Vault’s Viewpoint
- An initial $10,000 investment can be put into real estate, savings accounts, an investment portfolio or even go toward boosting your career.
- The return on your $10,000 can range from tens of dollars to multiple thousands in a single year, depending on how it’s invested and the risk you’re willing to accept.
- Time is arguably the most important factor when it comes to generating wealth with investments. So quickly finding the right investment for your $10,000 should be the priority.
Best Ways to Invest $10,000
Whether you have cash burning a hole in your pocket or are strategizing for a hypothetical windfall, here are the best ways to invest $10,000 to build wealth for the future.
Park Cash In a High-Yield Savings Account
If you want to keep your cash liquid and accessible, or simply need somewhere to put your money while you figure out what else to do with it, a savings account is a great option. With a high-yield savings account (HYSA), you’re able to maximize your return on those funds while they sit in the account and remain easily accessible. This means that if you have an opportunity to invest that cash elsewhere, or simply need to tap into those funds for an emergency expense, you can access the money quickly and without penalty.
Online banks are usually the best option for savings accounts, as online savings accounts tend to provide the highest annual percentage yield (APY). But you can also look into the interest rates offered by national banks, credit unions and even your current bank brand to see whether you qualify for promotional or even relationship rates.
Buy Real Estate
There are many different ways to invest in real estate, whether you’re looking for long- or short-term gains (or both). Real estate investments can come in many forms, but some of the most popular include:
- Buying, renovating and selling property (also known as flipping)
- Buying and renting out short- or long-term rental property (becoming a landlord)
- Purchasing and holding property (such as a second or vacation home for yourself)
- Buying shares of real estate investment trusts (REITs)
The right one for you depends on how much you have to invest, your personal investment risk tolerance, how soon you want to recognize a return on your investment and even where you’re located.
If you’re only looking to invest $10,000 in real estate right now, buying shares of a REIT will probably be your best bet. With this level of investment, you can buy into residential, industrial or even commercial property and earn regular dividends on that investment. When you’re ready, you can sell your shares back for their then-current value and reinvest your funds elsewhere.
Build an Investment Portfolio
Arguably, the most important factor for any investment is time. The sooner you can build and begin funding an investment portfolio, the longer those investments will have to grow and generate revenue that can increase your net worth.
If you’re unsure where to start, you can begin building an investment portfolio through one of the many online brokerages available today. Many of these platforms offer easy investment options including curated portfolios with pre-set allocations.
You can even sign up for a robo-advisor service that will continue reinvesting and rebalancing your portfolio on your behalf, so the entire thing is hands-off. With investment minimums as low as $0, you’ll have many options to choose from if you plan on investing $10,000.
Max Out Your Retirement Contributions
Failing to maximize your retirement account contributions can mean leaving free cash on the table and even missing out on certain tax benefits. If you have $10,000 sitting around to invest, first ensure that you’ve taken advantage of all retirement contribution opportunities first.
If your employer offers a workplace 401(k) with a contribution match, it’s usually best to max out this account first. Depending on the investment options available to you, you may or may not want to contribute the full $23,000 allowed in 2024. But you should contribute enough to collect your employer’s full contribution match, which is just free money for you.
After that, you should look into maximizing your individual retirement account (IRA) contributions. Depending on your income and other factors, you may be eligible for a traditional IRA or Roth IRA, though each has its own tax advantages to consider.
Lock Funds Away In a CD
A certificate of deposit (CD) can be an excellent investment vehicle, offering a safe and predictable return on your cash. With a CD, you earn a guaranteed return based on factors like CD term length and deposit amount, in exchange for locking away your funds for a specific period of time.
Even the best CD rates are only the right choice if you won’t need to touch that money until the term matures, as early withdrawal penalties often apply. You can also look into building a CD ladder, which allows you to continue maximizing your returns while maintaining some liquidity of your funds
Consider Peer-to-Peer Lending
When you think about borrowing money, you usually think of a traditional lender, such as a bank or credit union. But there are some peer-to-peer (P2P) platforms that allow you to invest in and lend money to others in exchange for a higher return on your cash.
With a P2P platform, you’re lending your money and investing in other borrowers. These borrowers may need the money for a big purchase or might be looking to fund a specific project, such as a real estate venture. You can often choose how and where you want to invest your money, with the return often hinging on the loan purpose and the details of the project. Taking on a higher risk borrower or project usually means the chance at a higher return.
Save for Your Kids’ Education
When brainstorming investments, your kid’s college fund probably isn’t the first thing that comes to mind. But saving for their future is an investment in them and in you.
By setting aside money for their education early, you can maximize the growth of those funds and save yourself a huge expense down the line. If you invest in designated education accounts, like a 529 plan, you can also enjoy certain federal and state tax benefits that you wouldn’t get if you simply paid their tuition when the time comes.
Invest In Yourself
Last but certainly not least, if you have $10,000 sitting around to be put to good use, consider ways you can invest in yourself. This could mean anything from going back to school to getting a new certification for your job or attending an important conference for your niche.
If you are currently walking around with debt, such as student loans or even high-interest credit cards, paying off these balances will save you money in interest and also free up your monthly cash flow. You can then use this newfound financial flexibility to save more toward retirement or invest in exciting new ventures.
Frequently Asked Questions
Is $10,000 Good to Start Investing?
Whether you have $10,000 or $100, investing today is a great way to start building wealth for tomorrow. You can invest your $10,000 in anything from real estate to an investment portfolio, put the funds in a high-yield savings account or CD, save for retirement or even grow your career. The right investment for you depends on your risk tolerance, interests and when you plan to tap into those funds down the line.
How Much Money Can You Make By Investing $10,000?
An initial $10,000 investment can grow exponentially, but it depends on how it’s invested. You could earn a few hundred dollars a year putting money in a high-yield savings account or certificate of deposit. With real estate, you could net thousands in returns each year through appreciation and rental income or dividends. Or by investing in the right ETFs or stocks, you could easily grow that $10,000 into tens of thousands more, even though you’d be taking on a proportionate risk.
How Much Can $10,000 Grow In a Year?
How much your $10,000 investment could earn in a year depends on the level of risk you’re willing to accept (and a little bit of luck).
- If you put $10,000 in a high-yield savings account that compounds monthly and has a 5.00% APY, you’ll earn $512 in interest in the first year alone.
- Invest that $10,000 in mutual funds with an average annual return of 12%, and you’ll bring in over $1,200 in a single year.
- Investing additional funds throughout the year or in subsequent years will result in even higher returns.
