What if you came into $10,000? What would you do? Any way you look at it, that amount is a healthy chunk of money to have, and the most prudent thing to do would be to improve your financial position even further. The best way to achieve this endeavor would be through reinvesting. You really don’t want to blow the entire money away. And to start things out, you’ll need to decide what the funds will be used for and when you’ll need it. So priorities, in this case, will play a significant factor.
Establish Your Goals
You should ask yourself why you want to invest in the first place. If your goal is farther away and much bigger – like retiring, buying a house, or achieving financial freedom – you should think about investing. When you know what the money will be used for, you can make informed decisions to get where you want. Not knowing your investment goals is a surefire way to your downfall. If you’ve got short term goals, don’t invest given how incredibly volatile they can be. You may even end up losing money instead.
Another thing to consider is your response to sudden portfolio value fluctuations, either up or down. Will you hold your ground and stay the course, or will you change things up? Either way, you’ll need to be deliberate with your decisions.
What Is Your Risk Level?
Investing is nothing like a federally insured savings account; all of it entails some form of risk. Markets typically go up or down depending on an array of factors that no one can really understand. According to statistics, long term stock market returns are better than anything else, including the real estate market. However, that only applies when the investment is on a long term basis. When it’s a short-term investment into the stock market, the situation turns volatile and that’s when risk comes into play.
Due to the fear of missing out, most people usually invest $1,000, and after a couple of weeks, the stock market performing poorly, they see a 5 percent decrement in their account after a month. After that is when the fear of losing it all kicks in. This short-term stock trading isn’t what you can call investing. Investing entails allowing money to sit for several, several years. If your time horizon is on the far end, the more you’ll want to be aggressive. Timelines are essential when it comes to this.
Think about it: if you are 25 years old and start putting money away for your retirement, you’ll have around 40 years to stack up for your financial future. You can also decide to invest the entire $10k in stocks with the potential of reaping in huge rewards. When you have 40+ years to work on your investment, volatility in the short run is the last thing that will bother you because you’re guaranteed to do just fine in the long term. Be conservative with your money if you will need it in five or fewer years.
The amount of risk tolerance you have will have a significant impact on your asset allocation. If you have decided to sink money into your retirement, you can try using this simple metric. Take 100 then subtract your age, what you get is the percentage you should buy shares into stocks contrary to bonds. So if you are 25, invest in 25 percent bonds and 75 percent stocks. If you want to be aggressive, you can increase the percentage of your stocks.
The Big Risks Of Investing in the Short-term
Say you put the entire $10,000 into buying a new home in the next five years. When it’s finally time to take it out, the market becomes bear just like in 2008 and 2009, and your account has already slumped 25 percent! Your once $10,000 has turned into $7,500 – and remember your ‘dream’ house is on sale now. Chances are the market won’t recover on time for you to make the acquisition.
Some individuals just aren’t patient enough and fear not getting a return on their investment, which is why they go for short-term goals. If you need the money in the near future, you risk your initial investment not being there first, let alone getting any prospective returns. Your options change when you make the $10k investment looking for returns in the coming 10, 20, 30 years. If that’s the case, investment is your best bet. If not, inflation and other fluctuations will eat away your cash with the years.
Hands-on or Hands-off?
After considering all your options, the next thing to decide is the investment style you want. If you are a newbie to all this, you can either invest the money by yourself or look for somebody to invest it for you. Go for the style that best suits the interests of your money. If you’re not up to it on your own, you should consider enlisting Robo-advisors. (More on this later) With a hands-on investment style approach, you’ll have control and can customize your investments. With a Robo-advisor, the system will take over management functions as it sails you to financial freedom.
How Can I Make Money With $10,000?
There’s no better feeling than your money working for you. Rather than staying idle in the bank accruing little interest, you should be looking for ways to make more money with the 10000. If you make smart decisions, you’ll get the opportunity of growing your money. Some ideas you can employ include:
Invest In High Yielding CDs or High-Interest Savings Account
Investing the $10k this way is a completely safe and sure way to make money. A CD is basically a certificate of deposit that is comparable to a conventional bank account where any investment that has been done will be risk-free. One can acquire CDs from financial institutions like credit unions and banks. In America, the National Credit Union Administration or the FDIC is the one that insures them—investing for the long-term guarantees an opportunity for earning a high-interest rate compared to short-term investment.
Peer to Peer Lending
If you a fixed-income investment, then peer-to-peer lending provides you with the ideal opportunity of earning interest rates that are above average. These online market places link borrowers together with investors with the aim of creating an open lending platform that eliminates banks and their restrictions and high rates in the process. What you get is flexible loan terms for borrowers and high-interest rates for the investors compared to what they would get from a long-term CD. From any amount you invest, you stand to earn 7 to 10 percent interest when it comes to your Return on Investment. You can try using Prosper, Lending Club, and Zopa.
Invest In Individual Stocks
With a brokerage account, you can put money into individual stocks. Stocks typically represent owning a stake in a company and can be an excellent way to accumulate long-term wealth. Given how frequently they fluctuate in value, it’s prudent to diversify your stock portfolio by having many at a time. With $10,000, you can assemble a well-balanced portfolio of individual stocks. Most brokerage firms such as Robinhood, Fidelity, and Square’s Cash App provide the option of purchasing fractional shares
Buy Worthy Bonds
You can consider investing in Worthy Bonds, which go for as low as $10. Funds raised are used for funding qualified American businesses through asset-based loans. The return rate you can expect to get from a Worthy Bond is a fixed 5%, with interest being paid out weekly. This means that if you invest $10,000 in bonds, it will have yielded $500 after a year. The spell of a Worthy Bond is 36 months, but one can cash in any time without getting penalized. Worthy Bonds are open to all American investors looking to buy in.
Where Should I Invest Money to Get Good Returns?
How best you invest the $10,000 is contingent on an array of factors. Since any type of investment is a risk, it would be prudent to diversify your portfolio across hundreds, if not thousands of bonds and stocks. This assists in cushioning against market swings and can assist in providing more consistent performance. What’s more, by having multiple investments, the fate of your money won’t hinge on one horse. Depending on your goal, you can choose any investment type you think can get you good returns. Just be diverse, ensure it’s a secure investment and let it be as you go on with life while it appreciates. Some of the investment options you can consider include:
Option 1: Mutual Fund
Considering how a mutual fund is an all-inclusive investment, it’s the ideal place to stash your windfall. There are various mutual fund companies available: Fidelity, Vanguard and Charles Schwab are just but a few from the plethora of funds you can select. And that’s where all your troubles begin! Choosing a fund that best suits you is the most challenging part of mutual fund investing. The most common types of mutual funds include:
- Actively managed funds: Here, a professional money manager sells and purchases mutual fund bonds and stocks with the aim of meeting predetermined criteria like an investing philosophy or target retirement date. There are socially conscious funds with investing philosophy criteria that don’t invest in tobacco companies, energy companies, and other comparable sectors.
- Index funds: This is an excellent and relatively stable investment solution to back if you want to earn money regularly without active management. Vanguard, the largest mutual fund company in the world and the leader in low-cost index investing, helps investors track an industry’s performance or market passively.
Each mutual fund offers a unique way of meeting a certain investment goal.
Option 2: Robo-advisors
If you don’t have the aggression and know-how to manage your investment account, automating your investment is an excellent way of ensuring that your $10,000 is working for you without the stress and hassle of having to manage it actively. With auto-pilot investing, you’ll go on with life as your money accrues in the background – how awesome is that! Here’s a list of Robo-advisors that can assist in putting your finances on auto.
- Ally Invest
- Betterment
- Wealthfront
- Personal Capital
- TD Ameritrade
- Wealthsimple
- Ellevest
- E*TRADE
- M1 Finance
So What Can You Do With $10K?
Now that you know the investment options up for considerations, here’s where to actually invest your money if you are looking to get good returns:
Max Out an IRA
They say your retirement years are supposed to be the golden years of life. There’s no better than enjoying this time than just relaxing and being with the grandkids as you spoil them. The best way you can ensure this future is by having an individual retirement account that saves you money in a tax-advantaged manner. IRA provides a lot of benefits to potential investors who want the earnings they receive to be tax-deferred.
This suggests that by investing $5,000 into an IRA, the money will have grown to $40,000 by the time you are retiring. You will only be required to pay taxes on the first $5,000 investment instead of the $40,000 that has accrued. Right from the start, this gives you a jolt towards financial fluidity. The best part with an IRA is that you’ll be in full control and have the freedom to invest the amount you wish.
However, you should note that IRAs have a maximum threshold you can invest in every year. So if you are in possession of $10,000, the first thing you should undertake is maxing out an IRA. The tax benefits and freedom IRAs provide are unparalleled compared to investing in a car. $10,000 is more than enough to max out an IRA account for the year. This type of investment is undoubtedly a no-brainer!
Max Out a 401(k)
If you are in a company that provides a 401(k)m matching program, don’t hesitate to take full advantage by dishing out the maximum amount they are ready to match. If not, it’s the equivalent of saying, “No, thank you” to free money. Look at it this way, every time you make a contribution, your money will automatically be doubled! Just Wow!
After you have come up with the maximum amount the employer is prepared to match, you can use an investment vehicle instead of your 401(k) for the remaining $10,000.
Note that 401(k)s don’t offer a lot of freedom when it comes to where your money will be invested and instead need you to diversify your portfolio in a limited spectrum of mutual funds. You’ll have to invest in companies based on their projected success and value.
Real Estate
There’s no doubt that real estate is a great investment. But the fact of the matter is that these days, $10,000 is nowhere near enough to pay a down payment on the investment property. However, this doesn’t mean you can’t put money into the lucrative real estate market.
The easiest way you can get into the real estate game is through real estate investment trusts. These investment trusts are basically companies with commercial real estate that make an income. The properties can range from shopping malls and warehouses to office buildings and hospitals. So you will own a portion of multiple REIT properties.
They come with numerous advantages over owning the property. They include diversification where REITs will provide a portfolio of mortgages or commercial properties, meaning risk will be low. High liquidity in that one can sell and buy shares just like in the stock market, high income compared to yield on stocks, and tax advantages since properties are not put on sale like mutual funds.
Build Your Emergency Savings Fund
You never really know what life will throw at you, which is why having an emergency fund is crucial. This should be your first stop in your journey as an investor. It might not be the prettiest way to invest $10k, but it sure is the smartest. It’s never fun living from paycheck to paycheck. Put some of the cash in high yielding savings account if you want to maximize the earnings. Also, be sure to keep some of the money handy in case of anything –at least three to six months’ worth. Stashing cash away for a rainy day is a substantial investment. This means that if and when you are in need, you won’t take out loans and will be avoiding getting charged high-interest rates when it comes to repaying.
Invest In Yourself
The most significant investment you can ever do is on yourself. Look at it this way; if you don’t believe in yourself, who else will? You can better yourself with the $10k anyhow you deem fit. By equipping yourself with the necessary resources and knowledge you require as an investor, you’ll be better off in your future prospects.
And you can totally invest in yourself in a number of ways: You can decide to invest in your education and go back to school to further your career if you feel like it’s at a standstill. It can be the perfect chance for retooling your career to meet the latest standards. Another way you can make an investment in yourself is by starting a business. Owning a business will allow you to harness your full abilities, skills, and knowledge. What’s more, having a business guarantees you income for the rest of your lifetime, and that’s way more valuable. Remember, there’s nobody as important in this world than you. So always look out for number one!
Pay Off High-Interest Loans
Interest payments and liabilities are a burden and have the potential of bringing down your wealth and what you will save. Eliminating any financial burdens like credit card debts that have a higher interest rate should be your primary goal. Paying down loans and debts is more of a long-term investment.
How Can I Double My Money Fast?
If you can’t afford to buy something twice, then you probably don’t deserve to have it in the first place. Doubling cash is always a badge of honor and can come from a feeling of investor psychology or pure risk-taking. There are several ways you can use to double your money fast. Depending on the state you reside in, you can decide to place a bet on a sports team of your choice with odds exceeding 1:1. You can your luck at the casino playing either roulette or blackjack. But that isn’t really investing.
Regardless of the decision you make, doubling your money fast should be a goal that every investor aspires for. There are different ways this can be approached and may include investing in speculative assets or using a diversified portfolio. The speculative approach entails using penny stocks or margin trading. If you have doubts or faith regarding a certain stock, you can sell it short or buy on margin. With extreme bargain hunting, you can convert pennies into dollars. If you believe it is the next big thing, you can back a former blue-chip company that has gone down to less than a dollar. Your money can be doubled with penny stocks within a trading day. These methods aren’t for the faint-hearted; there’s a significant amount of risk involved.
Final Thoughts
Most people in life would love to receive such a windfall. You really can’t predict how the tide will shift when it comes to investing. Plus, $10,000 is a lot, which is why you have to make sure you are conversant with anything about your money. If you’re not careful as to how you’re going to spend that money, you may soon find yourself parting ways, so don’t be a fool with your money. Instead, look for the best way to invest the $10,000. It may be risky, and you may even lose some money in the process, but the best way to secure your financial future is by choosing a viable investment opportunity, and the rest will follow suit.
