The Biz...

Q: As a college student, my finances are on a short leash, so I have only $1,000 to invest. Is it worth it, and where could I invest that little? -- R.K., via the Internet

A: Not only is it worth it, but by the time we get through with you, your leash will be long enough to reach the moon (or at least Montauk, N.J.).

Say you're 20 years old now. If you start with $1,000 and invest an additional $1,000 each year, and your money earns 10 percent, then when you're ready to retire at age 65, you'll have $863,685.80. That seems worth it to us. (If you have earned income, you can set up a Roth IRA, and then you won't even pay any taxes on that $863K when you withdraw it.)

Fortunately, there are some index funds (the only kind of mutual fund Fools like) that require only a $1,000 minimum to begin investing. So consider an index fund that tracks the S&P 500 as your entree (skip the appetizer) into an investment that has traditionally returned 11 percent a year, and lately has been doing a good bit better than that.

Next on the menu, there's something related to the S&P 500-stock index, called "Spiders." The name is actually an acronym, SPDRs, for S&P Depositary Receipts, which are bought and sold just like individual shares of stock, and which trade under the ticker symbol SPY. Spiders are shares in a unit investment trust that holds stocks that closely track the performance and dividend yield of the S&P 500 index.

For many investors, SPDRs may be cheaper than buying an S&P 500 index fund -- the cost of running SPDRs is lower. However, you also need to pay a commission to buy and sell SPDRs. So if you're planning to add $50 to $100 a month to your initial $1,000 investment (at about $8 a trade with a discount broker), SPDRs make less sense than an index fund.

If you're hungry for more, we offer up Dividend Reinvestment Plans, or DRIPs. These are plans offered by companies to their shareholders as a way to buy stock directly from the company (usually through a transfer agent) in very small amounts (you can buy in for as little as $10). The plans also reinvest all or partial dividends paid (it's up to you) into more stock, thus the name "Dividend Reinvestment Plan." You can sometimes buy stock at a discount to the current market price. Not all companies offer DRIPs, but more than 1,000 do. This can be a great way to create wealth over the long term.

And finally, we offer this nugget of advice. None of the above investments are for you and your $1,000 if you: a) carry a balance on your credit card; b) have no emergency fund built up; or c) are really an alien from a distant planet and don't even have a Social Security number.