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How To Invest 10k in Australia
If you’re considering investing money for the first time, then it’s best to start off with smaller amounts. In this article, we’re going to look at the best ways to invest 10k in Australia.
What Are The Best Way To Invest 10k in Australia
So you have AUD 10.000 and you want a good and safe investment?
One of the most effective ways to gain financial security is by having multiple streams of income. Not only will you earn more but you’ll ensure that you don’t rely on just one avenue for your livelihood. Hence, in addition to your full-time job, consider investing in a few different passive income streams.
Regardless of whether it’s $10,000 or $100,000, you need to think about a few things before you invest. Most importantly, your current circumstances will dictate how much of a risk you can handle.
Think About Your Current Financial Situation
From the wealthy to the low-income earners, risk is something that everyone worries about. It’s something you can never factor out of an investment.
Even if you do the most thorough research, some unforeseen factor can suddenly cause you to suffer massive losses. This includes things like economic slumps and major geopolitical events. For instance, large tax increases in certain industries can shake investor confidence. Before you know it, you’re suddenly in the midst of a bear market.
As an investor, you must be prepared to face some risk. However, your current financial status will determine just how much you can handle. For instance, if you can’t afford to lose the entire $10,000, then high-risk investments are a bad idea. Instead, you’ll have to find something stable, like government bonds. According to a report by ASX, average returns of 6.2% per year can be expected with these.
At the same time, you may need to access the $10,000 again in the near future. In that case, it definitely can’t be tied up in something long-term like a bond. What you need is an investment that can be liquidated easily like gold or cash. The trade-off is that these type of investments don’t give you many returns.
If you can afford to lose the $10,000, then high-risk, high return investments might be good enough. If you’ve already attained some financial security, you could also afford to invest in long-term ventures.
Think About Your Future Goals
Your future goals should factor into how much risk you can take. For instance, if you’re planning on having children, then you need to have a decent amount of savings. Hence, you should look for relatively safe investments that give you steady returns.
If kids aren’t going to be in the picture, then perhaps you can take on more risk.
What Should You Invest In?
Below are some of the best investments options available to you, if you live in Australia:
A lot of people view the stock market as a high-stakes game of chance. In reality, it’s a game of precise calculations and accurate predictions. Hence, if you want to be able to make money from it, you have to do your research on both the stock and the company.
For instance, here are a few details you need to look into before you invest:
- Company performance over the last decade
- Debt/Equity ratio – If this is high, then it means the company is using more debt than equity to finance its assets
- Profit margins – Increasing yearly profit margins signify continuous growth
- Whether the company relies solely on commodities – Companies like this turn volatile when something negatively impacts the availability of the commodity
Once you chose the right stocks, you’ll easily be able to get more than a 10% return on investment.
Blockchain-backed currencies are now increasing in popularity. Things like Bitcoin are now being accepted by many vendors all over the world, including Newegg and Microsoft. In addition, countries like the UAE are planning to integrate blockchain into all of their government operations.
What does all this tell you? That cryptocurrencies are going to be huge in the future. That’s why even Facebook is coming up with its own currency!
It’s true that the values of coins like Bitcoin or Ethereum seem volatile now. However, all signs point to the crypto market stabilizing in the future. Hence, if you buy stakes in a reliable cryptocurrency now, it may pay off in the long-term.
If you want to check cryptocurrency prices go to https://coinmarketcap.com/.
Gold is seen as a very stable investment instrument as it always retains its value. Why is that? First of all, gold is seen as ‘everlasting’ because it doesn’t corrode. Secondly, it has always been considered an indicator of wealth and luxury. This has been the case throughout the ages and across many cultures.
Gold is so stable that its value doesn’t plummet in response to negative economic and geopolitical shifts. As a matter of fact, its value rises when the stock market goes into a downturn.
There are two reasons for this:
- When the stock market crashes, inflation rises. This makes everything more expensive, including gold.
- During times when standard currency is seen as volatile, people view gold as a more stable way to maintain the value of their assets.
Living in Australia, there are three ways to invest in gold:
- Physically owning gold – You buy gold in the form of coins, bullions or jewelry and store it in a secure location. The downside of non-stock investments in gold is that you have to pay storage fees.
- Gold-backed Exchanged Traded Funds (ETFs) – In this scenario, the ETF actually owns the physical gold and you own a percentage of the fund. As a result, you’re not responsible for storing the gold.
- Buying shares in mining companies – the value of shares in mining companies are directly proportional to the price movements of gold. Hence, you can theoretically expect the same stability in value. However, the future of the company itself depends on the ability to keep finding gold. Hence, this method carries the most risk.
Before you invest $10,000, there are a lot of factors to consider. Most importantly, you have to think about how much risk you can handle. This, in turn, will determine what you should invest in. With $10,000 you can’t really invest in real estate. However, the stock market, cryptocurrencies, and gold are viable options.
Best Ways to Invest $10,000
Have $10,000 to invest? Here are 14 smart investments ideas that will turn that $10k into even bigger money.
What would you do if someone handed you $10,000? Would you go on a shopping spree, put it in a savings account, or contribute to the latest trendy investment?
Before you decide, consider your options.
Come up with a strategy to increase the chances of building on your capital. (And if $10,000 is too steep for your current situation, find great tips to invest $100 here.)
Here are some ideas on how to make the most of your $10k.
Shortcut: If you are really eager to start investing, one of our recommended choices is Betterment. They have no minimum balance, low fees and good returns. It’s a great choice for beginners and the app is very easy to use.
Before you jump right into investing your money, take inventory of your financial life. Ask yourself the following:
- Do you have a lot of personal debt?
- Do you have a 401(k)?
- Do you have an IRA?
You may want to get a handle on these things first. Here’s how:
Pay Down Your Debts
We don’t normally think of paying debts down as investing. But it can just as profitable, and sometimes more, in the long run. Here’s an example.
You can obtain a 5% rate of return on your investment portfolio. But you have $5,000 in credit card debt and you pay 23% interest.
If you invest your $10,000 rather than paying the $5,000 off, you actually lose 18% (= 23% – 5%). So paying off the credit card debt first is the smart move here. THEN you can invest the remaining funds using one of the strategies below.
Keep in mind that some interest is tax deductible. Credit card interest isn’t but home mortgage interest is. In this case, look at your after-tax rate of return to decide what to do. Here’s an example:
You’re in the 28% income tax bracket and pay a 5% mortgage interest rate. That means, you only pay 3.6% in mortgage interest after taxes (= 5% x (1 – .28)).
If you find an investment with a rate of return higher than 3.6%, then it makes sense to invest rather than pay down your mortgage. Once you pay down your debts, we recommend you focus on your retirement plans.
Plan for Retirement
Ask yourself two questions:
- Do you have a 401(k)?
- Does your employer match contributions?
First of all, if you don’t have a 401(k), you should. This is especially important if your employer matches contributions.
Check with the HR department to see what percentage your company matches. Make sure to contribute at least that amount—otherwise, you’re turning down free money.
Even if your company doesn’t match, consider contributing the maximum amount. It’ll give your retirement savings a boost AND lower your taxable income.
You may also want to consider opening a traditional IRA or Roth IRA to supplement your long-term savings. Here are two situations to consider:
If you’ve maxed out your 401(k) contributions, you can put up to $5,500 ($6,500 a year for those 50 or older) post-tax in a Roth IRA annually. And the best part is, you won’t be taxed when you withdraw this money after retirement.
Open an Ally Invest IRA today. No IRA fees
If you are self-employed, you can contribute up to $5,500 a year ($6,500 a year for those 50 or older) and that amount may be tax-deductible.
Depending on your situation, you may have other retirement savings options when self-employed. These include: starting a 401k or a SEP (Simplified Employee Pension) IRA. Check with a tax professional to review your options.
Now that your financial house is in order, read our list of the best ways to invest $10,000.
You’ve set goals and timeframes, lowered your debt and, funded the proper retirement accounts. Now it’s time to try making some money.
Here are some great options for investing $10,000, starting with the ones that can offer great returns—but also some risk.
Market risk: These are things you have no control over. If the overall financial market suffers, even diversification (basically having a balance of investments in your portfolio) doesn’t eliminate risk.
Business risk: If you invest in stocks, a company’s corporate decision could affect your investment one way or the other. If the market perceives decision as bad, the stock price could plummet.
Political risk: Political events also may affect the market. Think about how the public reacts to major government events and decisions. These reactions can affect your investments, both foreign AND domestic.
Liquidity risk: The time and cost involved in converting an investment into cash contributes to its risk. The more time or cost involved, the higher the liquidity risk.
Remember the greater the possible reward, the higher the risk. When you take a loss, you’ll need to decide whether to pull your investment or wait it out in hopes of reaping a higher return before too long.
Invest in Stocks
You don’t need a stockbroker to trade stocks. Today, you can use an online brokerage account, such as E*TRADE, among many others. Choose a company offering a simple interface and resources for new investors. Read How to Invest in Stocks for Beginners for more.
Once you choose an online broker, create an account. As a customer, you may have access to more resources. Take your time to learn about each company.
Read news, stock performance histories, and professional forecasts. Then choose one or two stocks to start your investment. Hold off on investing a lot until you have a good handle on the process.
When you have a handle on investing in stocks, create a plan. Set the amount you want to invest. Also, know the threshold for the amount you can lose.
This way you can remove the emotion from the process. Seeing your money plummet can force you to make a hasty decision. Have a plan in place and stick to it.
Consider a discount stock broker like Ally Invest:
- Low commissions for stock trades
- No account minimums
- Start investing in stocks with Ally Invest>>
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Invest in Mutual Funds
Mutual funds and ETFs offer diversification. Rather than investing in one company as with stocks, they diversify between stocks, bonds, and other short-term investments. They can invest in many securities all at once.
First, choose a brokerage. Charles Schwab, Vanguard, and Fidelity are among some of the most popular. See How to Invest Money for more detail.
Longer-term goals, such as retirement, do well with index funds. These funds mimic a specific index, such as the S&P 500. They offer diversification and a long-term investment strategy. The returns on index funds closely mimic market returns. They require very little management and often have lower fees.
Invest in Bonds
Buying a bond is basically just buying debt. You can invest in them much like you would stocks (for the differences between stocks and bonds, read our guide ).
Overall, bonds tend to be more predictable than stocks. There are three main types:
- Corporate, which are offered by corporations looking to raise capital
- Muncipal, which are issues by towns, cities and states to fund public projects
- Treasury, or T-bonds, which can be purchased directly from the U.S. government
Bonds also receive different ratings based on the credit of the issuer. Typically, you can calculate your return BEFORE you purchase a bond based on rate and period of maturity.
But as with any investments, bonds do carry some risk. For example, when interest rates rise, bond prices fall. This means that if you choose to sell a bond before its maturity date, you could make less than the price you paid for it.
Bonds generally must be purchased through a broker though T-bonds can be bought directly from the government.
Try a Robo Advisor
If you think $10,000 isn’t enough for a financial advisor to take you on as a client, consider a robo advisor, such as M1 Finance. A robo advisor is an automated advisor – really, a software program – that does the work for you. Find out more about the M1 Finance fees in our full review.
Betterment is one the most popular robo-advisors with low fees and no account minimum. You can get automated portfolio management and access to financial experts.
- Annual Fee:0.25% for accounts under $100,000; 0.40% for accounts $100,000+
- Minimum Deposit: $0
Try a new investment platform
If you prefer a little more control over what you invest in, consider Motif. As the investor, you create your own mutual fund. You also have the option to invest in someone else’s motif. These are different from pooled funds, like mutual funds.
With Motif, you own the stocks within the investment, but you determine the dollar amount invested. You don’t buy a specific number of shares. As a bonus, you don’t pay administrative or management fees. Motif is a hybrid of the robo advisor and a DIY investment strategy. You control certain factors, such as the industries you want to invest in, and Motif does the rest.
If you want to give real estate investing a try, Fundrise is a smart idea. Users can invest in private real estate without dealing with tenants, maintenance repairs and other problems in traditional rental estate.
$500 Minimum Investment
Start your own business
If you are tired of the 9-to-5 grind and want to answer to no one but yourself, this could be your chance. But you’ll need a great idea—and a solid business plan—before seriously considering starting your own business.
Unless you have a lot of experience in the industry, make sure you get the help necessary to help you succeed. We recommend visiting the Small Business Administration’s website before starting. They offer many resources and steps for beginners and even the experienced business owner.
Give peer-to-peer lending a shot
Peer-to-peer lending is a somewhat new method of investing. It’s a good choice for investors who don’t want to deal with a financial institution. Instead, you become the lender. By joining a P2P platform, you can connect with borrowers all over the world.
The benefits of P2P lending are the high rate of return and lower risk. As an investor, you may pay an origination fee, closing fee, or an annual fee. Lending Club and Prosper are the top two P2P platforms operating today. They work as the intermediary between you and the borrower. They fund the loans (after you pay them), collect payments, and help with litigation should the borrower default. You can diversify your risk by lending money to multiple borrowers at once. Your $10,000 could fund many borrowers with low borrowing needs.
Keep reading for some low (or no) risk investment ideas you don’t want to miss.
Look at CD rates
If you are looking for a risk-free investment with decent returns, look at CDs. We recommend using an online bank rather than a traditional bank like Chase. They tend to offer higher rates.
Pro Tip: A popular option to consider is CIT Bank. They provide a selection of CD rates and terms to choose from that help your savings grow.
With CDs, the longer you invest the money, the higher the APY (Annual Percentage Yield). Also, the higher the account minimum required, usually the higher the APY.
Certificate of Deposit
- 1.75% APY for 12-month term
- 1.75% APY for 24-month term
- 1.80% APY for 5-year term
CIT Bank Term CDs
- Up to 1.86% APY
- $1,000 minimum opening deposit
- No monthly maintenance fee
- FDIC insured
- Daily compounding interest
|6 Month||0.72% APY|
|1 Year||1.86% APY|
|13 Month||1.82% APY|
|18 Month||1.85% APY|
|2 Year||1.40% APY|
|3 Year||1.30% APY|
|4 Year||1.50% APY|
|5 Year||1.70% APY|
Fill a savings account
When we talk about savings accounts, we don’t mean the account at your local bank where you have a checking account. They probably offer measly returns. We mean online savings accounts where you could obtain rates as much as 10 times higher than your local bank. One such account, with a high APY, is CIT Bank’s Savings Builder (read our review). Take a look at our CIT promo code page to learn more.
You should consider a few things before you invest. Make sure the FDIC insures the bank. Also, read the fine print regarding withdrawals. Make sure you have access to your money when you need it. Some banks may charge fees for withdrawals. Check for required account minimums too. If you prefer a debit card, look for banks that offer this service.
CIT Bank Bonus Offer: $300 for New and Existing Customers
CIT Bank now offers up to $300 cash bonus for new and existing CIT Savings Builder customers. This limited time promotion expires May 30, 2020. Conditions apply.
Discover Online Savings – $200 Cash Bonus
To get your $150 or $200 Bonus offer: What to do: Apply for your first Discover Online Savings Account by 4/6/20, 11:59 PM ET, online or by phone. Enter Offer Code CY320 when applying. Deposit into your account a total of at least $15,000 to earn a $150 Bonus or deposit a total of at least $25,000 to earn a $200 Bonus. Deposit must be posted by 4/20/20, 11:59 PM ET. Maximum bonus eligibility is $200.
What to know: Offer not valid for existing or prior Discover savings customers or existing or prior customers with savings accounts that are co-branded or affinity accounts provided by Discover. Account must be open when bonus is credited. Bonus will be credited to the account by 5/4/20. Bonus is considered interest and will be reported on IRS Form 1099-INT. Offer may be modified/withdrawn without notice. See advertiser website for full details.
Invest in yourself
Did you ever think of investing in yourself? You could:
- Take online courses
- Go back to school full-time
- Hire a personal coach
or find other ways to better yourself. No matter which avenue you take, you’ll gain new knowledge and skills.
You can then take these skills out into the world and make money. They may provide new opportunities for employment, especially if you add a designation to your title.
Certain designations offer you the opportunity to be listed in online directories, such as a CPA. This may result in more business and earnings for you. It’s also a great way to enter a new industry. The money can help you make smarter decisions, try new opportunities, and make more money.
That number jumps to $78,000 for those with master’s degrees. Salaries vary significantly by industry, however.
Try Fulfillment by Amazon
Fulfillment by Amazon is like other selling sites, but easier. You supply the items you sell, but you ship them to Amazon.
You market the products on Amazon’s website. Once sold, Amazon ships the items for you. It’s the simplest form of selling products online. You don’t need coding, graphic design, or social media experience for success.
You’ll have access to Amazon’s large marketplace of buyers, and you only do a fraction of the work involved with other selling sites. It almost provides immediate gratification. You can sell new or used items. You can also choose between the individual account (a free account) and the professional account ($39.99 per month).
Fix up your home
Your home may be your largest investment. If it’s outdated or needs a facelift, certain improvements can have a direct impact on your home’s value.
You don’t need to make drastic changes to see a large improvement in value. In fact, major bathroom and kitchen remodels often don’t have a large return on investment. New siding, new roof, and new windows often pay off better.
Small changes within the kitchen or bathroom, such as the addition of granite countertops, often pay off. Another change with a large ROI is updating the home’s curb appeal. You may even get bonus points for energy efficient changes you make. Depending on the tax year, you may get a tax break for the new changes made.
Home improvements can add even more value to your property.
Start a blog
If you have a passion for the DIY, consider starting a blog. Many people use this as a side gig. They write when they have time and become affiliate partners with businesses to make money.
Starting a blog won’t cost $10,000, but having some capital helps. For starters, you can further your education before starting. Take classes on starting a blog or get in-depth training in your chosen industry. The more you have to talk about, the better, so education helps. You’ll also need money for the domain name, platform, and website hosting. You may also need to upgrade your computer equipment, camera, microphone, and video equipment.
Start a podcast
If writing isn’t your thing, but you love to talk, consider starting a podcast. It works like a blog, but you don’t host a website. You will need a host for your podcast, though. When you first start, your free website may offer enough support. As you gain more followers, you may need greater capabilities. Too many listeners can cause glitches in your podcast. This could be bad for your following.
Today, SoundCloud and Amazon S3 top the charts in podcast hosting. No matter which you choose, read the fine print. Some services, including Amazon S3, charge a base fee, but it increases as your following increases. Just like a blog, though, you can monetize your podcast. You can sell advertising time within the podcast or let a company advertise on your host page. This can help you afford the podcast hosting fees.
Watch Out! What to Consider Before Investing
Before that money burns a hole in your pocket, consider your goals and timeframe. Are you going to need to use it anytime soon? If so, avoid putting it somewhere that’s too risky, especially if you might need it in the short-term.
Read on to learn what you should consider.
Start with Your Goals
What do you dream of doing with your $10,000? Will it fund a luxurious vacation, help you retire, or buy a house? First, categorize your goals as being long-term (retirement) or short-term (vacation).
Determine the Timeframe
Divide your goals into categories:
- Less than 1 year = short-term goals
- 1-5 years = intermediate goals
- Greater than 5 years = long-term goals
These timelines dictate the level of risk you may want to take. Here’s a basic rule: The shorter the timeframe, the less risk you can take. The longer the timeframe, the more risk you may be able to handle.
Riskier investments tend to have more ups and downs. Do you have time to ride them out – and perhaps get a greater return? It’s a key question for every investment you make. Apps, such as Personal Capital, can help you look at all of your investments at once to see how they’re developing. Read more in our full review of Personal Capital.
Assess Your Ability to Take Risks
Your personality helps determine your risk level too. If you worry a lot, less-risky investments may be better. Obsessing over your investments isn’t healthy. They may cause you to make rash decisions, affecting your finances. If, on the other hand, you don’t worry much, more risk may work if you’re okay with potential losses. Knowing you are in it for the long run may help.
One good choice is the Vanguard Total Stock Market Index Fund ETF (Ticker symbol VTI). The fund is designed to track the performance of the Center for Security Pricing (CRSP) US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and NASDAQ. Total annual fund operating expenses are a miniscule 0.04%. So, for a $1,000 investment, $999.60 would be put to work and only $0.40 would go to fees. And there is no minimum investment required.
Robert R. Johnson, professor of finance at Heider College of Business, Creighton University, and co-author of Strategic Value Investing and Investment Banking for Dummies
In a perfect world, a balanced portfolio works best. It gives you a mix of risky and non-risky investments. When risky investments lose money, they can often be offset by more stable investments over time.
But don’t risk losing money you may need in the short term. Consider creating a rainy day fund first to cover unexpected expenses, including car repairs, illnesses or even loss of a job. Or invest that money in a risk-free option like a high-yield savings account or CD.
Evaluate the Fees
Most people investing $10,000 don’t hire a financial advisor. The fees alone would eat away your profits. Instead, they handle their own investments. Even without a financial advisor, though, you may pay fees. Look closely at the fine print before choosing an investment.
Fees you should watch out for include:
- Stock trading costs: Cost of buying or selling a stock
- Annual fees: Cost of holding an account with a particular company
- Account minimums: Fees you pay if you don’t meet the required minimum
- Account maintenance fees: Fees to have your investment accounts at the financial institution
- Sales loads: Fees added to mutual funds upon purchase or sale (you should avoid these)
- Advisory fees: Annual fees paid to the investment professional assisting with your portfolio
- Expense ratios: Annual fees charged by mutual funds or ETFs, as a percentage of assets
Just as you might comparison shop for large ticket items, you should do the same for an investment firm. Ask about their fees. You may even be able to negotiate some of them. Keep in mind, though, if you decide to change brokerage firms, you may face tax consequences. For more information on fees, see How to Invest Money.
If you are unsure about a brokerage firm, a great tool to use is BrokerCheck. They provide information about a broker’s background, experience, and prior complaints.
Your $10,000 has a promising future…as long as you have a smart plan to invest. Start by answering the following questions:
- Evaluate your situation: Do you have a retirement account? Do you contribute the maximum amount to it?
- Are you in debt? Is your interest rate higher than any rate of return you could get?
- Do you understand mutual funds, robo advisors, and stocks?
- Do you want to try something unique?
Knowing your situation will help you make a more informed decision. Many investment options have small minimum requirements and low fees. Shop around and consider your options to find the best way to grow your $10,000 investment.
Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.
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How to Invest: 10 Smart Ways to Invest $10,000 Like a Pro
Modified date: March 29, 2020
“What would you do if you came into $10,000?”
I received a lot of answers. What surprised me about the responses were how similar they were. They varied in the specific details of how people would spend $10,000, but they shared one thing in common–most would use the money to improve their finances.
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Most people would pay off debt, put the money into an emergency fund, or invest the money. Some invested for short-term goals, some for long-term goals. In almost every response there was at least one purpose that would improve the person’s overall financial situation.
The responses got me to thinking about another question that I didn’t ask: What would you do with $10? How would the answers be different?
Table of Contents:
The Power of Consistent Investing
Why do we treat large lump sums of money different than small monthly amounts? We tend to treat larger amounts in a more thoughtful way. Perhaps that’s why it’s easier for some to save a tax refund even when they struggle to save money month to month.
Maybe we need to treat small amounts of money more thoughtfully, too. After all, how we handle small amounts of money has an impact on the bigger picture.
Here are some reasons why we don’t take smaller sums of money more seriously:
- It’s hard to internalize compounding–we just can’t imagine $10 growing in any meaningful way.
- Spending small amounts doesn’t feel like it’s “bad” like blowing $10,000 would.
- Delayed gratification is required when saving small amounts of money.
Consider how you handle small amounts of money and how small daily decisions could improve your finances over the long-term. You may be surprised.
Now let’s look at some ideas on how to invest $10,000:
1. Invest With Betterment
Betterment is one of several robo-advisors offering an easy and inexpensive way to invest. You can open a taxable account with Betterment. It’s an ideal way to get started because there are no minimum requirements and Betterment walks you through the step-by-step investment process. Once your account is set up, Betterment rebalances it automatically and reinvests your profits.
2. Invest in stocks with You Invest by J.P. Morgan
Today, the news is filled with talk about the wild swings from the stock market and if you have cash to invest, you can make a lot of money buying low. You Invest by J.P. Morgan is an online discount broker that offers free stock trades, free options trades and free ETF trades.
Everything can be traded using the Chase Mobile App and they’re offering a fairly lucrative bonus to attract new business (if you have at least $25,000 to deposit).
- $200 cash bonus if you deposit at least $25,000
- $300 cash bonus if you deposit at least $100,000
- $625 cash bonus if you deposit at least $250,000
3. Invest in a 401k to Get the Company Match
Without question, the best investment is an employer match of a 401k, 403b, or other workplace retirement plan. This is the closest thing to a free lunch you can find. If your employer matches a portion of your retirement contribution, make sure you invest enough to get 100% of the match.
4. Max out an IRA
This won’t take up all of $10,000 (the IRA contribution limits are lower), but it’s an excellent start. The great thing about an IRA is that you are in total control. You decide where to open the account and what to invest in. And that brings me to number three.
5. Invest in a taxable account
Once you’ve maxed out your retirement plan contributions, open a taxable account. My favorite options are Vanguard (See Podcast 73) and Betterment. With Vanguard, you can invest in a target date retirement fund (yes, you can own these funds in a taxable account). Similar to a robo-advisor, Vanguard rebalances for your and reinvests your dividends. Alternatively, you can use Betterment much the same way you would with an IRA.
6. Pay off high-interest credit card debt
Paying off a credit card that charges double-digit interest is a guaranteed excellent return. There is no risk of an investment going down in value. You can also save a small fortune in interest. To supercharge this investment strategy, take advantage of a zero interest rate balance transfers if possible.
7. Increase your emergency fund
This may not be the sexiest way to put $10,000 to work. But it sure is a smart way. Living paycheck to paycheck is never fun. Aim for at least three months worth of expenses in your emergency fund. We recommend keeping your emergency money in a high yield savings account to maximize your earnings.
Our first choice comes from CIBC US which currently offers a 1.45% APY on all account balances. There are no monthly maintenance fees and there is a $1,000 deposit minimum to open.
Our second favorite account right now is the Citi Accelerate Savings. Account balances earn an impressive 1.70% APY and there is no minimum to open an account.
8. Fund an HSA account
If you have a high deductible healthcare plan, be sure to fund an HSA account (see Podcast 67). Contributions are tax-deductible, and your money grows tax-free. If you spend the funds on qualified medical expenses, there is no tax on withdrawals either. It’s like getting the advantages of both a traditional and Roth retirement account.
Our favorite HSA comes from Lively; which offers a terrific savings and investing account with no monthly maintenance fees. The savings account includes an APY of up to 0.01% and the investing account uses the TD Ameritrade platform, which means trades cost nothing to execute.
Open a Lively HSA or read our full Lively HSA review
9. Fund a 529 account
A 529 account is a tax-advantaged way to save for a child’s education (see Podcast 113). Not all 529 programs, however, are created equal. Keep in mind that you don’t have to use the one in your state, although there could be good tax reasons to do so. Regardless, a 529 account is a great way to put some of your $10,000 to work.
10. Start a CD Ladder
A CD ladder enables you to increase the yield you can earn on an FDIC-insured bank account. By staggering the maturity date of 5-year CDs, you get both higher rates and access to your money. Check out our 5-year CD rates for some of the best offers available today like Discover.
EXTRA. Buy Worthy Bonds
Worthy Bonds can be purchased in amounts of just $10 and are used to fund qualified U.S businesses. The rate of return on a Worthy Bond is a fixed 5%, which means that after one year, your $10,000 in bonds will have yielded a cool $500.
The term of the Worthy Bond is 36-months but it can be cashed in at any time, without penalty. Interest is paid weekly and all U.S investors are welcome to buy Worthy Bonds. Funds raised from Worthy Bonds are used to help fuel small businesses via asset-based loans. Check out Worthy Bonds or read the full Worthy Bonds Review here.
Bonus: Automate your Investments
Robo advisors are a great way to make sure your money is working for you without the hassle and stress of actively managing it. Below is a list of our favorite robo advisors and some information about each. If you’re interested, here’s a more in-depth breakdown of each robo advisor and how they can help you put your finances on autopilot.
Ally Invest: Ally Invest has come up fast in the investment brokerage space.
They offer trading in stocks, bonds, options, Forex and futures. You can also trade in thousands of mutual funds and ETF’s.
Ally Invest is particularly well-suited to active traders, due to its almost non-existent commission schedule. All stock trades carry with them a $0 commission cost and options trades are also $0 each, but with a fee of $0.50 per contract.
Ally Invest is recognized for having one of the top trading platforms in the industry. They offer customer support 7 days a week from 7 am to 10 pm ET by both phone and live chat.
Betterment: If you prefer a hands-off approach, Betterment does most of the work for you by automatically reinvesting dividends and rebalancing your portfolio. When you use an automated service like this, you’re likely not checking it everyday and won’t be tempted to make any major changes that could cost you money. Having a service like Betterment manage your investments could allow your money to grow more quickly over time.
Wealthfront: For young adults new to investing, Wealthfront is a robo-advisor worth a look. Wealthfront stands out in being a true robo-advisor with a fee structure suitable for investors with less than $2 million to invest.
Pesonal Capital: Personal Capital provides you with a dedicated investment advisor that you can reach by phone, web conference, online chat or email. While their Wealth Management service is available for a fee, one of the best features of Personal Capital is their free financial dashboard. You can always sign up for Personal Capital for free and then decide to add their Wealth Management service later. In the meantime, you can take advantage of the following features: 401k fund allocation analyzer, retirement planner, investment checkup tool, net worth calculator, and cash flow analyzer.
TD Ameritrade: TD Ameritrade is another option and covers both self-directed investing and professionally managed investing, or a combination of both. You can learn all about TD Ameritrade here.
Wealthsimple: For new and small investors, Wealthsimple lets you open an account for as little as $1 and also features a Socially Responsible Investing Portfolio (SRI). SRI Portfolio allows you to invest in companies with low carbon emissions, companies that support gender diversity and businesses that support affordable housing.
Ellevest: For a female-focused approach to investing, check out Ellevest. There are no fees for opening or closing your account and there’s no minimum to start. There’s a large mix of asset classes available to invest in and Ellevest can tailor a portfolio just for you.
E*TRADE: You’ll find a portfolio for every budget here and can get started with just $500. If you want to know how much you’ll pay a year to use their service, E*TRADE makes it easy by providing a calculator so you can enter the amount you want to invest, and you’ll see how much the annual fee is expected to be. This platform also offers a wealth of information for beginners. Plus, with a minimum investment of $25,000 you’ll be able to work with a Financial Consultant to make sure your portfolio is aligning with your goals.
Read More: The Best Robo Advisors – Find out which one matches your investment needs.
What If You Don’t Feel Comfortable Investing Alone?
All of the points made above are pretty much assuming you’re comfortable investing on your own–whether buying individual stocks, ETFs, mutual funds, index funds, or just working with a robo advisor. But it doesn’t have to be that way. In fact, there might even be a much better way.
If you aren’t comfortable investing on your own, you may want to consider working with a Certified Financial Planner (CFP). CFPs tend to operate on a fee-based structure for their advice and help –versus someone who just gets paid to invest in different stocks for you. This means that they will tend to have your best interests in mind.
But a problem I’ve found is locating a good CFP who knows your financial situation well enough to make educated recommendations on what you need and don’t need to achieve your financial goals.
That’s why I appreciate Facet Wealth. Facet Wealth will help you find a CFP that matches your financial profile and will help you reach your financial goal faster. You get to meet with them virtually through a video conference, and they’ll be your dedicated CFP–instead of a random person in a call center or a one-size-fits-all approach.
Everyone has a different money situation. Everyone varies in their comfortability with investing, too. That’s why a robo advisor or online brokerage may not work for everybody. That’s why if you’re even the least bit uncomfortable, I would look into Facet Wealth.
Other Ways to Invest $10,000
Those are my ten choices. Here are the responses from the Dough Roller community:
Larry: That’s a no brainer. Buy stock in a quality dividend paying company. (A great way to invest, but he didn’t say which quality dividend paying stock–Larry, please email me and let us know!)
Karen: I would pay off any outstanding debt that I had and put the rest in savings.
- $2,500 in the checking account for cash flow
- $2,000 split between two children’s UTMA accounts
- $2,500 to Vanguard Global Minimum Volatility
- $2,000 to Fidelity investment account for future investments NOS
- $1,000 to I bonds
Paolo: If I were given $10,000, I would…
- Use $5,500 of it to contribute to my Roth IRA contribution for 2020,
- $3,350 of it to max out my HSA contribution for 2020,
- $1,000 to pay down my mortgage principal,
- And the remaining $150 will go towards a trip down to Legoland San Diego for my wife and three kids!
Jeff: If I came into $10k right now I’d probably put it into one of my Vanguard Index funds. I’m debt free, have my needs covered, and anything else would be just wasting the money.
Christina: I would drop it right into my daughter’s 529 plan!
Sachin Shenoy (Right way to pronounce my first name is Such-in): With $10K there are couple of investment options…
1. The conservative investment option – Put it all in Vanguard 500 Index Fund Admiral. At 0.05% expense ratio its a no-brainer (May be able to convert non-Admiral shares to Admiral if you were already invested in investor shares)
2. Crazy investment option–Invest in USO ETF… Crude should be hitting the bottom sometime soon.
Other options include… Pay off the car loan and redirect the monthly payments to option рџ‰
Patrick: $7,500 minus expenses at the craps tables in Vegas. $2,500 in baby furniture since the wife is having twins….unplanned btw.
One other note–as a former USAF Capt, Navy Federal (Credit Union) doesn’t hold a candle to USAA. Besides the great insurance, banking and customer service, USAA gives out distributions to their members. Mine was 50 bucks. I don’t have insurance through them presently because I’m living outside the USA.
Donna: I would apply it on my son’s private school loan after I take out taxes to lower his debt.
Stephanie: If I received $10,000 I would give $1,000 to charity, put $2,000 into my dream vacation fund (actually into my savings until I actually am ready to take that dream vacation). I’d use the rest to max out my ROTH 403b (instead of my traditional 403b).
Prime: Spend it on an engagement ring.
Larry: I would buy $10,000 in mutual fund shares in energy/oil companies, such as VGENX.
Jeff: I try to live by the 10-20-70 rule. So I would give $1000, save $2,000, and spend the rest рџ‰ But in reality, I would probably save most of the $8,000 too. I bet a lot of your answers for this will be based on personality type (nerds versus free spirits, etc).
Guadalupe: Use $7,000 to consolidate debt and the other $3,000 to invest in my network marketing business. Thank You!
Earl: Pick 5 charities that I think need the help and give $2,000 to each.
Joe: Invest part in blue chip oil company stocks. The rest in short term high quality bonds.
Kyle: Buy back the years of service in my pension. The first six months of employment, nothing went onto my pension. I can now buy those months back to add to my service.
Max: I would pay off my credit cards.
Erin: If I were given $10,000, I would put it away for my emergency fund–still working on reaching that goal. I’d put it in a credit union checking account that accumulates exceptional interest.
ACE: Put it towards the mortgage.
Ok- easy :
- $3k savings–I need a lot more.
- $3k on my c/c that would put a small dent in my debt and lower payments
- $3k to my mom (unfortunately insulin is not covered with her Medicare, that would hold her for a while)
- $250–Go Red For Women (American Heart Association)
- $250–Step Out for Diabetes (I walk in honor of my Mom)
- $500–Fun Money/Day spa
That’s my personal breakdown. I’ve been hoping for that kinda windfall! Would be nice.
No name given: Spend half on a vacation and half to retirement fund. That what I do with my bonuses.
Mary: If we were given $10,000, I would use $7,000 to pay off my husband’s car loan, and put the remaining $3,000 into our emergency fund.
Logan: I would max out my ROTH ($5,500), put $2,000 in my son’s 529 plan (in GA you can deduct up to $2k off your taxes), and put the rest in cash reserves. Well, I would also buy a nice bottle of bourbon.
No name given: If I was given $10,000, I would use half of it to pay down debt, and the other 1/2 to start saving for a down payment for a house.
- Express gratitude to whoever provided the $10k,
- Pay off or pay down debts,
- Put 20% into an emergency account,
- Reserve a small amount to make a special meal with my family,
- Re-organize/plan/implement a new long and short-term budget.
(Rhea was the only one who mentioned thanking the provider of the $10,000! I didn’t say what the source of the money was, but it certainly could have been a gift. Good catch, Rhea!)
Jessica: Pay down my debt.
Bill: Reduce credit card debt.
AJ: I would use around 5k to invest and build positions and the other 5k to pay down debt.
Ben: If I were given $10,000 in a lump sum, I’d throw it at my fiancée’s student loans. They are at 6.625% through SOFI. Historically would stocks outperform that by half a percent or so? Yes, but gaining freedom by lowering debt is worth half a percent to me. That being said, I don’t know what the breaking point would be. Off the top of my head maybe two percent, but it’s definitely something I’m going to put some serious thought into.
(The best financial decisions aren’t always the ones that make the most mathematical sense, and Ben has provided an example of where this can happen.)
No name given: Ah. $10,000? Tithe, savings, and maybe something towards a long hoped for a visit to friends and family in Italy.
Sandra: What I would do with 10,000? If I wasn’t in financial restraints I would start an IRA (and) emergency fund.
Claus: I would take $6,500 and put it into the Roth for next year, the rest will go into the savings, adding to the reserve fund.
Kelly: Invest it – wherever my allocation needs it!
Jacki: What would I do with 10k? Pay down some credit card debt. Or maybe redo my driveway.
Erik: If I had $10,000, straight to a 25K balance HELOC (Home Equity Line of Credit) at 4.25%.
So there are your responses to my $10,000 question. Thanks to everybody who responded.
What would you do with $10,000? Leave a comment below.
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How to Invest Money: A Simple Guide to Grow Your Wealth in 2020
Figuring out how to invest money can be a real challenge.
And I’m sure you’ll agree with me when I say:
There’s certainly no shortage of information on investing available in the digital age.
However, too much information can be overwhelming.
That’s why we made a guide to help you get a solid grasp of investing. It’s the perfect resource for beginners who want to start investing money in order to reach their financial goals.
We structured the information in a way that is comprehensive yet not overly complicated.
Outlined below you will find everything you need to know to start investing and begin preparing yourself financially for the future.
Free Investing Course for Beginners: Intro to Rule #1 Investing
How to Invest Money
When figuring out how to invest money, it’s best to start with the basics. I’m sure any financial advisor will agree with that.
These basics include setting the goal of your investments and determining where to invest money to best achieve each goal.
Investing Money for Beginners
When you invest money, what you are doing is either buying a portion of a company or a commodity with the belief that the value of that company or commodity will grow over time.
Investing is not a get-rich-quick scheme, but rather a way to consistently grow the wealth you already have. The good news is that even though investing is a way to grow your wealth, you don’t have to have a lot of money to get started.
Compounding interest dictates that even small sums of money can be turned into fortunes over time, providing you select the right investments.
Where Should I Invest Money?
When deciding where you should invest your money, you’ve got plenty of options. These options include:
1. The Stock Market
The most common and arguably most beneficial place for an investor to put their money is into the stock market.
When you buy a stock, you will then own a small portion of the company you bought into.
When the company profits, they may pay you a portion of those profits in dividends based on how many shares of stock you own.
When the value of the company grows over time, so do the price of the shares you own, meaning that you can sell them at a later date for a profit.
Other investment options include:
2. Investment Bonds
When you purchase a bond, you are essentially loaning money to either a company or the government (for US investors, this is typically the US government, though you can buy foreign bonds as well).
The government or company selling you the bond will then pay you interest on the “loan” over the duration of the bond’s lifecycle.
Bonds are typically considered ‘less risky’ than stocks, however, their potential for returns is much lower as well.
3. Mutual Funds
Rather than buying a single stock, mutual funds enable you to buy a basket of stocks in one purchase. The stocks in a mutual fund are typically chosen and managed by a mutual fund manager.
But here’s the kicker:
These mutual fund managers charge a percentage based fee when you invest in their mutual fund.
Most of the time, this fee makes it difficult for investors to beat the market when they invest in mutual funds. Also, most mutual fund investors don’t actually ever beat the stock market.
4. Savings Accounts
By far, the least risky way (and probably the worst way) to invest your money is to put it in a savings account and allow it to collect interest.
However, as is usually the case, low risk means low returns. The risk when putting your money into a savings account is negligible, and typically, there are little to no returns.
Still, savings accounts play a role in investing as they allow you to stockpile a risk-free sum of cash that you can use to purchase other investments or use in emergencies so you don’t touch your other investments.
5. Physical Commodities
Physical commodities are investments that you physically own, such as gold or silver. These physical commodities often serve as a safeguard against hard economic times.
Best Ways to Invest Money in Your 20’s
It’s never too early to start investing. In fact, just a few years of a head start can often lead to hundreds of thousands of dollars more money by the time you retire.
When you’re investing in your 20s, it’s best to start out by focusing on paying off any debt you may have such as student loans or credit-card debt.
Debt works just the opposite of investments, exponentially decreasing your wealth rather than exponentially growing it, so it’s a good idea to make getting debt-free your first and foremost goal.
Once you have your debt under control, start researching the stock market and investing as much as you can.
Take in as much information as you are able, and start highlighting quality companies that you believe will grow in value over time.
In case you’re wondering:
We’ll talk later about how to find good investments, but for now, know that once you have a few companies chosen, it doesn’t matter how much or how little you are able to invest.
It’s always a good idea to invest as much as you are able, but if you start in your 20s investing as little as a few thousand dollars a year, you will be well on your way to preparing for retirement.
How to Invest Money to Make Money
Many people view investing as a form of income, and some are quite successful at making a living by trading stocks.
This is the most glamorized form of investing, however, it isn’t the type of investing that most people benefit from. Most people benefit from long-term investing. This involves letting your money compound in the stock market over 10 and 20 years.
Long-term, value investing is how people retire rich.
Best Way to Invest Money Short-Term
Short-term investors make money by trading in and out of stocks over a short period of time rather than buying and holding them for several years.
While you certainly can make money doing this, the problem is that no matter how skilled at trading you become, there will always be a big element of luck involved.
For beginner investors, short-term trading comes down almost entirely to luck, and you can easily lose as much or more than you profit.
Rather than thinking about investing as a way to make short-term gains, it’s better to think of investing as a way of making long-term gains.
Keep in mind that you’re still making money either way.
With long-term investing, though, you are able to minimize your risk and negate the sometimes-crushing effects of short-term volatility and price-drops.
Where to Invest Money to Get Good Returns?
Investing money for small returns is incredibly easy and almost fail-safe. For example, you can put your money in US treasury bonds and be almost guaranteed to earn 2-3% annual returns on your investment.
The problem is that 2-3% returns are not nearly enough for most people to reach their retirement goals.
To actually build enough wealth to retire comfortably on, you’re likely going to have to seek out higher returns.
By far the best place to find these returns is the stock market by learning Rule #1 investing and buying wonderful companies on sale.
A wonderful company is one that will continue to grow as the years go by, surviving whatever challenges the market may throw at them along the way.
If you are able to find these companies to invest in, achieving average annual returns upwards of 15% is certainly within the realm of possibility.
Other (less desirable) investing options include:
Over the past 90 years, the S&P 500 – which is an index of the 500 biggest companies in the US and a pretty good reflection of the overall stock market – has delivered an average annual return of 9.8%.
This means that if all you did was take your money and dump it into the S&P 500 with no time spent researching and choosing stocks, you could still expect to make 3-4 times more than if you invested in bonds and upwards of 10 times more what you would earn putting your money in a savings account.
Investing in a 401(k) is another way to invest in the stock market. The real value of a 401(k), though, comes if your employer is willing to match a portion of your contributions.
This is essentially free money that doubles your investment regardless of what the market does, and it is certainly something you should take advantage of if you have the opportunity available.
Once you’ve reached the maximum amount of money that your employer is willing to match for the year, though, investing in a 401(k) becomes less desirable.
What’s the Best Way to Invest Money?
Of the investment options available, investing in the stock market is the option that offers the most potential for reward. However, you can’t blindly put your money in stocks chosen at random and expect to achieve great returns.
In order to succeed investing in the stock market, you have to use a system and a strategy.
At this point, I’d like to introduce you to what I firmly believe is the most effective investment strategy available today – Rule #1 investing.
Investing Strategy of Rule #1 Investing
Rule #1 investing is a process for finding great companies to invest in at a price that makes them attractive.
The pillars of this process are the 4Ms of Rule #1 investing, which are guidelines for determining whether or not a company is worth investing in.
These 4Ms of Successful Investing are:
One important factor to consider when analyzing the investment potential of a company is its management.
Companies live and die by the people who are running them, and you need to make sure that any company you invest in is managed by executives who are honest, talented, and determined.
Before you invest in a company, take the time to thoroughly familiarize yourself with its management, and make sure that you trust them to grow the company going forward.
If you are going to invest in a company, it needs to have some sort of personal meaning to you.
There are a couple of reasons why this is important. For one, you are more likely to understand companies that have meaning to you.
This means that you will be better able to analyze the future of the company.
Investing in a company that has meaning to you and that you believe in also makes you more likely to research the company and stay on top of what is happening with it – which, in the end, is a big part of being a successful investor.
When a company has a moat, it means that it is difficult for competitors to come in and carve away a portion of that company’s market share.
Margin of Safety
The final of the 4Ms of Rule #1 investing is Margin of Safety. The Margin of Safety is a measure of how “on sale” a company’s stock price is compared to the true value of the company.
The difference between price and value is an important distinction, as a company’s stock price can vary wildly without their value ever being affected.
Here’s the deal:
As Rule #1 investors, the goal is to find wonderful companies for a bargain price (50% off their actual value). By using our margin of safety calculator , you can determine whether a company’s stock price is on sale relative to the true value of the company.
How to Invest Money in Stocks
Getting started investing is simple.
Online trading platforms such as TD Ameritrade , and many others have made it easier than ever for beginner investors to buy and sell stocks without having to go through a traditional stockbroker. If you want to practice, you can read more here about paper trading .
However, in order to give yourself the best possible chance at succeeding as an investor and reaching your retirement goals, you will need to learn as much about investment strategy as you can as well as how to practically apply the strategies that you learn.
To this end, one of the most beneficial things that you can do is enroll in a free beginner investing course .
Stock Trading Courses for Beginners
Stock trading courses that are designed for beginner investors are able to teach you everything you need to know about the stock market, how to choose quality companies, when to buy and when to sell, and much more.
They are designed to thoroughly walk you through the process of investing one step at a time, teaching you investment strategies and how to apply them in a much more efficient way than the bombardment of sometimes confusing and contradicting information you will be able to find online.
If a beginner stock trading course sounds like something you could benefit from, I invite you to check out my Intro to Rule #1 Investing course .
This course is free to sign up for and is designed to teach you the fundamentals of Rule #1 investing that you can use to find wonderful companies at an attractive price and start achieving the types of returns that will set you up for future success.
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