Best Way To Make Money With 10k
You've got $10,000 and you want to invest it. But if you don't know how, here are the best ways you can invest because you've got several options.
If you've reached the point where you have at least $10,000, it's definitely time to begin investing. But if you've never invested before, what's the best way to invest $10,000?
You may be surprised to learn that you have several investment options. Which one you select will depend on your own investment experience and preferences, as well as your risk tolerance.
Invest with Public and save big with their zero commission policy
Risk tolerance is all-important when it comes to determining how you invest. If your level is high, you may want to favor choosing your own investments, like individual stocks. In that case, a self-directed brokerage account or real estate crowdfunding platform may work best for you.
But if you tend to be on the more conservative side, and particularly if you have very little investment experience, you'll want to favor managed options. These include mutual funds and exchange-traded funds – which are portfolios of stocks, bonds and other securities that are professionally managed for you.
And if you don't want to have anything to do with investing at all, including selecting specific securities or funds, you can always choose a fully managed option, like a robo-advisor.
Let's discuss each of the different investment strategies you can use, and which may represent the best way to invest $10,000 based on your circumstances and risk profile.
First, decide what your goal is
First things first. Determine what your goal is. If you want to figure out the best way to invest $10,000, you need to decide what end result you want. If you don't know where you want to get to, it'll be impossible to get there, and you won't know how to most adequately invest the money.
If you have a short-term focus – for example, buying a home or getting married – I don't recommend investing the money at all. You should keep it safe in a high-yield savings account instead.
My general rule of thumb is if you need the money within the next 24 months, it's probably best to not invest it – or at least not invest it in risky ventures.
Assuming you have a longer-term focus, though, you should definitely be investing that money. If you don't, your money won't have a chance to grow exponentially over time. Below are some of my best recommendations for how to invest 10k.
Stash it in a high-yield savings account
While I wouldn't consider this an investment necessarily, it's better than keeping the money in your checking account or under your mattress. A high-yield savings account is a great way to hold your money for a short-term period, or until you decide what your longer-term strategy is. It's actually quite simple.
Just open an online savings account, deposit your cash, and let it sit until you have a plan. And you can often find accounts that give you over 2% APY. Plus, you'll get the same type of FDIC insurance that major banks get – protecting your deposits up to $250,000.
One of the best savings accounts, in my opinion, is the CIT Bank Savings Builder. You'll get an interest rate of 0.40% .
To get that rate you'll need to do one of two things:
- Have a $25,000 balance in your account, or
- deposit at least $100 every month into your account.
That $100 monthly deposit is a pretty low threshold for one of the best interest rates out there!
Start or add to your emergency fund
If you don't have an emergency fund, it's the first thing you should probably do with your $10,000 investment.
You never know what will happen – job loss, medical bills, etc. – so it's smart to stick away at least three to six months worth of expenses in an emergency fund. This $10,000 should be enough to get you started or to pad an already existing fund.
The nice thing about an emergency fund is that it's liquid – meaning that you can draw on it if and when you need it.
No, it's not the greatest investment, but think about the alternative if you ran into an unforeseen circumstance, like a job loss. How would you cover yourself and your family until you have an income again? This is definitely where I'd start if I didn't already have something stashed away.
Try out a self-directed brokerage accounts
These accounts are held at major brokerages, and usually allow you to trade an almost unlimited variety of investments. That can include:
- Stocks
- Bonds
- Options
- Mutual funds
- Exchange-traded funds (ETFs)
- Real estate investment trusts (REITs)
The better platforms will enable you to trade at very reasonable commissions, but also provide you with all the tools you need to be a successful investor. Most will also provide a generous amount of customer support, though they won't make specific investment recommendations for you.
Self-directed brokerage accounts are designed for those who prefer to choose and manage their own investments. You should have some investment experience before using one – though you'll need to use one to get experience – as well as higher risk tolerance.
You can open a self-directed brokerage account for regular taxable investing, or to hold a retirement plan, like a traditional or Roth IRA, SIMPLE IRA, SEP IRA, or a Solo 401(k) plan.
If you're looking for a self-directed account that finally makes investing easy, look no further than J.P. Morgan Self-Directed Investing. When you invest, you won't be met with any commissions, trade fees, or management fees. AND, you don't even need a minimum amount of cash to get started.
Disclosure – INVESTMENT PRODUCTS: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
If you're a beginner, stick with mutual funds and exchange-traded funds (ETFs)
If you like the idea of choosing your own investments, but aren't entirely comfortable with building your own portfolio of individual stocks and bonds, you can always choose to use either mutual funds or ETFs. Each is a portfolio of professionally selected and managed securities. All you need to do is choose the funds you will invest in, and how much you'll invest in each.
Though mutual funds and ETFs are often mentioned interchangeably, they're actually quite different investment vehicles.
Mutual funds
Mutual funds are typically actively managed portfolios. That means the portfolio manager seeks to outperform the general market by actively buying and selling securities within the portfolio. Unfortunately, most mutual funds fail to outperform the market.
Mutual funds have minimum investment amounts, and $3,000 is quite common. That will make it a bit difficult to diversify among several different mutual funds with an investment of $10,000. Since the funds are actively traded, their investment fees are usually higher than those of ETFs.
Many mutual funds also have what is known as load fees . These are basically sales charges that can range from 1% to 3% of your investment. They may be charged upfront, or upon sale. Some funds will charge at both ends, such as 1% upon purchase, and 1% upon sale. However, there are many mutual funds that charge no load fee at all.
ETFs
ETFs are typically index-based, which means the fund is constructed to match an underlying index. One common index is the S&P 500 index. It represents stock in the 500 largest publicly traded corporations in the US. In this way, it represents investing in the broad US-based market.
An ETF that's based on the S&P 500 index will invest in the companies that make up the index, and in the same proportion as the index itself. In that way, the ETF will track the index. That means while it won't outperform the index, it won't underperform it either. In that way, an ETF is an ideal way to invest in the general market.
But since there are thousands of ETFs that invest in hundreds of different indexes, you can choose to invest in any type of market you want. For example, there are ETFs that invest in the underlying index of foreign developed-country stocks, emerging country stocks, international regional stocks, and specific industries (like technology, healthcare and energy).
Because of this specialization, you can construct a portfolio of ETFs invested in a cross-section of countries and industries of your choice.
ETFs lend themselves particularly well to this, because they have no minimum required investment amount. They trade just like stocks on major exchanges, and usually at commissions comparable to those on stocks.
Where to invest in mutual funds and ETFs
E*TRADE
For investing in mutual funds and ETFs, one of the best platforms to consider is E*TRADE . E*TRADE is what's known as a robo-advisor, which uses algorithms to help you maximize your results while investing.
E*TRADE gives you access to more than 9,000 mutual funds and more than 4,400 no-load, no-transaction-fee mutual funds. A fund screener helps you find the best mutual funds to add to your portfolio.
For ETFs, you'll get commission-free access to every ETF sold. You can use the ETF screener to find the best funds to match your needs.
Use a robo-advisors for hands-off investing
This is a relatively new class of investment platforms, having come up only in about the past 10 years. Robo-advisors are online, automated investment platforms, that represent a much lower cost alternative to professional human investment advisors.
For example, while a human investment advisor may charge between 1% and 2% of your account balance as a management fee, a robo-advisor will charge as low as 0.25%. That means you can have a $10,000 account managed for just $25 per year!
Robo-advisors have another major advantage over human financial investment advisors. Where most of the latter require a minimum investment of $500,000, there are robo-advisors that will allow you to get started with no money at all. That means $10,000 is more than enough to invest with most robo-advisors.
Robo-advisors have a lot of advantages, and will work best for those who want to invest, but don't want to be involved in the day-to-day management.
The robo-advisor will start by evaluating your risk tolerance. This will be done by determining your investment goals, time horizon, and your likely reaction to market declines. Based on that information, they'll construct a portfolio for you that will range anywhere from conservative to aggressive, with several iterations in between.
The portfolio will consist of ETFs. As discussed earlier, ETFs are based on indexes, which allow the robo-advisor to invest in specific markets, and to do so at very low cost.
Not only will the robo-advisor create a portfolio for you, but they'll also manage it going forward. That will include rebalancing your portfolio. But they'll also reinvest dividends, and may even provide strategies to minimize the tax impact of investment income in your portfolio.
All you need to do is fund your account on a regular basis, and the robo-advisor will do all the work for you.
Dozens of robo-advisors have sprung up in recent years. In fact, nearly every major investment brokerage in the industry now has its own in-house robo-advisor, including all three of the brokerage firms listed earlier.
But other popular robo-advisors we recommend include the following:
Betterment
Betterment was the first robo-advisor, and is the largest independent one in the industry (not connected to an investment brokerage).
They'll invest your account in a mix of ETFs focusing on stocks and bonds. There is no minimum initial investment, and most portfolios will be managed for just 0.25% per year (rising to 0.40% on account balances of $100,000 or more).
Wealthfront
Wealthfront is Betterment's major competitor among independent robo-advisors. But this robo-advisor is extremely innovative, even forcing other advisors to up their investment games.
Wealthfront invests your portfolio in a mix of stocks and bonds, but adds real estate and natural resources for broader diversification.
The minimum initial investment is $500, and your account will be managed for an annual fee of 0.25%.
Personal Capital
Personal Capital is a hybrid between traditional human investment advisors and robo-advisors. It starts out as a budgeting platform, providing limited investment advice, free of charge. But you can also get full investment management, robo-advisor style, by taking advantage of the Wealth Management service.
You'll need a minimum of $100,000 to take advantage of that service, and the annual fee is 0.89%. That's higher than Betterment and Wealthfront, but well below the fees charged by traditional investment advisors.
Unlike the other two robo's, Personal Capital also provides you with access to live financial advisors. You won't be able to invest with the Wealth Management service with just $10,000, but it's certainly a service to aim for as your portfolio grows.
Stick it in U.S. Treasuries
If you're looking for a super-safe investment that still pays a respectable rate of return, I would suggest taking a look at the incredibly-unsexy U.S. Treasuries. Yeah, they're very boring and kind of a pain to buy, but they provide a solid rate of return if you're looking for a safe place to store your cash if you're willing to keep your money in an investment for a while (like you would with a CD).
U.S. Treasuries are government debt, and you can buy into one of four different types: Treasury Bills, Treasury Notes, Treasury Bonds, or TIPS. I'll explain each of these below.
- Treasury bills (you might hear it as T-Bills) tend to be your shortest-term investment. Most T-Bills have maturities from one to 12 months, and interest is paid at maturity.
- Treasury Notes pay interest every 6 months but have maturities of either two, three, five, seven, or 10 years.
- Treasury Bonds also pay interest every six months but have maturities of 20 or 30 years (yeesh!).
- TIPS (Treasury Inflation-Protected Securities) also pay interest every 6 months and have maturities of five, 10, and 30 years. What's cool about TIPS is that the principal balance gets adjusted by the CPI (Consumer Price Index), which means the value of your security will keep up with inflation.
If you want to use your $10k investment (or part of it) on treasuries, you can see current rates and buy U.S. Treasuries through Treasury Direct.
Pay off your high-interest debt
Sometimes the best investment isn't an investment at all. In this case, I mean paying off your debt. If you think about it, by paying off high-interest debt, you're "making money" by not having to pay interest.
Imagine you have $10,000 in debt at a 15% interest rate. Using Money Under 30's handy loan calculator, let's say you pay $250 per month. This would take you almost five years to pay off in total, and you'd have paid close to $4,000 in interest charges.
Yikes.
So instead, if you put your $10,000 toward the debt, you'd be saving almost $4,000 over the next five years. To me, that's one heck of an ROI.
Get the full 401(k) match from your company
There are almost no guarantees in life (except death and taxes, of course). So when you think about something like a 401(k) match from your company, it's not only a guaranteed return on an investment, but it's FREE money.
Yep. When you put money into your 401(k), your company will add funds on your behalf as well (assuming they participate in a matching program, which they should!).
How much money your company will match really depends on the company itself. Generally speaking, though, you can expect to get 50% – 100% of your contributions matched, up to a specific percentage of your salary. In most cases, the max is between 3% and 6%.
So, if you make $60,000 per year and your company matches dollar-for-dollar (100%) up to 5% of your salary, you're getting $3,000 per year from your company, on the house, if you're putting that much in too. So the $10,000 you have to invest will probably give you enough to get your match this year.
blooom
You don't have to go it alone when managing your 401(k). blooom connects to your retirement account and helps you see how they're performing.
You can start with a free, no-obligation analysis of your 401(k) account and, if you want to continue, sign up and keep an eye on your retirement savings 24/7.
Try real estate crowdfunding platforms (for experienced investors only)
This is another relatively new class of investment platforms, coming out at about the same time robo-advisors did. But rather than investing in stocks and bonds, they focus entirely on real estate. That's a broad category however, because while some platforms enable you to invest in single-family properties, others involve only owning slices of large commercial deals.
Real estate crowdfunding platforms also operate primarily as peer-to-peer (P2P) platforms. That is, they match those who want to invest in real estate with others who want to create or manage various real estate deals. In some cases, the projects involve renovating existing properties and selling them for a profit. In other cases, it involves buying existing properties to produce cash flow from rents.
In a more typical configuration, a crowdfunding platform will invest in a commercial property that produces rent income for a time, but is later sold for an appreciated price. You'll get the benefit of both the income from the property while it's held in the portfolio, and then a windfall on the sale.
Because of the nature of these investments, being higher risk than paper securities, crowdfunding investing is designed primarily for those with a high-risk tolerance. It also requires tying up your money for a significant amount of time. It's not unusual for a crowdfunding project to pay out fully in 10 years or more. And just as in the case of investing in stocks or funds, you can lose money investing on these platforms.
Accredited investor requirements
Many real estate crowdfunding platforms offer their investments only to what are known as accredited investors . These are wealthier investors, who have the financial wherewithal to absorb the potential risk involved in these investments.
The Securities and Exchange Commission defines accredited investors as follows:
earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person's primary residence).
This requirement is usually imposed on the riskiest types of investments. And while some real estate crowdfunding platforms restrict investments to accredited investors, others make investments available to both accredited and non-accredited investors.
While it's best to be an accredited investor when investing in real estate, you do have options if you're not accredited. The following are examples of real estate crowdfunding platforms that allow non-accredited investors:
Fundrise
Fundrise advertises returns as high as 12%. You'll invest through electronic REITs or eFunds, which are designed primarily to produce income .
The minimum investment is $500, and there's a 1% annual management fee. They invest in commercial properties, including both equity and debt positions. On income funds, dividends are paid quarterly.
Realty Mogul
Realty Mogul offers REITs for non-accredited investors. They're invested in commercial real estate, and pay regular income distributions, then principal and capital appreciation once the underlying investment is sold.
The minimum investment is $1,000, and there's an annual management fee ranging from 1% to 1.5%. Investments can be made in real estate debt, equity, or preferred equity.
There's also real estate investment trusts
If the idea of investing in real estate crowdfunding platforms scares you, and you don't have the capital or experience to buy an individual investment property, an excellent alternative are real estate investment trusts, or REITs.
A REIT is something of a mutual fund that invests in a portfolio of real estate properties. They're typically commercial properties, including retail space, office buildings, large apartment complexes, hotels, hospitals, warehouse space and other property types.
You'll invest a flat amount of money in a REIT (with the amount varying by trust), similar to purchasing shares of stock. You don't own any of the properties in the trust, but rather an interest in the REIT itself.
One of the big advantages with REITs is that they pay generous dividends. In fact, they are required by law to pay out 90% or more of their net income in dividends to their shareholders. The returns on REITs can be impressive, averaging 11.8% per year.
We're not going to make any specific recommendations on REITs, because we have not reviewed any of the hundreds that are available, nor do we claim any expertise in this area of investing. But there are plenty of online sources where you can find well-performing REITs that will be worth investing in.
Streitwise
If you're interested in dipping your toe in the pond, though, Streitwise can help you get started with minimal risk. With an investment of as little as $5,000, you can invest in private real estate. You can even use Bitcoin or Ethereum for some or all of that investment.
Although real estate, like most investments, comes with an element of risk,Streitwise has consistently shown strong returns. You can check out the properties on their website before you invest to have a say in where your money is being spent. Streitwise also has an easy-to-use iOS app, and it welcomes investments from non-U.S. residents, LLCs, trusts, and IRAs.
One downside to real estate investing is that you'll need patience. You have to be willing to leave the money alone for at least a year. Those who can set $5,000 or more aside, though, will likely find Streitwise is a great way to get started in real estate investing while keeping risk to a minimum.
Max out an IRA
An IRA is one of the best investment vehicles you can have. It's like a 401k, only you fund it yourself – meaning you don't get a company match like you would with your 401k. But an IRA is something everyone should have due to the tremendous amount of benefits it offers.
There are two main types – Roth and Traditional. A Roth IRA allows your earnings to grow tax-free and you'll be able to take withdrawals in retirement without paying any income tax on the money. A Traditional IRA, on the other hand, gives you tax deductions for your contributions in the current tax year.
Since you have $10,000 to invest – it will be more than enough money to max out a single IRA (plus you'll have a bit left over for a second one for a spouse!).
Which option you choose is up to you, but an easy way to determine if you should open a Traditional or a Roth IRA is where you think your tax rate will be in retirement. If you think your tax rate will be higher in retirement, generally a Roth IRA is a better choice, since your withdrawals will be tax-free. On the other hand, if your tax rate is expected to be lower in retirement, a Traditional IRA might be better – since you can take advantage of tax deductions now.
Open a 529 plan
A 529 plan is basically a Roth IRA for your kid's college tuition. It has most of the same tax benefits, like tax-free growth and withdrawals, but the money has to be used for qualified education costs.
If you have any urge to pay for your child's college education, this is hands-down the best way to save for those expenses in my opinion. I just recommend taking care of your own retirement first, though.
It also makes sense to shop around for a good 529 plan, as some states will give you credits or discounts, or offer special perks (like the ability for family members to chip in).
Max out an HSA
If you have a high-deductible health insurance plan, odds are you've been offered a Health Savings Account (HSA). This is a separate account you can independently fund with pre-tax dollars, and use the money for qualifying medical expenses.
But there's a secret about the HSA – it makes an amazing retirement account. That's right. An HSA is like an IRA on steroids. Whatever money you don't use, you can rollover from year to year. Eventually, this can be withdrawn at retirement without paying any taxes. So it's pre-tax money in, tax-free growth, and tax-free withdrawals. You just have to be 65 and it can be taken out without any questions, tax-free.
Like a 401k, though, you can't just deposit a lump sum. It has to come out of your paycheck, so you'll need to use the trick I shared above to get the funds into your account. And with $10,000 – you can meet the max allowed.
Make improvements to your own home
With $10,000, you can make an investment in your home that could have a return of as much as 98% (I'll explain below). Yes, that's technically a loss when you sell the home, but it may increase the overall value of your home, and you can expand your capacity to get a home equity line if you need it.
It's nearly impossible to make a home improvement that will return more for you than the cost of the investment itself, but The Street gets pretty close. In their article, they layout six home improvements, backed by data, that can get you a pretty solid return on investment (ROI). Here are their picks, with the estimated ROI:
- A steel entry door – 74.9% ROI
- New siding – 75.6% ROI
- Wood deck – 75.6% ROI
- Minor kitchen remodel – 80.5% ROI
- Stone veneer – 94.9% ROI
- Garage door replacement – 97.5% ROI
If you've taken care of your emergency fund and you have retirement savings, sprucing up your home a bit with projects that will ultimately add value is a very good idea.
Take (good) online courses
If you've already gone to college or don't want to go that route, you can take a bunch of online courses through reputable providers and invest more in yourself. For example, Coursera offers a ton of online courses that are very good (and created through a partnership with many universities).
If you've ever wanted to learn how to code in Python, for example, there's a class for that. You can then take these skills and apply them to your current job or start your own side hustle. I wouldn't recommend dumping all $10k into online courses for yourself, but it's a worthwhile investment to do a couple.
Loan to others through P2P lending
One of the best things about P2P (peer-to-peer) lending is the ability to earn much better rates of return than you might with a traditional investment in stocks or bonds. P2P lending sites match borrowers who need a loan with lenders looking to invest.
As an investor with $10,000, you could fund multiple P2P loans at a variety of risk levels. With most P2P lenders, you can start with a low dollar amount, such as $25. This helps you stay diverse so you don't dump all $10k into one loan and run the risk of it defaulting.
This process excludes banks entirely, which leads to not only better terms and conditions for borrowers, but also better rates of return for investors.
You'll find a bunch of options, particularly on this list of best peer-to-peer lending sites, but the two I'm most excited about are Prosper and Lending Club.
Prosper
While bothProsper and LendingClub Bank have been around for a while, Prosper was the first company to ever offer peer-to-peer lending.
While the risk can be higher with peer-to-peer lending, you can mitigate that risk by balancing your portfolio with several different risk levels. Prosper uses a handy letter designation system where the lowest risk investment is labeled "AA" and the highest risk is "HR".
Prosper's investment average rate of return is 5.1% – a fantastic return in the peer-to-peer investing world.
Lending Club
Lending Club works similarly to Prosper when it comes to investing. They have a $1,000 minimum investment, meaning even lower-level investors can invest through Lending Club.
Lending Club's returns are also similar to Prosper, but reach a little higher with an average rate of 4%-7%. What's also nice about Lending Club is the fact that you'll get your principal paid out monthly (since borrowers make monthly payments). That means you can rely on your investment income more so than with other riskier types of investments.
Start a business
It doesn't take much to start a business these days – I know from first-hand experience. With $10,000 to invest, you can get set up with a very good business if you know what you're doing.
The first thing to do is determine if it'll be a side hustle or your full-time gig. If you're going full-time, make sure you have some additional savings set aside to back you up in case things don't work out, or in case they don't happen as quickly.
As a side-hustle, though, it's a great investment to see if you can scale it to a full-time income. And with $10,000, you can fund a very good side-hustle. That's enough to get started in eCommerce, a home baking business, or some other type of internet-based business.
Start a blog
You might think I'm crazy by suggesting this, especially because there are millions upon millions of blogs out there, but it's a legitimate investment. You can take a few different options here.
The first option is to invest in yourself as a brand. Gary Vaynerchuk highly recommends this, and he's made millions off of it. But that's Gary Vaynerchuk – not you. If you want to invest loads of money writing on a blog and marketing yourself as a brand, go for it. Some people have done very well, even in small markets, doing this.
$10,000 is an awesome amount to invest in a blog. You can get set up with a great site, logo, and probably even pay a content writer to write a bunch of articles for you if you don't want to do it on your own. You can make money from advertising, affiliate marketing, or creating your own products.
Start a podcast
Maybe writing isn't your thing. If you're more of a talker, you could start a podcast. Over 165 million people listen to podcasts now – that's more than half the population!
With $10,000, you would have more than enough to get started with the right equipment, get some professional editing tools, and still have a bunch leftover for marketing and advertising your new podcast.
Once you've developed a following, you can sell advertisements on your podcast, which makes it a totally viable investment.
Summary
As we said at the beginning, by the time you have $10,000 you should begin investing. Fortunately, $10,000 is enough money that not only are you able to invest, but you can also spread your money across different investment platforms. And in the interest of diversification, that's exactly what you should do.
Just make sure you have some money sitting in a safe emergency fund, just in case an unexpected event should arise. Having an emergency fund will keep you from needing to liquidate investment accounts to cover the issue at hand. And once that account is covered, $10,000 is more than enough to begin cutting your teeth on the investment universe.
Read more:
- How To Invest Money: The Smart Way To Make Your Money Grow
- How To Start Investing Now (Without Paying A Ton Of Fees)
Recommended Investing Partners
Related Tools
Best Way To Make Money With 10k
Source: https://www.moneyunder30.com/best-way-to-invest-10000
Posted by: estellhosess.blogspot.com
0 Response to "Best Way To Make Money With 10k"
Post a Comment