4 Simple Steps – How to Invest $1,000

How to Invest $1,000While I may have a dividend stock portfolio with over $300K, I still invest in small amounts throughout the year. The fact is, it’s the easiest way to invest. I could wait until I have more but I set my minimum at $1,000 as my $9.99 transaction fee represent 1% and I don’t want to pay more than that. Back when trading used to cost $35 per transaction, it felt prohibitive if you remember those days. Since I have been able to invest this way, I wanted to share my process on how to invest $1,000. Please share your thoughts or add to it.

How to Invest $1,000

The follow steps assume you already have a discount broker and are ready to make purchases on your own. If not, feel free to continue reading but you will first need to research the discount broker that works for you. Depending on your investing goals, different discount brokers may fit your needs.

Step 1 – Which sector needs money?

The first thing I do is to take away the emotion by simply looking at my portfolio allocation to see where I am short. Usually there are a couple of sectors that are in need of extra funds.

With the size of my dividend income portfolio, there are always movement in stock value which easily create a gap of $1,000 in a sector so it’s not like I feel I have to break it down. I can usually put all on one stock. For the most part, I am also adding to existing holdings.

Step 2 – Review the stocks from the selected sectors in my list

I look at both my Canadian and US list to assess what options I have available. I make a short list to see what the best opportunities are at the time.

I don’t always pick the stock with the highest score. I will assess if the stock matches the 10/10 rule of 10 years of consecutive dividend growth with a 10% growth on average for the 10 years.

Step 3 – Deeper look into my short list

Dividend Snapshot
I spend some time reading about the stocks on my short list. I like to have a look at stockchase.com to get an idea of what is being said by analysts to make sure I don’t miss anything.

At this point, I will be making my decision and get ready to make a purchase. Believe it or not, I don’t set a purchase price based on some value formula and I cannot predict where the stock price would go either. I usually purchase knowing stocks move up over time and I get paid dividends to wait and I DRIP where I can. If the stock drops, my sector allocation will pick it up and I can add to the sector by adding to same position or create a new position if I find I am overweight in that one stock.

Step 4 – Choose the account

There are 3 accounts I can choose from where I manage my diversification which are non-registered, TFSA and RRSP. As it happens though, there are some rules to choosing an account. For example, all my US investments go in my RRSP (I have plenty of room to add more funds) as it is more tax efficient. If my decision is to buy a US company, I have to make an RRSP contribution but otherwise, it also depends if there is room in my TFSA.

I usually make my TFSA contribution in the first week of January so it’s not usually an option except when Step 4 becomes Step 1 where the account is already chosen at which point I don’t look at my US list.

Readers: What are your steps?

Image courtesy of Stuart Miles – FreeDigitalPhotos.net

5 Responses to "4 Simple Steps – How to Invest $1,000"

  1. Good article,
    on my side since I still have a 13yo kid I focus mainly on investing small amount on a bi-weekly basis on his RESP since it gives me 30% return.

    In my other accounts, I wait until dividends reach a minimum amount of 500$ before investing. Since it is for long term and dividend income I’ll get reimburse my 9.95$ transaction fee within the first two dividend payments.

    Reply
  2. Great List,
    Just started myself with my TFSA this year. I was investing at $700 mark and doing what LeDividende.com said just getting back my $9.99 fee from the first 2 Dividend payments. I been thinking about the $1000 +dividend income to start adding more sectors to my Portfolio.

    I enjoy your articles and look forward to more great ones for Newbies like me!

    Reply
      1. My first pick may of been too much emotion involved. I picked TD for my first pick, by the time it closed I was alot higher than I wanted to pay for it.

        My 2nd pick was about a month after with Telus, I set a limit order at the price I wanted to pay. Took awhile but I got it on a down slide. I like Limit Orders, my emotions can not take over lol.

        I am at the point now my extra cash flow is stable now so I can not add as much as possible with 1-5 years when everything is paid off. Been putting more into my LO RESP to get that stone rolling.

        -Josh

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