By Kim Clark and Anne Kates Smith
From Kiplinger’s Personal Finance
Although the savings rate has dipped again following pandemic highs, many investors still have ample cash sitting in a low-interest bank or money market account.
If you’re among them, here are some ways to invest $1,000.
Buy Some Small Fry
Get more bang for your $1,000 with small-company stocks. They’re some of the best bargains on Wall Street this fall. What constitutes “small caps” depends on who you ask, but they are often defined as companies with a total market capitalization (stock price times shares outstanding) from $300 million to $2 billion.
Small-cap bull Ed Clissold, chief U.S. strategist for Ned Davis Research, says “small caps could be in the early stages of a multiyear run of outperformance.”
Small caps are riskier than their blue-chip brethren. They’re more volatile than large companies, and their size makes them more vulnerable to economic downturns. So it pays to be picky.
Dip your toe into this sector with T. Rowe Price Small Cap Value (symbol PRSVX). Lead fund manager David Wagner says he looks for bargains that also have strong earnings outlooks. The fund currently favors industrial, energy, materials and financial firms.
Load up on Fractional Shares
Fractional shares, increasingly available at online brokers, allow you to buy a portion of a stock you might not otherwise be able to afford or build a portfolio of stock snippets, giving you a diversified ownership stake in the best of corporate America—even if you’re just starting out and your budget is limited.
Say you have $1,000 to invest and want to buy stock in NVR (NVR), a homebuilder recently rated “strong buy” by investment research firm CFRA. You’d be out of luck, considering the shares recently traded for about $4,200 a pop. But at Schwab, for example, you’d be able to buy what the company calls a Stock Slice. Investors can purchase a single slice or up to 30 slices at a time of any S&P 500 stock for as little as $5 per slice, commission-free. With Fidelity’s Stocks by the Slice program, you can access more than 7,000 U.S. stocks and exchange-traded funds for as little as $1.
You can also trade fractional stocks and exchange-traded funds at Robinhood and Interactive Brokers, and Vanguard is testing fractional trading in Vanguard ETFs for launch later this year.
The rules and eligible investments differ by broker, so be sure to compare options. You’ll receive dividends on a prorated basis, but partial shares typically do not give you voting rights. And you likely won’t be able to transfer fractional shares to a new brokerage.
(Kim Clark is senior associate editor and Anne Kates Smith is executive editor at Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.)
©2022 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.
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