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Best Ways to Invest 10k

Receive a bonus, financial windfall, or just saved up $10,000 that you are ready to invest? You have numerous options to help you get the most out of your money. Depending upon your needs, goals, age, and risk tolerance, there are investment vehicle options that can help grow your wealth.

Investing is personal. There are multiple ways you can make your money work for you, but no one-size-fits all solution. Instead, you’ll need to assess your current situation to determine the best course of investment for your $10,000.

Make a Financial Plan

You have probably heard the saying “begin with the end in mind.” This is especially true for investing. If you do not know where you want to be, how will you know when you get there?

The first thing to do in your financial plan is to start with your current financial situation. During the process you will need to ask yourself and address these questions: What are your monthly bills? Do you have an emergency fund? Or any debt? Do you have retirement savings? Are there other short or long-term items you’d like to save for?

It is important to establish the answers to these questions to make sure your existing obligations are covered before you can properly plan for your future.

Do You Have Short-term or Long-term Focus?

Planning out your short and long-term goals is key to successful investing. It can help you create an investment strategy to implement what you want to accomplish within your desired timeframe. As mentioned above, all investments are personal.

Your goals may be different than your family, friends, and co-workers, but outlining them and breaking the investments needed into smaller, manageable chunks is the best way to accomplish your goals.

Are You Risk-Adverse or Risk-Tolerant?

Understanding your risk tolerance will be a good gauge of where you should invest $10,000. If the possibility of losing the capital makes you unable to sleep at night, you should consider a more conservative investment approach.

However, if you are willing to take the risk for the potential reward that comes with it, you can invest your $10,000 in riskier investment vehicles.

Do You Have Debt to Pay Off?

If you have debt, sometimes the best way to invest $10,000 is not with an investment at all. Instead, paying off your debt, especially high-interest debt, can help you save substantially more in the long run.

For example, if you have a $10,000 line of credit that has a 15% interest rate, you will likely be paying $250 per month for five years. This amounts to about $4,000 in interest charges that you could save if you paid off the loan.

Once your debt is paid, you’d immediately be saving $4,000 – talk about a return on investment!

Is 10k a Lot to Save?

In the United States. $10k typically does not cover living expenses for most Americans for 3 months. However, this question is subjective to the personal experience of the investor. For some, saving $10,000 is a feat. It took time, sweat, and patience to get to this amount. For others, $10,000 is a drop in the bucket.

Whether you consider $10K to be a lot of money or not is personal, but regardless it is not any less valuable depending upon your financial means.

Savings Plan

If you have your debt covered and are looking to put your money in a savings plan, there are multiple options you can choose from to keep your money safe.

High Yield Savings Account

A high yield savings account is not necessarily a way to invest your money, but it is a way to keep it safe for a short period of time. With average interest rates around 0.40%, you will not receive substantial returns, but you are protected from losses.

Emergency Fund

If you do not have an emergency fund set up, now is the time to do so. Life is unpredictable. There’s no knowing when you will face medical bills, job loss, car repairs, and other emergencies. Having an emergency fund that has at least three to six months of income safely inside should be a priority.

Make sure when you are setting up your emergency fund that it is in a savings account you can pull from easily when you need it. Then, work to build up the funds again if/when you utilize them.

Match Your 401(k)

Does your company match your 401(k) investments? If they add funds to your account on your behalf, do not leave money on the table. It is literally free money. Most companies will match a certain portion of your contributions, typically between 3% and 6% of your salary.

If you make $75,000 per year and your company matches 6%, you are getting $4,500 per year extra in your retirement savings if you max out your dollar-for-dollar match.

Max Out Your IRA

Another retirement account that is a valuable investment vehicle is an IRA. While IRAs are not matched by your employer, they do come with a plethora of benefits. If you create a Roth IRA, you grow tax-free earnings. When you retire, you will not be subject to paying income tax. On the other hand, with a Traditional IRA you receive tax deductions in the current year.

A $10,000 investment will max out an IRA for the year. Also, you would have a little left over for you to invest elsewhere since the maximum contribution for an IRA is $6,000 (as of 2021).

529 Plan

Opening a 529 plan is a great way to save for your children’s education. It has similar tax benefits like a Roth IRA, but the money is designated for qualified educational expenses. If you know your child will be heading down a collegiate path, this is the best way to save for their future education.

Invest It 

You also have the option to invest your $10k in other investment vehicles to help diversify your portfolio.

Index Funds

An index fund pools money from various investors to buy stocks, bonds, or other securities within a particular market index. While they do have investment minimums, $10,000 is more than enough to invest in multiple index funds.

Mutual Funds

A mutual fund is also a great option to invest in stocks, bonds, and other securities. They tend to have higher fees than index funds because they are more actively managed. Unlike index funds that try to match market returns, the goal of mutual funds is to outperform the market.

Exchange Traded Funds

Investing in Exchange Traded Funds (ETFs) is a great way to see a return on your $10k investment. ETFs are bought and sold on stock exchanges, like company stocks. They even have a ticker symbol.

Treasuries & Bonds

If you prefer to invest in safer investment vehicles, treasuries and bonds are a great option. They still pay respectable returns, but slightly lower than average stock market ROIs. This is a valuable option if you have a conservative risk tolerance.

Real Estate Investment Trusts

The real estate market is booming. If you want to get in on the action but know your $10,000 investment is not enough to buy property, a Real Estate Investment Trust (REIT) is a solution to get you in the game. You invest your money in the REIT, similarly to buying shares of stock. Within the REIT, you do not own the property, but you will receive generous dividends.

Getting Started Investing Your 10k

There are numerous tools and apps available to help investors of any skill level put their $10k to good use.

Ally Invest

Active and passive investors can grow their $10k by opening an account through Ally invest. Its robust tools, research, and strong web-based platform make it easy for all to utilize.

Best For No Fee Trading

Ally Invest is ideal for beginning investors who do not want to pay a lot of transaction fees or worry about account minimums.

Benefits

Ally Invest has no account minimums, no trading costs (on eligible U.S. securities), and has automated platform management options. It also comes with free tools for investors.

Downsides

While Ally Invest shines in a lot of ways, it does fall short by not offering futures and fractional shares.

Pricing

  • Account Minimum $0
  • Account Fees $0 – No annual fees or inactivity fees
  • Outgoing Transfer Fee $50
  • Stock Trading Costs $0 (on eligible securities)
  • Options Trades – $0 base commission; $0.50 per contract

Star Rating

4.5/5 Stars

SoFi

SoFi is a robo-advisor that is great for beginning investors who are cost-conscious.

Best For Beginners

The hands-off approach of SoFi provides customers with valuable investment insight, with minimal research required.

Benefits

SoFi takes the stress out of investing by helping new investors set goals, invest, diversify, and rebalance their investments. It requires no minimum to start investing. If you are looking to invest in cryptocurrencies, SoFi has options available. And if you do not know where to start you can turn to its Certified Financial Planners at no extra charge.

Downsides

The biggest drawback to SoFi is that it has only been around since 2017. It does not have a long track record compared to other brokerages.

Pricing

  • Investment Minimum $0
  • Account Fees $0
  • Outgoing Transfer Fee $75

Star Rating

4.5/5 Stars

Betterment

Betterment is hands down the leading robo-advisor for investors who prefer a hands-off approach.

Best For Hands Off Investors

This platform invests your funds based on your long-term goals, risk level, income, age, and planned retirement age.

Benefits

There is no minimum account balance and no transaction fees. This is truly a set it and forget it robo-advisor. Betterment also has a RetireGuide that helps you calculate what you should be saving weekly to reach your retirement goals.

Downsides

This is not a great solution for active traders. Investors are not able to choose individual EFTs or stocks.

Pricing

  • Investment Minimum $0
  • Account Fees 0.25% annually
  • Human Advisor $199 to $299

Star Rating

5/5 Stars

E*Trade

If you are a savvy investor who wants to invest in stocks, EFTs, mutual funds, options, and futures, E*Trade is the best solution for you.

Best For Data Driven Investors

The E*Trade app provides the best research library, interactive charts, and expert studies. It allows investors to dive deep into company news, earnings, dividends, and metrics to guide their investment decisions.

Benefits

E*Trade is designed for new and veteran investors. The app will help you build your portfolio to ensure it is aligned with your risk tolerance. The customer support is phenomenal, and it has an advanced mobile app.

Downsides

Until recently, E*Trade charged one of the higher commissions at $6.95 per trade. Now, that is no longer the case. The biggest drawback with E*Trade is that the website can be difficult to manage and possibly overwhelm a beginning investor.

Pricing

  • Account Minimum $0
  • Account Fees $0 – No annual fees or inactivity fees
  • Outgoing Transfer Fee $75
  • Stock Trading Costs $0
  • Options Trades – $0 base commission; $0.65 per contract

Star Rating

4.5/5 Stars

Fidelity IRA

Fidelity is the go-to IRA option to help you get the most out of your retirement.

Best For Retirement

Fidelity focuses on retirement and offers plenty of tools to help you understand your retirement goals and how to reach them. Their extensive educational library makes it a top choice for a retirement account.

Benefits

Reach your retirement goals with no-transaction-fee mutual funds, no recurring monthly fees, and no minimum account balance requirements.

Downsides

The biggest drawback to Fidelity’s IRA account is the yearly access fee for a human advisor. Even with this fee, it is still our top choice for IRA investment vehicles.

Pricing

  • Transaction Fees $0
  • Stock and EFT Commission $0
  • Annual Fee for Human Advisor 0.50%

Star Rating

5/5 Stars

Make Your $10k Investment Work For You

Deciding which investment option is the best for your $10k is a highly personal choice. There is no right or wrong decision. If you are unsure of where to start, reach out to a financial advisor. They will start by creating a financial plan to determine your current financial situation, then provide a roadmap to help you reach your goals.