How to Wisely Invest $1,000 in the Stock Market in Your 20s or 30s

As a former portfolio manager, here’s how I would invest $1,000 into the stock market if I were in my 20s or 30s:

1. Invest in a Roth IRA

First, I would invest in a Roth IRA, not a taxable brokerage account. Why?

Because in a Roth IRA, 100% of your gain, every penny you earn on your investments, is 100% tax-free after you turn 59 ½. If you ever need that money back that you’ve put into a Roth IRA, you can transfer it right back to your bank account without any penalties or taxes.

2. Focus on Low-Cost, Aggressive Index Funds

Next, I would invest $700 into a low-cost, aggressive index fund like Vanguard's VIGAX, which has fees of just 0.05%. This is not your typical index fund, but it invests more heavily in higher-risk, higher-reward companies.

So why take the risk? Because I have 30 to 40 years to reap the reward of compound growth, and I can tolerate the inevitable economic downturns along the way.

3. Invest in Individual Stocks

Finally, I would invest the remaining $300 into 10 individual stocks of young companies that I believe have massive future growth potential. Yes, I might lose 9 out of 10 of those bets, but all I need is one stock to hit.

For instance, Peter Thiel famously invested $2,000 in a Roth back in 1999 in PayPal. That Roth is currently worth more than $5 billion, and he won’t owe a penny of that to the government in taxes.

Conclusion

As always, do your own research. Personal finance is, forever and always, personal.

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