the Best Ways to Invest $5,000
the Best Ways to Invest $5,000
If you ask investing experts how to put $5,000 to work, you'll likely get wildly different answers.
Warren Buffett, for example – the famed investor and CEO of Berkshire Hathaway Inc. (ticker: BRK.A, BRK.B) – advocates for a low-cost S&P 500 index fund, even revealing that the trustee of his own estate is instructed to invest in one for his wife after his passing.
On the other hand, Cathie Wood of Ark Invest is a growth-focused investor heavily bullish on emerging technologies, and her suite of thematic exchange-traded funds (ETFs) reflects that.
Meanwhile, Peter Schiff, a long-time market bear, warns of overvalued equities and champions real assets like gold as a hedge against inflation and economic uncertainty.
The takeaway for investors? Be aware of authority bias – just because an expert has a strong opinion doesn't mean it's the right move for you. Always weigh opposing views, assess the facts, and, most importantly, invest according to your own risk tolerance and goals.
Fortunately, there's no need to follow the same old investment playbook. You don't have to pick the same stocks, buy the same index funds, invest in the same countries or even stick to the same asset classes as your peers. Remember, investing is not a team sport.
These days, there's no shortage of creative ways to put your money to work. Here are seven of the best ways to invest $5,000:
Chinese stocks.
Indian stocks.
Sector investing.
Thematic investing.
Berkshire Hathaway.
Value investing.
Contrarian investing.
Warren Buffett, for example – the famed investor and CEO of Berkshire Hathaway Inc. (ticker: BRK.A, BRK.B) – advocates for a low-cost S&P 500 index fund, even revealing that the trustee of his own estate is instructed to invest in one for his wife after his passing.
On the other hand, Cathie Wood of Ark Invest is a growth-focused investor heavily bullish on emerging technologies, and her suite of thematic exchange-traded funds (ETFs) reflects that.
Meanwhile, Peter Schiff, a long-time market bear, warns of overvalued equities and champions real assets like gold as a hedge against inflation and economic uncertainty.
The takeaway for investors? Be aware of authority bias – just because an expert has a strong opinion doesn't mean it's the right move for you. Always weigh opposing views, assess the facts, and, most importantly, invest according to your own risk tolerance and goals.
Fortunately, there's no need to follow the same old investment playbook. You don't have to pick the same stocks, buy the same index funds, invest in the same countries or even stick to the same asset classes as your peers. Remember, investing is not a team sport.
These days, there's no shortage of creative ways to put your money to work. Here are seven of the best ways to invest $5,000:
Chinese stocks.
Indian stocks.
Sector investing.
Thematic investing.
Berkshire Hathaway.
Value investing.
Contrarian investing.
Re: the Best Ways to Invest $5,000
Chinese Stocks
"The Chinese equity market has remained unloved for some time," says Arne Noack, regional investment head of Xtrackers, Americas, at DWS Group. "Trading at an average price-to-earnings ratio of around 15.9 for the last five years, the domestic CSI 300 index has returned merely 4.6% in U.S. dollar terms over the same period."
The sluggish performance of Chinese equities in recent years has been driven by several factors, including an ongoing crisis in the real estate market, a slowdown in capital market activity and a preference among domestic investors for real assets like property.
However, this could be set to change as Beijing rolls out various stimulus measures aimed at revitalizing economic growth and boosting investor confidence.
"Helped by various announcements by Chinese officials to do more for the local economy in addressing monetary, fiscal, and structural challenges, the CSI 300 has outperformed the S&P 500 by over 5% since last August," Noack notes.
For U.S. investors, major Chinese stocks like Alibaba Group Holdings Ltd. (BABA) are available through American depositary receipts (ADRs), which represent shares of foreign companies.
However, these ADRs typically track dual-listed H-shares on the Hong Kong Exchange, while the bulk of China's equity market remains accessible only through A-shares listed on mainland exchanges.
"Out of the 300 companies in the CSI 300 index, only 79 are dual listed in Hong Kong," Noack explains. "These dual-listed H-shares only account for about 30.7% of the total market cap within the index."
Only a select few ETFs like the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) provide exposure to A-Shares. For a 0.65% expense ratio, this ETF holds hard to access Chinese A-share companies like Kweichow Moutai Co. Ltd., a state-backed liquor producer known for its premium baijiu, deeply ingrained in Chinese business and government culture.
"The Chinese equity market has remained unloved for some time," says Arne Noack, regional investment head of Xtrackers, Americas, at DWS Group. "Trading at an average price-to-earnings ratio of around 15.9 for the last five years, the domestic CSI 300 index has returned merely 4.6% in U.S. dollar terms over the same period."
The sluggish performance of Chinese equities in recent years has been driven by several factors, including an ongoing crisis in the real estate market, a slowdown in capital market activity and a preference among domestic investors for real assets like property.
However, this could be set to change as Beijing rolls out various stimulus measures aimed at revitalizing economic growth and boosting investor confidence.
"Helped by various announcements by Chinese officials to do more for the local economy in addressing monetary, fiscal, and structural challenges, the CSI 300 has outperformed the S&P 500 by over 5% since last August," Noack notes.
For U.S. investors, major Chinese stocks like Alibaba Group Holdings Ltd. (BABA) are available through American depositary receipts (ADRs), which represent shares of foreign companies.
However, these ADRs typically track dual-listed H-shares on the Hong Kong Exchange, while the bulk of China's equity market remains accessible only through A-shares listed on mainland exchanges.
"Out of the 300 companies in the CSI 300 index, only 79 are dual listed in Hong Kong," Noack explains. "These dual-listed H-shares only account for about 30.7% of the total market cap within the index."
Only a select few ETFs like the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) provide exposure to A-Shares. For a 0.65% expense ratio, this ETF holds hard to access Chinese A-share companies like Kweichow Moutai Co. Ltd., a state-backed liquor producer known for its premium baijiu, deeply ingrained in Chinese business and government culture.
Re: the Best Ways to Invest $5,000
Indian Stocks
"We estimate the average U.S. investor's exposure to India equities stands at just 0.8% despite representing 5% of global market cap," explains Kevin T. Carter, founder and chief investment officer at EMQQ Global. "India is still a blind spot for U.S. investors, but lofty valuations and India's relative island of safety may force investors to shed some of the home country bias."
India presents a case for investors due to its rapidly growing middle class, increasing digitization and robust capital market activity. Additionally, its large expatriate population across the globe contributes to strong foreign remittances and economic stability, further bolstering investor confidence.
"India is one of the most uniquely positioned markets in the world outside the U.S. today – it has the world's largest population, and it's the fastest-growing major economy," Carter argues.
For exposure to India, U.S. investors can once again resort to ADRs. But for higher diversification, an ETF like the iShares India 50 ETF (INDY) can spread risk across a basket of 50 blue-chip Indian equities represented by the Nifty 50 Index.
But INDY isn't the only ETF for exposure to India – more specialized options are available for targeting specific themes, such as the country's rapidly expanding digital economy.
A great example is the India Internet ETF (INQQ), which holds a portfolio of 30 Indian-listed companies involved in e-commerce, fintech and more. Notable holdings include Reliance Industries Ltd., Zomato Inc., and ICICI Securities Ltd.
"India's internet economy is where countries like China and the U.S. were over a decade ago," Carter explains. "Hundreds of millions of Indians will get their first smartphone in the coming years and that will drive the growth of the local tech economy."
"We estimate the average U.S. investor's exposure to India equities stands at just 0.8% despite representing 5% of global market cap," explains Kevin T. Carter, founder and chief investment officer at EMQQ Global. "India is still a blind spot for U.S. investors, but lofty valuations and India's relative island of safety may force investors to shed some of the home country bias."
India presents a case for investors due to its rapidly growing middle class, increasing digitization and robust capital market activity. Additionally, its large expatriate population across the globe contributes to strong foreign remittances and economic stability, further bolstering investor confidence.
"India is one of the most uniquely positioned markets in the world outside the U.S. today – it has the world's largest population, and it's the fastest-growing major economy," Carter argues.
For exposure to India, U.S. investors can once again resort to ADRs. But for higher diversification, an ETF like the iShares India 50 ETF (INDY) can spread risk across a basket of 50 blue-chip Indian equities represented by the Nifty 50 Index.
But INDY isn't the only ETF for exposure to India – more specialized options are available for targeting specific themes, such as the country's rapidly expanding digital economy.
A great example is the India Internet ETF (INQQ), which holds a portfolio of 30 Indian-listed companies involved in e-commerce, fintech and more. Notable holdings include Reliance Industries Ltd., Zomato Inc., and ICICI Securities Ltd.
"India's internet economy is where countries like China and the U.S. were over a decade ago," Carter explains. "Hundreds of millions of Indians will get their first smartphone in the coming years and that will drive the growth of the local tech economy."
Re: the Best Ways to Invest $5,000
Sector Investing
If you want to take a more active approach than simply indexing the broad market but prefer to avoid the risk of picking individual stocks, sector investing offers a middle ground. This strategy allows investors to target specific areas of the economy that align with their market outlook.
Sector investing is made possible by classification systems like the Global Industry Classification Standard (GICS), which divides the stock market into 11 different segments.
The currently recognized sectors are information technology, health care, financials, consumer discretionary, communication services, industrials, consumer staples, energy, utilities, real estate and materials. Each of these sectors has historically performed differently depending on the economic cycle.
For example, during periods of economic expansion, sectors like technology and consumer discretionary tend to outperform, as companies see rising revenues from increased consumer and business spending. On the other hand, in a downturn or recession, defensive sectors such as health care, utilities and consumer staples typically hold up better due to their inelastic demand.
"Using a sector ETF as a satellite for your core investments may enable you to capitalize on trends and opportunities within a particular sector that you believe could outperform the broader market," says Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors. "Sector selection involves more work and input on your part but allows you to tailor your investments to align with your expectations for specific industries."
State Street offers a lineup of 11 ETFs that track the respective sectors of the S&P 500, all of which charge a low 0.09% expense ratio and are highly liquid.
If you want to take a more active approach than simply indexing the broad market but prefer to avoid the risk of picking individual stocks, sector investing offers a middle ground. This strategy allows investors to target specific areas of the economy that align with their market outlook.
Sector investing is made possible by classification systems like the Global Industry Classification Standard (GICS), which divides the stock market into 11 different segments.
The currently recognized sectors are information technology, health care, financials, consumer discretionary, communication services, industrials, consumer staples, energy, utilities, real estate and materials. Each of these sectors has historically performed differently depending on the economic cycle.
For example, during periods of economic expansion, sectors like technology and consumer discretionary tend to outperform, as companies see rising revenues from increased consumer and business spending. On the other hand, in a downturn or recession, defensive sectors such as health care, utilities and consumer staples typically hold up better due to their inelastic demand.
"Using a sector ETF as a satellite for your core investments may enable you to capitalize on trends and opportunities within a particular sector that you believe could outperform the broader market," says Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors. "Sector selection involves more work and input on your part but allows you to tailor your investments to align with your expectations for specific industries."
State Street offers a lineup of 11 ETFs that track the respective sectors of the S&P 500, all of which charge a low 0.09% expense ratio and are highly liquid.
Re: the Best Ways to Invest $5,000
Thematic Investing
Thematic ETFs fill the gap between sector ETFs and individual stock picking. These funds group together baskets of similar stocks but don't rely on a classification system like GICS.
Instead, they focus on narrower and niche themes that span multiple sectors, targeting innovative, developing or unconventional trends.
"Thematic ETFs invest in companies that are aligned with specific trends or themes, such as artificial intelligence, cybersecurity or defense technology," says Pedro Palandrani, senior vice president, head of product research and development at Global X ETFs. "These trends are often long-term in nature, which means that thematic ETFs can offer investors exposure to potential growth opportunities."
A good example is the Global X Defense Tech ETF (SHLD), which doesn't just hold traditional aerospace and defense contractors but also provides exposure to cybersecurity and intelligence firms like Palantir Technologies Inc. (PLTR). The tailwinds from conflicts around the world have helped the ETF achieve a stellar one-year return of 41.6% through Jan. 31.
Thematic ETFs fill the gap between sector ETFs and individual stock picking. These funds group together baskets of similar stocks but don't rely on a classification system like GICS.
Instead, they focus on narrower and niche themes that span multiple sectors, targeting innovative, developing or unconventional trends.
"Thematic ETFs invest in companies that are aligned with specific trends or themes, such as artificial intelligence, cybersecurity or defense technology," says Pedro Palandrani, senior vice president, head of product research and development at Global X ETFs. "These trends are often long-term in nature, which means that thematic ETFs can offer investors exposure to potential growth opportunities."
A good example is the Global X Defense Tech ETF (SHLD), which doesn't just hold traditional aerospace and defense contractors but also provides exposure to cybersecurity and intelligence firms like Palantir Technologies Inc. (PLTR). The tailwinds from conflicts around the world have helped the ETF achieve a stellar one-year return of 41.6% through Jan. 31.
Re: the Best Ways to Invest $5,000
Berkshire Hathaway
There is a single stock that, for around $500 per share, provides exposure to an impressive collection of wholly owned businesses, an expertly managed stock portfolio, a $330 billion-plus cash pile, historical market-beating returns and excellent tax efficiency: Berkshire Hathaway.
Run for more than half a century by Warren Buffett and the late Charlie Munger, Berkshire operates as a conglomerate with a unique model. It generates cash through its insurance businesses, which collect premiums before paying out claims.
This creates a substantial float that Buffett uses to invest in stocks and acquire companies outright. This structure has allowed Berkshire to build a diversified empire that includes BNSF Railway, Duracell and GEICO, among many others.
One quirk of Berkshire Hathaway is that it does not pay dividends. Instead, the company retains cash for share buybacks when its stock trades near book value or hoards capital to deploy during market downturns like 2008, when stocks were deeply discounted.
This means investors who hold Berkshire shares don't pay taxes on dividends and can defer capital gains taxes until they decide to sell.
There is a single stock that, for around $500 per share, provides exposure to an impressive collection of wholly owned businesses, an expertly managed stock portfolio, a $330 billion-plus cash pile, historical market-beating returns and excellent tax efficiency: Berkshire Hathaway.
Run for more than half a century by Warren Buffett and the late Charlie Munger, Berkshire operates as a conglomerate with a unique model. It generates cash through its insurance businesses, which collect premiums before paying out claims.
This creates a substantial float that Buffett uses to invest in stocks and acquire companies outright. This structure has allowed Berkshire to build a diversified empire that includes BNSF Railway, Duracell and GEICO, among many others.
One quirk of Berkshire Hathaway is that it does not pay dividends. Instead, the company retains cash for share buybacks when its stock trades near book value or hoards capital to deploy during market downturns like 2008, when stocks were deeply discounted.
This means investors who hold Berkshire shares don't pay taxes on dividends and can defer capital gains taxes until they decide to sell.
Re: the Best Ways to Invest $5,000
Value Investing
You don't have to pick individual stocks to be a value investor today. Instead, you can assemble a collection of companies that, in aggregate, trade at lower valuations than the broad market, typically measured by metrics like price-to-earnings, price-to-book and price-to-free cash flow.
The easiest way to do this is through an ETF, which can track an index that applies these value investing principles automatically, saving investors time from screening and selecting individual stocks.
For example, the Vanguard Value ETF (VTV) holds 340 large-cap U.S. value stocks, with top holdings including Berkshire Hathaway, JPMorgan Chase & Co. (JPM), Exxon Mobil Corp. (XOM), Johnson & Johnson (JNJ), UnitedHealth Group Inc. (UNH) and Procter & Gamble Co. (PG).
It also comes at a bargain price. With a 0.04% expense ratio, VTV ranks among the lowest-cost funds in the large-cap value category. For a $5,000 investment, that translates to just $2 per year in fees.
You don't have to pick individual stocks to be a value investor today. Instead, you can assemble a collection of companies that, in aggregate, trade at lower valuations than the broad market, typically measured by metrics like price-to-earnings, price-to-book and price-to-free cash flow.
The easiest way to do this is through an ETF, which can track an index that applies these value investing principles automatically, saving investors time from screening and selecting individual stocks.
For example, the Vanguard Value ETF (VTV) holds 340 large-cap U.S. value stocks, with top holdings including Berkshire Hathaway, JPMorgan Chase & Co. (JPM), Exxon Mobil Corp. (XOM), Johnson & Johnson (JNJ), UnitedHealth Group Inc. (UNH) and Procter & Gamble Co. (PG).
It also comes at a bargain price. With a 0.04% expense ratio, VTV ranks among the lowest-cost funds in the large-cap value category. For a $5,000 investment, that translates to just $2 per year in fees.
Re: the Best Ways to Invest $5,000
Contrarian Investing
There are always "hot stocks" that dominate headlines and attract waves of investors. These are often companies experiencing rapid growth, sparking a bandwagon effect where more people pile in simply because everyone else is.
This behavior, known as herding, has fueled the surge in artificial intelligence (AI) stocks like Nvidia Corp. (NVDA) and Microsoft Corp. (MSFT) – both of which have benefited from the AI boom and widespread investor enthusiasm.
Contrarian investing takes the opposite approach. Instead of chasing popular stocks, contrarians seek out unloved, ignored or beaten-down companies that, despite a lack of attention, still have strong fundamentals.
A prime example is tobacco stocks, which often trade at a "sin discount" due to regulatory risks and exclusion from funds with environmental, social, and governance (ESG) mandates.
Despite this, many tobacco companies generate high free cash flow, maintain double-digit profit margins, offer strong dividend yields and trade at multiples below most consumer staples companies – making them enticing for contrarian investors willing to look beyond market sentiment.
There are always "hot stocks" that dominate headlines and attract waves of investors. These are often companies experiencing rapid growth, sparking a bandwagon effect where more people pile in simply because everyone else is.
This behavior, known as herding, has fueled the surge in artificial intelligence (AI) stocks like Nvidia Corp. (NVDA) and Microsoft Corp. (MSFT) – both of which have benefited from the AI boom and widespread investor enthusiasm.
Contrarian investing takes the opposite approach. Instead of chasing popular stocks, contrarians seek out unloved, ignored or beaten-down companies that, despite a lack of attention, still have strong fundamentals.
A prime example is tobacco stocks, which often trade at a "sin discount" due to regulatory risks and exclusion from funds with environmental, social, and governance (ESG) mandates.
Despite this, many tobacco companies generate high free cash flow, maintain double-digit profit margins, offer strong dividend yields and trade at multiples below most consumer staples companies – making them enticing for contrarian investors willing to look beyond market sentiment.