You may be wondering what the best ways to invest $10,000 are. Investing $10,000 to start with is a nice sum as it can help you begin growing an investment portfolio that will eventually help you achieve both medium and long-term financial goals, such as purchasing a new home, traveling to faraway places, or even attaining a certain amount of monthly retirement income for the rest of your life.
It can also be a losing proposition – and a heartbreaking one – if you get into the wrong types of financial vehicles. Often, though, having a good understanding of your particular financial goals, risk tolerance and time frame can help you to determine the investment alternatives that will be best for you.
Finally, it helps if you don’t try to “time” the market, but rather invest with a good, solid investment strategy that will help you meet your specific objectives based on the amount of money that you’re going in with. If you have $10,000 to invest in the stock market, there are a number of opportunities that are open to you. The key is choosing the one that best meets your specific requirements and financial needs.
First Things First: Become Debt Free
First, while you may be eager to get started with an investment strategy, if you have any type of high interest debt, such as credit card debt, you should consider paying it off first. This is because your unpaid debt balance will essentially be working against you. Investing your $10,000 to earn 10% doesn’t make sense when you have a 20% or 30% interest rate on your credit card balance.
Killing the debt will eliminate a high interest payment that you have due each month, essentially freeing up more cash for you. It will also help you to improve your credit rating. One of the best ways to kill high interest debt is taking out a personal loan, at a significantly lower rate, so you can become debt free quicker – and thus invest sooner. Check out rates at Lending Club and start that process today!
Where To Invest: The Best Discount Brokers
When you’re ready to move forward and invest your $10,000, there are a variety of avenues in which to do so. Unlike years ago when you had to go in person to a bank or brokerage house in order to transact your investments, today there are a plethora of online opportunities as well. And, because these entities have lower overhead, they can pass on discounted trading fees to their customers. Here are some of the discount brokers that you can choose from:
Through E*TRADE, you can invest in a variety of financial vehicles, including stocks, mutual funds, options and more, with trading fees that are priced at $6.95 or less for stocks and options. They also provide professional guidance, either via phone, or in person through any of their local branch offices.
Etrade is one of the most well-known discount brokerages thanks to their time in the space. Read our full Etrade review to get a better idea of how you can grow your $10,000 into something more.
Just as with Etrade, you can invest in a number of investment products through TradeKing. They offer stocks, mutual funds and more. The beauty with TradeKing is you can their commission comes in at a dirt cheap $4.95 per trade – that’s tied for the lowest in the discount brokerage space. If mutual funds are more your style they offer a very competitive $9.95 commission.
What sets TradeKing apart is they also offer a robo-advisor service if you’d rather have someone else manage your investing. That’s not something most discount brokers offer. Read our full TradeKing review to get a better idea of how you can grow your $10,000 into something more.
TD Ameritrade offers a wide variety of products, too, including stocks, mutual funds, options, futures, bonds and ETFs . Here, stocks can be traded for $6.95 per trade, regardless of the size of your account balance, or how often you trade. In fact, TD Ameritrade also offers free commission on over 100 ETFs, as long as you hold them for 30 days.
TD Ameritrade also offers trading assistance from licensed representatives who are available by phone, email and in person. Read our full TD Ameritrade review to get a better idea of how you can grow your $10,000 into something more.
The New Investment Option: Robo-Advisors
Recently, a new type of wealth management service has become available in the market. Robo-advisors provide automated, online portfolio management advice that is algorithmic-based, and it is all performed without the use of human financial planners.
With $10,000 to invest, a robo-advisor could place the funds into a wide variety of different options, based upon your specific needs and goals and coupled with automated tools – typically at a fraction of the cost of traditional financial services. Some options for investing through robo-advisors include:
Betterment will not only invest your funds based on your personal goals, but will also re-balance your portfolio at regular intervals in order to help you in achieving optimal returns. On average, Betterment customers receive 4.3% higher returns than investors who “do it themselves.”
With Betterment, there are no minimum account balances so you can open with any amount you like and start growing your money. Read our full Betterment review to get a better idea of how you can grow your $10,000 into something more.
Wealthfront also invests your funds based on your specific goals – and it monitors your portfolio every day in order to seek out opportunities to re-balance or to harvest tax losses. Wealthfront is much like Betterment, but a quick look at Betterment vs Wealthfront shows enough differences to give cause to see which is better for you.
With Wealthfront, you can open an account with as little as $500 and start investing. Read our full Wealthfront review to get a better idea of how you can grow your $10,000 into something more.
Options For Your Money
Although $10,000 is a nice sum of money, there may be areas where it makes more sense to invest than others. For example, when considering a portfolio of just individual stocks, it may be difficult to obtain the amount of diversification that you would need with this amount of funding.
However, there are other ways to not only diversify, but to also find the opportunity for nice return with $10,000. One option may include building your own “custom” mutual fund or ETF through Motif investing. This can actually be accomplished by either using your own insights, or by tapping into the knowledge of other investors in order to create your fund.
Through Motif, it is easy to add, remove, or adjust the weighting of any stock – which would be much more difficult, and expensive, to try and do on your own through a regular market exchange. You can open a Motif Investing account for as little as $250. If you’d rather not go the custom ETF route, Motif also allows you to trade individual stocks for $4.95 per trade.
Yet another option for your $10,000 is to go the route of peer to peer lending. Although some may not consider this to be an investment per se, the returns can actually be impressive – especially if you prefer fixed income investments over equities. This is because peer to peer lending provides the opportunity to earn interest rates that can be well above average.
A peer to peer lending website will bring together borrowers with lenders – who are also investors. This basically cuts out banks, along with their high interest rates and other lending restrictions. In some cases as an investor, you may be able to earn returns in the double digit range.
The Bottom Line
Knowing the best ways to invest $10,000 before you dive into any “opportunity” is essential. This is because you want to ensure that you are doing the best thing for you and your money. While there is certainly no shortage of places to put your funds today, it is your specific goals, time horizon and risk tolerance that should be the ultimate driver of which direction you choose.