How to Invest $1,000 into the Stock Market

Here's how I would invest $1,000 into the stock market as a former professional portfolio manager. I'm Tyler, a former professional portfolio manager and financial advisor, and now I create financial content for free so that you don't have to pay for it.

Step 1: Open a Roth IRA

The first step is to open a Roth IRA. This is where I will do all of my investing, especially if I'm in my 20s or 30s. Why? Because all of your gains are ultimately 100% tax-free after age 59 and a half, and I can withdraw the money that I've contributed any time for any reason, completely penalty and tax-free.

Step 2: Invest in an Aggressive Growth Fund

Next, I would invest $800 directly into an aggressive growth fund like Vanguard's VUG. With fees of just 0.03%, this fund is hard to beat. It is riskier than investing in an index fund because it invests more heavily in high-risk, high-reward companies. Over the past 20 years, a fund like this would have turned that $800 into just over $15,000.

Step 3: Invest in Individual Stocks

I would invest the remaining $200 in 10 individual stocks that I believe will perform exceptionally well in the future. This diversification method allows me to avoid capital gains taxes on every single dime, even if nine out of ten bets don't pan out. For example, if you had invested $200 in Tesla back in 2010, that holding alone would be worth over $1.5 million today, with no taxes on those gains because it's all within a Roth IRA.

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