If you've been tightening your budget and have managed to save up $5,000 to invest -- or if you've ended up with $5,000 some other way -- that's great! Your next step is figuring out what to invest that money in.

Here's a look at three kinds of investments you would do well to make with $1,000, $5,000, $50,000, or any other sum. See which one(s) make the most sense for you, given your particular situation.

Someone in a military uniform is outside, smiling.

Image source: Getty Images.

1. The merits of short-term investments

I'm always eager to point out to people that there are few better ways to build wealth than via the stock market, but the stock market isn't the right choice for all of your savings. For example, if you have money to invest that you expect you're going to need within five or so years -- or even 10 years, if you want to be more conservative -- then you shouldn't plunk it into stocks. That's because the stock market can be volatile. It might swoon just before you need to withdraw money for, say, a down payment on a home or a year of college tuition. If your timing in terms of those upcoming expenses won't be particularly flexible, that could leave you forced to sell stocks while they are down -- not an ideal outcome.

So instead, park your short-term investment dollars elsewhere. You might consider certificates of deposit (CDs), especially if you know exactly when you'll need that money. If it will be in three years, you might invest in a good three-year CD. If you're not sure, though, or you might need the money at any time to cover an emergency, a high-yield savings account or a money market account might be preferable. Short-term bonds are another possibility.

2. For the longer term, invest in stocks

If you have money that you expect you'll be able to leave  invested for at least five years -- if not 10 or more -- do consider the stock market. Don't just take my word for it -- check out the table below, which shows the average annualized returns of various asset classes between 1802 and 2021, per Wharton Business School professor Jeremy Siegel:

Asset Class

Annualized Nominal Return

Stocks

8.4%

Bonds

5%

U.S. Treasury bills

4%

Gold

2.1%

U.S. dollar

1.4%

Source: Stocks for the Long Run, Jeremy Siegel.

Stocks reign supreme over shorter periods, too: For example, Siegel found that between 1946 and 2021, stocks grew at an average annualized rate of 11.3%, vs. 5.8% for long-term government bonds.

Here's how your wealth can grow if you regularly invest meaningful sums and happen to average annual growth of 8%:

Growing at 8% for

$7,500 invested annually

$15,000 invested annually

5 years

$47,519

$95,039

10 years

$117,341

$234,682

15 years

$219,932

$439,864

20 years

$370,672

$741,344

25 years

$592,158

$1,184,316

30 years

$917,594

$1,835,188

35 years

$1,395,766

$2,791,532

40 years

$2,098,358

$4,196,716

Source: Calculations by author.

You can aim for returns like that by investing in one or more great index funds, such as the following broad-market exchange-traded funds (ETFs):

  • SPDR S&P 500 ETF (NYSEMKT: SPY)
  • Vanguard Total Stock Market ETF (NYSEMKT: VTI)
  • Vanguard Total World Stock ETF (NYSEMKT: VT)

Index funds are really all you need to build long-term wealth. But if you'd like to include individual stocks in your portfolio, here are some types of stocks to learn more about and consider:

  • Growth stocks: Growth stocks are tied to companies that are growing at faster-than-average clips. They are often popular, having drawn attention for their growth spurts, but they can sometimes be overvalued, too, and due for a pullback.
  • Value stocks: Value stocks are shares of companies that seem to be trading at prices below their intrinsic value. Their undervalued status gives investors a margin of safety. Value investing is favored by many great investors, such as Warren Buffett. (Note that an undervalued growth stock can be a value stock, too -- and that can be a powerful kind of investment.)
  • Dividend-paying stocks: Dividend-paying stocks offer not only potential share price appreciation, but also regular cash payouts that can increase over time, too. Dividend payers tend to be more stable, established companies, and on average, perform well.

3. Invest in yourself

Finally, with some or all of your money, consider investing in yourself. There are many ways to do so:

  • Invest in your family: Spend quality time with your family members -- those in your home and your extended family and good friends, too. Strong relationships make for a good life.
  • Invest in your career: Spend time building and strengthening your professional network so that you can tap it when you need to -- for advice or help finding a job in the future. Consider earning additional certifications or degrees that could qualify you for higher-paying jobs.
  • Invest in knowledge: The more you know, the better you might perform at work and the better your investing results may be. Read up on personal finance, great investors, and great businesses, as well as about industries tied to your career.
  • Invest in your health: Take time to get and stay healthy. This might cost very little, or it can mean investing in a gym membership and/or some fitness equipment. Learn to eat more nutritiously, too, and you may end up extending your life.

Whichever of these great investments you can make with your money (and your time), be sure to not procrastinate. Putting off investing can be surprisingly costly.