5 Stocks to Start With if You Only Have $1,000

If you have $1,000 and you're ready to invest, taking the first step is the most important part. Once your money is invested, you can sit back and wait for it to compound over time. If you can add consistent sums at different points, even better.

The earlier you start, the more you have to gain. Consider the possible outcomes with different compound annual growth rates (CAGR) over time:

Given the small initial size, you want to make sure you're still diversified, since that reduces overall risk and gives you greater exposure to different trends and categories. A great lineup to get started is Palantir Technologies (NASDAQ: PLTR), AGNC (NASDAQ: AGNC), Eli Lilly (NYSE: LLY), SoFi Technologies (NASDAQ: SOFI), and Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB).

This is a diversified group of stocks. Each has excellent long-term potential, but in different ways. Some of these cost more than $200 each, which is how much you'll have to invest in five different stocks, so this is where you would want to use fractional shares.

1. Palantir

Palantir uses artificial intelligence (AI) to unify a client's varied databases, while detecting patterns and making recommendations. It has several platforms, and its original Gotham product is geared toward the defense industry, but its Artificial Intelligence Platform is being used by an increasing number of commercial clients.

Image source: Getty Images.

It has been reporting breathtaking results for a long time now, which is why it has been able to support a high valuation; it trades at 178 times trailing-12-month earnings and 87 times trailing-12-month sales at the current price. In the second quarter, revenue increased 93% year over year, driven by a 149% increase in U.S. commercial growth. It's also highly profitable, with a 62% adjusted operating margin.

Palantir is your growth component. It's the only AI stock on this list, and it has years of high-growth potential as more clients sign up for long-term contracts. At a certain point, the advantage it gives its customers over the competition will become the baseline, providing a huge long-term opportunity.

However, as a growth stock, it also comes with risk. It's very expensive, and AI continues to develop and change.

2. AGNC

AGNC is a real estate investment trust (REIT) focused on mortgages. It doesn't own properties, but it buys mortgage-backed securities, and it makes money by raising funding at a lower interest rate than the yields on the loans that it buys. Since it's a REIT, it pays out 90% of its earnings as dividends.

It primarily buys loans issued by U.S. government agencies like Fannie Mae, Freddie Mac, and Ginnie Mae. Since it operates in an area highly exposed to credit risk and interest rate changes, it carries some risk. Today, its dividend yields 16.6%, but it has been cut many times since it went public in 2008. However, it has never suspended it.

AGNC is your income component. You wouldn't buy it for stock growth, but for its dividend, which can be used as passive income -- or before you need it, reinvested in more shares.

3. Eli Lilly

Eli Lilly is the most valuable healthcare company in the world and the only one with a $1 trillion market cap. It owns many of the pharmaceuticals that have been around for a long time, like Prozac, as well as new ones like Zepbound, and like any pharmaceutical company, it always has many new medicines in trials and waiting for government approval.

Its anti-obesity treatments have been driving growth and led to a 48% sales increase year over year in the second quarter. It's highly profitable, and it has many products in its pipeline. The company has been around for more than 150 years, proving itself over time, but it still has a long growth runway.

Eli Lilly is your healthcare component and is a powerhouse in its industry, offering a safe investment option in a space outside of tech.

4. SoFi

SoFi is your fintech component, providing exposure to the financial industry wrapped in a tech platform that represents the future of the field.

SoFi Stadium in Inglewood, California. Image source: SoFi.

It's growing much faster than a traditional bank, and it's expanding into new products to create a full financial services platform for its customers, who are now joining at more than a million each quarter. Its core segment is lending, but it offers bank accounts, credit cards, investing tools, cryptocurrency trading, and more.

Adjusted net revenue increased 40% year over year in the second quarter, and cross-buy, which indicates that existing customers are buying more products, rose as 51% of new product purchases came from existing customers.

SoFi is still building its business, and so it is exposed to credit risk, but over many years, it's likely to be a standout.

5. Berkshire Hathaway

Lastly, Berkshire Hathaway is your security component. Your other stocks may lead with growth, but Berkshire still offers incredible value. It owns nearly 200 companies that meet Warren Buffett's exacting standards, which means they're likely to keep generating strong growth, in addition to its well-curated equity portfolio that gives you exposure to around 30 great stocks.

The company outperformed the market by a wide margin during Buffett's tenure, and it's entering a new phase under the leadership of his successor, Greg Abel. It may or may not continue to beat the market, but it's sure to provide safety and stability to any portfolio.

Jennifer Saibil has positions in SoFi Technologies. The Motley Fool has positions in and recommends Berkshire Hathaway, Eli Lilly, and Palantir Technologies. The Motley Fool has a disclosure policy.