savings account. Not only that, but some companies also offer investors dividends, which means you can turn your investment into monthly income that supplements a salary.

To get started with ETFs and index funds, open an online brokerage and make sure to look for global, well diversified and low fee ETFs/index funds.

If you invest €1,000 with a 8% annual return, you will end up with €1,469.33 after 5 years.

2. Gold

As J.P. Morgan said, “Gold is money, everything else is credit”.

Gold has stood the test of time for thousands of years (literally), and is one of the most coveted, valuable possessions. Even when computers collapse and inflation weakens currencies, gold will remain valuable. This makes it an incredibly attractive investment.

So far gold has been in pace with inflation. If you bought gold in 2014, it would have cost under €900 per ounce. In 2020, the gold price reached €1,700 per ounce: an 88% increase!

However, gold is not an income-generating asset. It is viewed as more of a safety net held in periods of economic growth and sold while the market is not doing well. If you are keen on preserving your wealth as well as growing, then gold might be an asset worth investing.

To get started, your best bet is to look for online gold brokers. There are many gold brokers that allow you to get started with as little as €50. They hold your gold in a vault, handle your insurance and can deposit the gold at your house when you’re ready (although always be aware of the fees!)

If you invest €1,000 with a 12% annual return (gold’s average return in the past 49 years), after 5 years, you can expect a return of €1,762.34. So, better than an index fund.

3. Pay off debt

Prioritising paying off your debt can drastically increase financial security. That’s because debt threatens your credit score, reduces your affordability and means you’re not in full control of your assets. If there’s debt that’s stressing you out, consider paying it off with your €1,000.

Most importantly, paying off debt stops interest in its tracks. This is most beneficial for debts with high APR that end up costing you double or triple the initial borrowed amount over the long term – such as credit cards or payday loans.

Whether it’s your credit card, a personal loan or even your mortgage, consider paying some of it off to reduce the pressure.

If you use your €1,000 to pay off a mortgage with a 2.25% interest rate, your return won’t be as high but you will have peace of mind that you are closer to owning your own home.

And that’s way better than a return of a few hundred euros!

4. REITs (Real Estate Investment Trusts)

Want to get into property, but don’t want all the hassle of buying, managing tenants and paying taxes? You might be interested in REITs.

REITs are real estate investment trusts where investors can give money to a group of experts who buy, develop and sell property. Just like other investment opportunities they are bought and held as they grow in value, then sold at a later date.

Similar to ETFs, they are considered low risk investments. REITs offer the added benefit of providing high-yield dividends since they are required to distribute a minimum of 90% of taxable income to shareholders each year.

If you’re bullish on property and want to diversify your portfolio further, it’s worth allocating some of that €1,000 to a REIT.

If you invest €1,000 with a 10.5% annual return (the average return of REITs), you can expect a return of €1,647.45. Not bad, right?

5. Peer to peer investing

P2P investing involves lending your money to strangers for profit.

By using a P2P platform, you can lend your money to businesses and individuals who need loans. The interest they pay is your return on the investment.

Since the platform does all the management and sourcing, all you need to do is deposit your money, set up an Auto-Invest portfolio and see your returns increase over time.

Although it depends on the platform, most P2P platforms allow you to invest in short-term personal loans. You receive the interest on your investment, and once the loan term is up you get your full investment back.

At Swaper, you can expect to make an annual return of 14% if you invest €1,000.

With buyback, you can also be rest assured you’ll get your money back if a borrower defaults on their loan.

If you invest €1,000 with a 14% annual return, you’ll end up with €1,925.41 after 5 years that’s almost double on your first investment!

(If you invest more than €5,000 in Swaper, you’ll be rewarded with our 16% loyalty bonus – which would return a jaw-dropping €10,501.71 after 5 years).

Can I start investing with 1,000€?

The short answer: yes!

The long answer: €1,000 is definitely enough to get started with all the types of investing we listed above. If you are planning on dividing up your €1,000 into smaller chunks, make sure you have enough to get started (some REITs might ask you to deposit at least €500, for example).

If you decide to do P2P lending with Swaper, you can get started for as little as €10!

What should a beginner invest in?

As a beginner, it’s best to invest in lower risk opportunities that you’re comfortable with.

All investments are learning experiences, but going high risk at the beginning may cause significant losses and put you off investing in the future.

However, as a beginner you also want to invest in something that is easy to get started with. For example, both REITs and ETFs do require a bit of knowledge of the stock and property market, as well as how to navigate a brokerage.

If you’re looking for something straightforward, it’s easier to focus on paying off debt or investing in P2P loans, for example.

In order to get the most out of your investment, you want to invest sustainably and for the long run. Once you’ve made your first investment of €1,000, don’t stop there!

Make it a habit and start investing every month.

That’s when compound interest really kicks into gear!

And that’s when you’ll truly see the benefits of investing.