The latest consumer price index, or CPI, report for May showed headline inflation of 4.2% year over year — its highest level in three years. Much of the increase was driven by a sharp rise in energy prices following the second-order effects of the Iran war.
Most Americans likely noticed the impact first at the gas pump, but higher energy prices rarely stay confined to gasoline alone. Energy is a key input throughout the economy.
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Manufacturers rely on it to power factories, transportation companies need fuel to move goods and businesses often face higher utility costs. Those increases can eventually work their way through supply chains and into the prices consumers pay for everything from groceries and household goods to travel and discretionary purchases.
While recent inflation readings have attracted attention, economists and policymakers at the Federal Reserve are often more focused on the long term. Under its dual mandate, the Fed seeks to promote maximum employment while maintaining price stability, which generally means targeting inflation of around 2% annually.
Even that seemingly modest rate, however, can have a significant impact when compounded over decades. According to the U.S. Bureau of Labor Statistics’ CPI inflation calculator, the cumulative effect has been substantial.
A basket of goods that cost $100 in January 2000 would cost $198.53 in May 2026. Put differently, the purchasing power of a dollar has been cut by more than half over roughly a quarter century.
That helps explain why investing is so important. Money sitting in cash may avoid market volatility, but over long periods it can steadily lose purchasing power.
Building wealth involves more than simply contributing enough to earn an employer match in a 401(k). It can also mean maintaining an emergency fund, taking advantage of tax-advantaged accounts such as a Roth IRA or health savings account, and putting excess savings to work in investments capable of outpacing inflation.
Here are seven of the best ways to invest $5,000 today:
— S&P 500 index funds.
— Balanced funds.
— Sector funds.
— Thematic ETFs.
— Treasury bill ladder.
— Money market funds.
— Berkshire Hathaway Inc. (ticker: BRK.A, BRK.B).
S&P 500 Index Funds
The S&P 500 is the most widely followed stock market benchmark alongside the Dow Jones Industrial Average and the Nasdaq-100. It consists of 500 large-cap U.S. companies selected based on factors such as size, liquidity and earnings consistency, with additions and deletions overseen by a committee.
The index is market-cap weighted, which creates a natural self-cleansing effect. As successful companies grow, they become a larger part of the index, while weaker firms gradually lose influence or are eventually removed. The approach results in relatively low turnover and allows winning businesses to compound over long periods.
That dynamic has helped the S&P 500 outperform most actively managed funds. According to S&P Dow Jones Indices’ SPIVA Scorecard, 89.9% of large-cap funds underperformed the index over the 15-year period ending last December.
Investors can access this exposure very cheaply through either mutual funds or exchange-traded funds, or ETFs. The Vanguard 500 Index Fund Admiral Shares (VFIAX), for example, charges a 0.04% expense ratio, while the State Street SPDR Portfolio S&P 500 ETF (SPYM) is even cheaper, at just 0.02%.
“In his 2014 letter to Berkshire Hathaway Inc. shareholders, Warren Buffett said that when he passes away, the instructions for the trustee for his wife will be to put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund,” says Robert Johnson, professor of finance at Creighton University Heider College of Business. “If that idea is good enough for Mr. Buffett, it is good enough for the vast majority of investors.”
Balanced Funds
Diversification is about more than simply owning the S&P 500. A truly diversified portfolio should include exposure to international developed and emerging markets, different sectors, both value and growth styles, large-, mid- and small-cap companies, and multiple asset classes, particularly fixed income.
One of the most time-tested ways to achieve this is through a balanced fund, which combines stocks and bonds in a predetermined allocation. Balanced funds are available in both mutual fund and ETF formats.
Balanced funds typically maintain a target mix of stocks and bonds and automatically rebalance back to those weights over time. The goal is to capture a rebalancing premium by systematically trimming assets that have appreciated and adding to those that have underperformed.
For example, during a stock market correction, a balanced fund may sell a portion of its bond holdings and use the proceeds to purchase stocks at lower prices. This process can improve discipline and help investors avoid the temptation to time the market.
The Vanguard Balanced Index Fund Admiral Shares (VBIAX), for example, provides a 60% allocation to the U.S. total stock market and 40% to the U.S. aggregate bond market for a 0.07% expense ratio. Over the trailing 10 years, the fund has delivered a respectable 9.9% annualized total return, although investors must meet a $3,000 minimum investment requirement.
Those seeking a lower entry point may prefer the iShares Core 60/40 Balanced Allocation ETF (AOR). With a share price of roughly $70, the ETF is more accessible to newer investors with smaller amounts of capital. Unlike VBIAX, AOR provides global diversification across both stocks and bonds, although it comes with a somewhat higher 0.15% expense ratio.
Sector Funds
The market-cap-weighted methodology used by the S&P 500 and many other broad market indexes naturally allows winners to become larger portions of the portfolio over time.
In 2026, that has resulted in a significant concentration in technology-related companies. Investors should remember, however, that technology is just one of the 11 Global Industry Classification Standard, or GICS, sectors. The others are communication services, consumer discretionary, consumer staples, energy, financials, healthcare, industrials, materials, real estate and utilities.
Some investors may find it useful to selectively overweight certain sectors based on their economic outlook or risk preferences. Different sectors respond to different macroeconomic drivers and can behave very differently across market cycles.
“Using a sector ETF as a satellite for your core investments may enable you to capitalize on trends and opportunities that you believe could outperform the broader market,” says Michael Ashley Schulman, partner at Cerity Partners. “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.”
Utilities, for example, have historically been viewed as a “widows and orphans” investment because of their relatively low volatility and above-average dividend yields. By contrast, the energy sector is often tied to boom-or-bust commodity price cycles, but can serve as a useful hedge during periods of elevated inflation or geopolitical conflict.
Investors can gain sector exposure through either mutual funds or ETFs. For the latter, State Street Investment Management offers a popular lineup corresponding to the 11 S&P 500 sectors, with each individual ETF carrying a relatively low 0.08% expense ratio.
[See: Best Health Care ETFs to Buy.]
Thematic ETFs
GICS organizes the stock market into 11 sectors, which are further divided into 25 industry groups, 74 industries and 163 sub-industries. While this framework is useful, it is ultimately just one way of categorizing companies.
ETF providers can also license custom indexes that cut across sectors and industries to capture a specific long-term trend or investment thesis. This approach is commonly known as thematic investing.
“Thematic ETFs invest in companies that are aligned with specific trends,” says Pedro Palandrani, senior vice president and 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.”
One notable example is the $7.4 billion Global X Defense Tech ETF (SHLD). Rather than focusing exclusively on industrial companies like many traditional aerospace and defense funds, SHLD also allocates roughly 13% of its assets to information technology companies, recognizing that firms such as Palantir Technologies Inc. (PLTR) play an increasingly important role in national security through software, data analytics and AI capabilities.
“Thematic strategies have gained popularity, as they allow investors to capitalize on transformational trends and emerging investment opportunities by focusing on specific themes and investing through an ETF wrapper,” Palandrani says.
Thematic investing can certainly deliver impressive returns if and when the underlying trend proves durable. From its September 2023 inception through the end of May, SHLD generated a cumulative return of 176.2%. The challenge is that many thematic ETFs are launched near the peak of investor enthusiasm and often carry higher expense ratios than broad market funds.
Treasury Bill Ladder
Not every investor is comfortable with the volatility that comes with stock ownership. While equities have historically trended higher over the long run through a combination of earnings growth, dividends and share buybacks, short-term losses are common due to recessions, geopolitical events, interest rate changes and shifts in investor sentiment.
As a result, many financial professionals recommend maintaining a cash allocation either within a portfolio or separately as an emergency fund. The challenge is earning a reasonable return while still preserving principal.
One solution is a Treasury bill ladder, which involves purchasing multiple short-term U.S. government securities with staggered maturity dates. For example, an investor might divide $5,000 among Treasury bills maturing in three, six, nine and 12 months.
As each Treasury bill matures, the proceeds can either be spent or reinvested into a new 12-month Treasury bill, a process known as rolling the ladder. Over time, this creates a steady stream of maturing securities while maintaining exposure to prevailing interest rates.
The approach also helps avoid the risk of locking all funds into a single maturity date. Unlike traditional bonds, Treasury bills do not make periodic interest payments. Instead, they are issued at a discount to face value and mature at their full face value, with the difference representing the investor’s return.
Because Treasury bills mature quickly, they generally experience minimal sensitivity to interest rate changes, and because they are backed by the full faith and credit of the U.S. government, they carry an extremely low risk of default.
Money Market Funds
Treasury bill ladders can be effective, but they also require some effort to maintain. Investors must purchase individual securities, track maturity dates and often use TreasuryDirect, a platform that has drawn criticism over the years for its dated interface and limited functionality.
For investors seeking a simpler solution, money market funds may be worth considering. These are a specialized type of mutual fund that invests in high-quality, ultra-short-term, fixed-income securities.
Their defining feature is a stable $1 net asset value, which is designed to preserve principal while generating modest income. Although a handful of funds temporarily fell below $1 during the 2008 financial crisis, an event known as “breaking the buck,” regulatory reforms have made such occurrences far less likely.
Investors can choose from several types of money market funds, depending on their goals. Municipal money market funds may appeal to investors seeking federal and potentially state tax-exempt income. Prime money market funds can generate higher yields by investing in corporate securities such as commercial paper, while government money market funds focus on Treasurys and repurchase agreements for maximum safety.
Money market fund income potential is typically quoted using a seven-day SEC yield. In practice, those yields tend to closely track the federal funds rate, which currently sits between 3.5% and 3.75%, less the fund’s expense ratio.
Berkshire Hathaway Inc. (BRK.A, BRK.B)
Generally speaking, concentrating an entire portfolio in a single stock is not advisable. Some companies, however, are far more diversified than others due to their structure. Berkshire Hathaway is a good example, functioning as a conglomerate that owns dozens of operating businesses while also maintaining a substantial public equity portfolio.
Although Warren Buffett has stepped down as CEO, his successor, Greg Abel, is a longtime protégé and widely viewed as a steward of the company’s existing culture. In his inaugural shareholder letter in February, Abel emphasized long-term capital allocation, signaling that Berkshire would continue operating as a compounding vehicle rather than a hedge fund focused on short-term results.
Abel has already been active in deploying Berkshire’s nearly $400 billion cash position. The company repurchased $234 million of its own shares in March, a move that historically tends to occur when management believes the stock is trading at an attractive price-to-book ratio. Abel also personally purchased $15 million worth of Berkshire shares.
Beyond buybacks, Berkshire has continued expanding its portfolio of public and private investments. Recent transactions include a $10 billion commitment to Google’s AI-related capital raise and a $6.8 billion acquisition of Taylor Morrison Home Corp. (TMHC). The latter deal adds another wholly owned subsidiary that includes businesses such as BNSF Railway, GEICO, Duracell and Dairy Queen.
Perhaps most importantly for long-term investors, Abel has reaffirmed Berkshire’s commitment to retaining and reinvesting capital internally. The company famously does not pay a dividend, allowing earnings to compound within the business and making Berkshire a relatively tax-efficient holding for investors focused on long-term wealth creation.
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7 of the Best Ways to Invest $5,000 originally appeared on usnews.com
Update 06/22/26: This story was published at an earlier date and has been updated with new information.
