CDs

• The safest investment you can make with $1,000 is a certificate of deposit. This type of bank deposit is insured by the FDIC, just like a checking or savings account. A CD pays a guaranteed rate of return for a specified period of time that ranges from a few months to five years. Typically, the interest rate on a CD is higher than that of a bank's money market accounts. The downside is you agree to leave the money deposited until maturity or pay a hefty interest penalty.
  
  

Savings Bonds

• U.S. Savings Bonds are another option with minimal risk, since they are backed by the federal government. You can buy electronic savings bonds online at TreasuryDirect.gov or paper bonds at almost any financial institution. Savings bonds are sold for as little as $25 up to a maximum of $5,000 per year. Since 2005, savings bonds have paid a fixed rate guaranteed until they mature.
  
  

Other Bonds

• Negotiable bonds carry some risk, but top-quality corporate or municipal bonds, along with Treasury bonds, are considered quite safe. However, bond prices vary as interest rates change. Many negotiable bonds are available for $1,000 and $5,000 face values. Corporate bonds pay the best rates as a rule. To minimize risk, you should buy a bond with an AAA rating that is trading at or below its face value.
  
  

Mutual Funds

• Investing in stocks with only $1,000 can be tricky, but there are a couple of options available. You can open an account with a good stock mutual fund. Mutual funds are professionally managed portfolios of securities and some will open an account for $1,000 and add additional amounts over time. A no-load fund, or one that doesn't deduct a sales commission from your investment, is usually best. Before choosing a mutual fund, read the fund prospectus carefully. It will disclose the fund's earnings history, fees and management philosophy.
  
  

Caution

• You should avoid some investments when you have only $1,000 to start with. These include penny stocks, stock options and foreign currency trading, which are all high-risk investments. Even the most experienced traders take a big loss occasionally. You need enough money to give you the staying power to absorb losses and eventually make a profit.