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Investing wisely is key if you want to build wealth, and the specific ways you can invest will be influenced by the amount of money you have available. If you’re wondering how to invest $10k, we’ll cover the best options in this article.
Saving $10,000 is a significant accomplishment and you’ll want to make sure that you’re investing effectively to help it grow and compound as much as possible.
Related reading: How to Save $10,000
This article provides general information and should not be taken as financial advice. If you need personalized assistance, please contact a financial advisor or financial professional who can assist you based on your own unique situation.
Ways to Invest
Before we get into the specific investment opportunities, let’s look at the different ways you can invest your money.
Traditional IRA or 401(k)
If you’re already contributing to an employer-sponsored retirement plan like a 401(k) or 403(b), then you should consider maxing out your contributions before investing elsewhere. For 2022, the contribution limit for 401(k)s is $20,500 (plus an additional $6,500 catch-up contribution if you’re age 50 or older).
For IRAs, the contribution limit is $6,000 (plus a $1,000 catch-up contribution if you’re age 50 or older).
Not only do these accounts offer tax benefits, but they also help you to save for retirement on a regular basis. This can be helpful if you have trouble saving on your own.
If you’re looking for more flexibility with your retirement savings, a Roth IRA may be a good option. With a Roth IRA, you contribute money that’s already been taxed, but you can withdraw the money tax-free in retirement.
The contribution limit for IRAs of $6,000 includes your contributions to both Roth and Traditional IRAs. You can contribute $6,000 in one or the other, or some combination up to the maximum of $6,000 (plus the $1,000 catch-up if you’re 50 or older).
A taxable account is an investment account that doesn’t have special tax benefits. This includes accounts like a brokerage account, joint brokerage account, or even a checking or savings account.
The advantage of a taxable account is that you can withdraw the money at any time without penalty. This makes them ideal for short-term goals like saving for a down payment on a house or taking an annual vacation.
The downside of taxable accounts is that there are no tax benefits.
Invest in Yourself
One of the best investments you can make is in yourself. This includes things like taking courses to improve your job skills, starting a side hustle to earn extra income, or anything else that helps to increase your earning potential in the future.
How to Invest $10,000
Here are some specific ways you can invest 10,000 dollars with the goal of building more wealth.
It’s important to understand that investing involves risk and you could lose some or all of your money. Be sure to do your own research before making any investment decision.
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When you buy stocks, you’re buying a piece of a company that can potentially grow in value over time. You can choose to buy stocks in companies that you believe will grow in value. StockRover is an extremely valuable tool for research and analysis.
One of the most popular approaches is to buy dividend stocks. These are stocks that pay out regular dividends (usually quarterly), which can provide you with a steady stream of income.
Dividend stocks are often considered to be less risky than the stock market as a whole because they tend to be large, well-established companies. Also, even if the stock price drops, you should still receive dividends. If you’re focused on long-term growth, you can reinvest the dividends to buy more shares, which can help you to build wealth over time.
Mutual Funds or ETFs
Another option for investing your $10,000 is to buy mutual funds or exchange-traded funds (ETFs). With a mutual fund, you’re pooling your money with other investors and the fund manager invests in a variety of assets on your behalf. An index fund like Vanguard’s VTSAX is a popular choice.
ETFs are similar to mutual funds, but they tend to be lower cost. They also offer more flexibility because you can buy and sell them any time the stock market is open, just like individual stocks. Mutual funds are only traded once per day after the market closes.
Both mutual funds and ETFs can provide you with diversification, which can help to reduce risk. When you invest in a mutual fund or ETF, you’re buying a basket of assets, which can include stocks, bonds, and other investments. This diversification can help to protect your investment from the ups and downs of any one particular asset.
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Real Estate Crowdfunding
Real estate crowdfunding platforms like Fundrise have become extremely popular over the past 5-10 years. With Fundrise, you can invest in a variety of real estate projects without having to put down a large amount of money or go through the hassle of being a landlord.
The Fundrise team selects and manages all of the properties in their portfolio, so you don’t have to worry about things like repairs or tenant issues. And, because Fundrise invests in a variety of properties, your investment is diversified, which can help to reduce risk. Fundrise returns have also been excellent so far.
Plus, when you invest with Fundrise, you can start earning money from your investment right away through quarterly dividends (the dividends can be automatically reinvested or deposited into your bank account). And, as the properties appreciate in value over time, you can potentially make more money when those properties are eventually sold.
The downside to real estate crowdfunding is that it’s not a liquid investment. Most platforms have a target hold of about five years. Some platforms like Fundrise offer limited liquidity, but others are completely illiquid. As a result, you should only invest money that you won’t need for at least several years.
Related reading: Real Estate Crowdfunding for Non-Accredited Investors
A Real Estate Investment Trust (REIT) is a company that owns and operates income-producing real estate. Some REITs focus on a specific type of real estate like office buildings or apartments, while others invest in a variety of property types.
REITs must pay shareholders in the form of dividends, so they can potentially offer investors a high yield. And, because REITs have a broad portfolio that includes many properties, they offer built-in diversification, which can help to reduce risk.
Some REITs are publicly-traded on major exchanges like the New York Stock Exchange, while others are private. Private REITs will often provide higher potential returns, but they are typically illiquid. Publicly-traded REITs can be bought or sold any time the stock market is open.
You can also invest in real estate or REIT ETFs. A REIT ETF will hold many different REITs within its portfolio, so it provides even more diversification.
Use a Robo Advisor
With a robo advisor, you simply decide how much you want to invest and answer a series of questions related to your financial goals and risk tolerance. The robo advisor will do the rest by selecting the appropriate mix of assets for your portfolio.
M1 Finance is technically not a robo advisor, but it is an automated investment platform that can serve as an alternative to robo advisors. With M1 Finance, you can create your own custom portfolio or choose from one of their pre-made portfolios (they call them “pies”).
Once you’ve selected your pie, M1 Finance will automatically invest your money according to your chosen allocations.
The downside to robo advisors is that they typically have higher fees than low-cost investments like stocks or ETFs.
That said, if you’re not interested in managing your own investments, the convenience and expertise of a robo advisor can be worth the extra cost.
A basic M1 Finance account is free, which is one of the reasons why it is an appealing alternative to robo advisors.
M1 Finance makes it easy to manage your investments. Choose from a wide variety of professionally-created "pies" (portfolio allocations) or create your own. Contribute to your account and M1 Finance automatically invests based on your selections.
- Free alternative to robo advisors
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- Easily view and manage your portfolio
- Ideal for long-term investors
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There are many different types of alternative assets you can purchase if you’re looking for something less traditional. We’ll cover a few options below, and you can see more in our list of alternative investments.
Fine wine has an impressive track record as an investment. The challenge is that the average person doesn’t know enough about wine to make the right decisions with this investment opportunity.
However, platforms like Vinovest and Vint have made fine wine a viable investment option for almost anyone. The two companies operate differently, but in both cases, you’ll get ownership of a portfolio that has been selected by industry experts.
Art can be an excellent investment, but like wine, the average person doesn’t have enough experience to invest wisely in art. However, Masterworks makes it easier by identifying pieces that their experts believe will offer the potential for solid returns.
Masterworks allows you to purchase shares of paintings by well-known artists. So, rather than buying the painting outright, you own a share in it. When the painting is eventually sold, you’ll be entitled to your share of the proceeds.
Masterworks does all the research and curates the paintings that are available for investment, so it’s a hands-off way to invest in art.
FranShares is a new platform that makes investing in franchises a realistic option for almost everyone. The experts at FranShares identify franchises that have the potential to produce excellent returns, and investors can purchase a share in the portfolio.
When you invest through FranShares, you won’t have any of the responsibilities that typically go along with owning or operating a franchise. Everything is handled for you. And franchises can produce a lot of revenue for owners, so this has the potential to be an excellent source of passive income.
Small Businesses and Startups
There are a growing number of platforms like Mainvest and EquityNet that allow you to invest in small businesses and startups. These types of investments can be high risk because many new businesses fail, but there’s also potential for high returns if the business grows quickly.
Pay Off Debt
If you have high-interest debt, one of the best things you can do with your money is to pay off the debt, or at least pay down the balance. You’re essentially guaranteed to get a return equal to your interest rate, and you’ll free up more cash flow each month as you eliminate debts.
This might not be the most exciting way to invest your money, but it can be an effective way to use your funds if you’re trying to get out of debt. If you have high-interest debt, like credit cards, this should be your first priority.
Build Emergency Savings
If you don’t have an emergency fund, now is a great time to start one (and $10,000 is an excellent starting point). An emergency fund is simply a savings account that you use for unexpected expenses like medical bills or car repairs.
The goal is to have enough money in the account to cover 3-6 months of living expenses, so you’re not forced to put these types of costs on a credit card.
Most people prefer to keep their emergency fund in a high-yield savings account because there is no risk of losing their money.
Another option for investing your $10k is to buy bonds. When you buy a bond, you’re essentially lending money to a company or government entity. In exchange, they agree to pay you interest on the loan and return your principal when the bond matures.
Bonds tend to be less risky than stocks because they offer a fixed rate of return. However, they also tend to have lower returns than stocks.
One advantage of bonds is that they can provide stability in your investment portfolio. This is especially true if you’re invested in stocks as well since bonds tend to perform differently than stocks in different market conditions.
Related reading: Low Volatility Investments to Consider
A certificate of deposit, or CD, is a type of savings account that offers a higher interest rate than a traditional savings account. The downside is that you have to commit to keeping your money in the account for a set period of time, typically 1-5 years.
If you need to access your money before the CD matures, you’ll typically pay a penalty. But if you’re willing to keep your money locked up for the duration of the CD, it can be an excellent way to earn some extra interest on your savings.
Start a Business
If you have an entrepreneurial spirit, another option for investing your $10k is to start your own business. This is obviously a riskier proposition than some of the other options on this list, but it also has the potential to earn a much higher return.
Of course, starting a business takes more than just money. You’ll need to have an idea for a business that you think has potential, and you’ll need to be willing to put in the hard work to make it successful. But if you’re up for the challenge, starting a business can be a great way to invest your 10,000 dollars.
Related reading: Low-Cost Business Ideas with High Profit Potential
Invest in Training or Education
If you want to improve your earning potential, one of the best things you can do is invest in your own education and training. Whether it’s taking a course to learn a new skill or getting a degree to qualify for a higher-paying job, investing in yourself can pay off in the long run.
Investing in education can also be a great way to make yourself more marketable and employable. And if you’re already employed, it can help you earn raises and promotions.
Make Improvements to Your Home
If you own your home, making improvements can be a great way to invest your money. Not only will you improve the value of your home (ideally), but you’ll also get to enjoy the benefits of the improvements while you live there.
Some examples of home improvements that can add value to your property include adding a new bathroom or renovating an existing one, finishing a basement, or adding a deck or patio.
Not all home improvements will add value to your home, so it’s important to do some research before you start any projects. But if you choose wisely, investing in your home can be a great way to grow your equity and increase the resale value of your property.
Fund an HSA
If you have a high-deductible health insurance plan, you may be eligible to open a health savings account, or HSA. Contributions to an HSA are tax-deductible, and the money in the account can be used to pay for qualified medical expenses.
One of the great things about an HSA is that it can be used to save for retirement. Once you turn 65, you can withdraw money from your HSA for any purpose without paying any income tax on the withdrawal.
Invest in a 529 Account
A 529 plan can be used to save for college. Contributions to a 529 account are not tax-deductible (although some states offer tax incentives), but the money in the account can grow tax-free.
Withdrawals from a 529 account can also be taken tax-free as long as they’re used to pay for qualified education expenses. This makes 529 accounts an excellent way to save for college while getting some tax benefits.
There are two types of 529 plans: prepaid tuition plans and college savings plans. Prepaid tuition plans allow you to purchase units or credits at participating colleges and universities. College savings plans, on the other hand, work like a regular investment account.
You can choose how to invest the money in your account, and the earnings can be used to pay for qualified education expenses at an eligible institution.
Determine Your Goals
Before you invest your $10,000, it’s important to take some time to think about your goals. What do you want to achieve with your investment? Do you want to grow your money, earn some extra income, or protect your savings from inflation?
Your goals will play a big role in deciding how to invest your money. For example, if you’re trying to grow your money, investing in stocks or mutual funds may be a good option. But if you’re more concerned with preserving your capital, investing in bonds or CDs may be a better choice.
Once you have a clear idea of what you want to achieve with your investment, you’ll be in a better position to choose the right option for you.
Frequently Asked Questions
Yes, $10k is a great amount to start investing, but you don’t need to wait until you have $10k. Thanks to platforms like Public.com and Webull, you can invest in stocks and ETFs with just a few dollars. Fundrise allows anyone to invest in real estate with as little as $10. You’ll have more options if you’ve got $10k to invest, but you certainly don’t need to wait until you have that much saved before you start investing it.
Yes, you can invest in real estate with $10k. There are a few different ways to do it. One option is to invest in a REIT (real estate investment trust). A REIT allows you to invest in a portfolio of properties without having to buy or manage any property yourself.
Another option is to invest in a crowdfunding platform like Fundrise. With Fundrise, you can start investing in real estate with as little as $10.
Final Thoughts on How to Invest $10k
Investing $10k is a great way to grow your money, but it’s important to choose the right option for you and your investment strategy. Consider your goals and what you want to achieve with your investment before making a decision. Once you’ve done that, you’ll be well on your way to reaching your financial goals.