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The $10,000 Investing Guide

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Have you recently found yourself with $10,000 burning a hole in your pocket? While this might not seem like a life-changing sum of money, if invested properly over time it could grow to become a very tidy nest egg. 

Whether it comes from a sudden windfall, an inheritance or a winning lottery ticket, let’s talk about the best ways to invest $10,000.

Open an IRA

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Bolstering your retirement savings is a great use of $10,000. If you don’t have one already, consider opening and funding an individual retirement account (IRA).

An IRA is your go-to choice if you don’t have a 401(k) plan at work. It’s also a great option if you want better investment options than you get with your workplace retirement plan. The best IRA accounts let you pick and choose from a very broad range of asset classes, giving you more flexibility.

Another strategy to consider is a Roth IRA. Contributing to a traditional IRA gives you an upfront tax deduction, while a Roth IRA provides you with tax-free withdrawals in retirement. Plus, you get more flexibility in making withdrawals before you’ve even reached retirement age.

In 2022, you can contribute up to $6,000 per year into an IRA, or $7,000 per year if you are 50 or older. Maxing out your contributions can help keep you on track to reach your retirement goals—and possibly leave you with a few thousand bucks to invest in some of the ideas below..

Invest in Mutual Funds and ETFs

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Mutual funds and exchange-traded funds (ETFs) help make investing easy, and the best funds charge minimal fees.

These pooled investment vehicles own portfolios of stocks or bonds, and aim to achieve clearly defined goals. Things like investing in a specific market sector, generating cash flow, tracking the price of a commodity like gold or emulating the performance of a market index like the S&P 500.

Regular investors can buy shares of any number of funds. When you invest, each fund’s management team handles the hard work of keeping the portfolio on track. In exchange for this convenience, funds charge an annual expense ratio, which is expressed as a percentage of your total investment.

You can buy mutual funds and ETFs using a brokerage account or an IRA. Vanguard is widely recognized as a leading provider of both types of fund. Check out our listings of the best Vanguard ETFs and the best Vanguard mutual funds for more insight.

Build a Stock Portfolio

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Buying individual stocks is riskier than investing in mutual funds and ETFs. But for self-directed investors who want to take the time to learn about public companies and do the research, this could be a great way to invest $10,000.

As you consider your options and research stocks, remember the importance of diversification In a word, don’t put all your eggs in one basket. No matter how much you might like a certain stock or company, you should never, ever buy $10,000 worth of a single stock.

Instead, build an equity portfolio with a mix of different individual stocks, preferably ones that offset each other’s risks. For example, if you invest in an oil company, which should do well if the price of oil goes up, also purchase an airline stock, which should do well if the price of oil goes down.

Invest in Bonds

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If you’re looking to generate income, bonds could be a useful investment for $10,000.

When you buy bonds, you’re lending money to a company or government. You agree to hold onto the bond for a period of time, and at the end this term the bond issuer will give you your money back. In the interim, the issuer pays you interest at a set rate on a periodic basis.

Remember, it’s not impossible to lose money investing in bonds. If you want to sell your bond before the end of its term, you could find a buyer in the secondary market, but you might have to accept a lower price than you paid depending on market conditions.

In addition, if the bond issuer ran into financial trouble, they could miss payments or even default on returning your principal investment.

Bonds with higher interest rates—so-called junk bonds—tend to be riskier. Like any investment, there’s always a tradeoff between greater risks and higher rewards. You can buy bonds through most brokerage platforms that offer stocks.

Buy Real Estate with REITs

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In today’s hot real estate market, $10,000 won’t take you very far when it comes to buying property. But there’s more than one way to invest in real estate.

Try real estate investment trusts (REITs), for example, which are a type of publicly traded company that can give you exposure to many different types of property.

Most REITs concentrate on one type of real estate—like commercial property or residential real estate—although some own a variety of different types of property. To qualify as a REIT, companies must distribute at least 90% of their taxable income to shareholders, which also makes REITs a good way to generate income.

Much like regular stocks, REITs are highly liquid. That makes it easy to cash out your investment and move your money elsewhere. Contrast that with owning physical real estate, where selling is a long, expensive process.

Prepare for healthcare costs with an HSA

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A health savings account (HSA) lets you save and invest for future healthcare costs. Just remember, you can only open and fund an HSA if you have a high-deductible healthcare plan.

You can contribute up to $3,650 to an HSA in 2022. In return, you get three valuable tax benefits.

First, you can deduct your contributions from your income tax. Once money is in your account, you can invest it in different mutual funds and exchange-traded funds (ETFs), depending on your HSA provider.

Second, you delay income taxes on your gains so long as they stay in the account.

Third, when you spend money on healthcare costs, you withdraw money from an HSA tax-free. That’s right, you never owe capital gains taxes if you use withdrawals for qualified medical expenses.

If you don’t need the money for healthcare, you can also use an HSA for whatever you want once you turn 65. You’ll owe income tax on the withdrawals, but there are no other penalty fees.

Considering Crypto? Be Cautious

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Until very recently, cryptocurrency was the hot new investment that everyone wanted a piece of. But if you’ve been following the news, you probably already know that crypto has seen something of a fall from grace—thanks in part to massive market volatility.

Even before recent market events, however, crypto had been seeing spectacular gains and stomach-churning losses. Given the uncertainty and high amount of risk involved in crypto, it would probably be best to look somewhere else besides cryptocurrency for places to invest $10,000.

However, if you’re dead set on investing in Bitcoin or Ethereum, make sure it’s money you can afford to lose. In addition, consider making crypto only a very small part of your overall portfolio, no more than 5%. For more crypto investment ideas, check out our list of the top cryptocurrencies.

Focus on the long-term

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Investing is a long game. No matter which assets you choose to buy with your nest egg, your investment performance will see both gains and losses over the years. And that’s to be expected—your job is to remain focused on the future.

If you can manage to earn a 10% return on your investment every year for 30 years, your $10,000 could grow to as much as $174,000—all without contributing another penny on top of your original investment.

That’s the magic of compound interest. On the other hand, if you kept $10,000 in cash, in 30 years all you will have is $10,000. And after the impact of inflation, the purchasing power of your $10,000 will be much less than it is today.

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Investing FAQs

How to invest in stocks?

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There’s more than one way to invest in stocks. You can buy individual stocks, invest in ETFs or even buy mutual funds.

Investing in individual stocks is best for people who enjoy learning about the market and different companies, and who are willing to take an active role in picking what’s best for their portfolio.

Owning an ETF is like buying many stocks from the same sector or index, giving you more diversification. Investing in mutual funds works like ETFs, but actively managed mutual funds have managers that pick different stocks for you.

How can I buy gold?

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Gold can be purchased either in its physical form, as stocks of gold mines, as gold mutual funds and ETFs, or as futures and options. Each opportunity comes with pros, as well as special considerations.

Physical gold, for example, can be bought as gold bars (or bullion), gold coins or jewelry. If you decide to buy physical gold, you’ll need to consider a secure storage location, insurance (particularly if storing your gold at home), and the purity of the object, since the gold content in the item has a big impact on its value and worth.

Alternatively, you can invest in a basket of gold-related securities through gold mutual funds or ETFs. For investors who prefer more risk, gold futures involve a committment to buying or selling gold in the future at a specified price.

How should I invest in real estate?

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Purchasing your own primary residence or rental properties is a common way that people invest in real estate, but you can add real estate exposure to your portfolio in several additional ways.

Real Estate Investment Trusts (REITs) are public companies that raise funds by selling shares of stock and issuing bonds, the proceeds of which are used to buy and lease out real estate assets. This offers immediate access to real estate investments with as little money as possible.

Real estate investing platforms offer a more hands-on approach for investors to pick specific real estate development projects to back.

Should I buy NFTs?

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NTFs are digital assets that can’t be duplicated, but buying them requires some knowledge of cryptocurrency and blockchain technologies. A minority of NFTs have become very valuable, while the vast majority are not reliable investment assets.


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