Saving up $10,000 to invest is an impressive accomplishment. Since you surely don't want that money to go to waste, how you invest it is important. One of the most common mistakes people make in this situation is going with complex or high-risk investments in hopes of getting rich quickly.
For most people, it's better to stick to simple and proven investment options. If you're looking for ideas, here are 10 easy ways to invest $10,000.
1. Index funds
An index fund tracks a market index, which is a group of stocks or bonds. For example, there are index funds that track the entire U.S. stock market, the S&P 500 (500 of the largest publicly traded companies on U.S. stock exchanges), and large cap index funds that focus on the largest companies.
Bonus offer: unlock best-in-class perks with this brokerage account
Read more: best online stock brokers for beginners
These are a popular way to invest in stocks. Most of my portfolio is in a total stock market index fund. There are a few reasons index funds are a great investment:
- They tend to have low fees.
- They invest your money in a large number of stocks or bonds, making it easy to build a diversified portfolio.
- All the best stock brokers have plenty of index funds available.
2. Target-date funds
A target-date fund is an investment designed with a specific retirement year in mind. For example, a 2050 target-date fund will be set up for investors to be able to retire in 2050. It will start out heavily weighted toward investments with higher potential returns, such as stocks. As time goes on, asset allocation shifts more toward conservative investments, such as bonds. It's essentially a retirement fund in a single investment.
3. Robo-advisors
Robo-advisors use algorithms to choose investments and manage your portfolio for you. When you start using one, you answer basic questions so it can figure out the best investment strategy for you. While robo-advisors typically have management fees, they're much more affordable than the fees charged by a human advisor.
TOP PICKS: Best Robo-Advisors
4. Treasury bills, notes, and bonds
The U.S. Department of the Treasury offers multiple Treasury securities with a reasonable return. There are three types, depending on how long you want to invest:
- Treasury bills are sold for terms ranging from four to 52 weeks.
- Treasury notes are sold for terms of two, three, five, seven, or 10 years.
- Treasury bonds are sold for terms of either 20 or 30 years.
These pay fixed interest, so they're good if you're looking for a stable investment. They're also considered risk free.
5. Certificates of deposit
A certificate of deposit (CD) is a deposit account where you lock up money for a set term. Terms generally range from six months to five years. They pay fixed interest rates, which means your CD's rate stays the same even if interest rates on bank accounts drop. They're backed by FDIC insurance, so they're completely safe.
RELATED: Best CD Rates
6. Real estate investment trusts
A real estate investment trust (REIT) is a company that owns income-producing real estate. REITs make it possible for anyone to invest in real estate, as you can buy and sell them with a brokerage account, just like with stocks. They're ideal if you're looking for investments that generate passive income, because REITs pay high dividends (a portion of company profits paid to investors).
7. High-yield savings accounts
A high-yield savings account is a savings account with an above-average interest rate. Several of the best options currently offer rates of 4.30% or higher, which is much better than the national average of 0.45%. High-yield savings accounts are used more often for savings goals than investing, but with how high rates are right now, they can grow your money quite a bit.
RELATED: Best High-Yield Savings Accounts
8. Paying off debt
Not everyone sees this as an investment, but if you have high-interest debt, paying it off is one of the best investments you can make. For example, the average credit card interest rate is over 20%. If you have credit card debt at a 20% APR, then by paying it off, you're effectively getting a 20% return.
9. Money market funds
A money market fund invests in short-term, low-risk securities. They're conservative investments that typically generate reasonable returns. The tradeoff is that they won't increase in value as much as more volatile investments, such as stocks. But they work well if you're looking for security, and you can withdraw from them within a day, so it's easy to get your money if you need it.
10. I bonds
I bonds are another type of bond issued by the U.S. Department of the Treasury. The interest rate on I bonds is tied to the rate of inflation, so when inflation is high, I bonds pay out more. The current interest rate for I bonds issued from May 1 to Oct. 31, 2023 is 4.30%. This is another risk-free investment that provides a solid return.
Pick the right options for you
There are lots of simple ways to invest $10,000. Choosing the right ones depends on your goals with that money, age, and risk tolerance. If you're investing for retirement decades down the road, stock and real estate investments are excellent choices because of their growth potential. Index funds, robo-advisors, and REITs would all be worth considering.
If you're looking for more stability, bonds, banking products, and money market funds can provide that. Last but not least, paying off high-interest debt is always a good choice if you have any, as is a target-date fund if you're saving for retirement.
Alert: our top-rated cash back card now has 0% intro APR until 2025
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.
