If you had $10,000 to invest, how would you invest it? Liann and I revisit this question every so often because it’s a good mental exercise that is indicative of your financial mindset. Why $10,000? It is an amount of money that really allows you to see some solid return on investment. Here are some of the best ways you can invest $10,000:
Open a High Yield Savings Account
This is pretty much as safe as it gets when it comes to investments. High Yield Savings Accounts are a great option if you need to keep your money liquid and prefer a better return than the next-to-nothing you receive from your normal banking savings account. High Yield Savings Accounts are FDIC Insured and are currently yielding around 1.5% APR (May 2018). While this is lower yielding than a CD, it is a great option if you quickly need access to the money.
Lock It Away in a Certificate of Deposit (CD)
Just like the High Yield Savings Account, a CD is one of the safest investments you can make with your money. CDs come with a lot more rules than the High Yield Savings Account, but will yield higher return on investment. With a CD, you sign up to lock your money into an account for a specific amount on time. They call this the mature date.
Once the CD has “matured”, then you can decide to take your initial investment plus interest or you can renew the CD to keep it growing. Depending on your investment strategy, this could be a positive or a negative. Generally, you cannot make additional deposits once a CD is opened, and, should you decide to withdraw early, you will be charged an early withdrawal fee.
CDs are great if you don’t need access to your money right away and are currently yielding around 2.1% APR (May 2018).
Contribute to a Retirement Account
Saving for retirement is so important to do when planning for your future. $10,000 allows you to maximize your total contributions for a given year to a Traditional IRA or Roth IRA. Currently in 2018 you can contribute $5,500 ($6,500 if you’re age 50 or older) to an IRA account. This means that you can maximize your contributions for the year early and still have some left over for another investment. Some people call this “diversification”, while others (like me) call this “Awesome! MORE MONEY!”.
Invest in the Stock Market
Friend or Foe? That is how I view the stock market. It can make a person a whole lot of money, break the bank, or make for a very solid investment choice. The stock market is a large and deep pool of investment types, which is far past the purpose of this article. However, I did want to highlight it as it is a viable option when choosing how to invest $10,000.
To participate in the stock market, you typically need a brokerage account. Once you are signed up for a brokerage account, you can trade individual stocks, bonds, mutual accounts, and more. Just like peer-to-peer lending, this is a riskier investment type, but has the potential to yield better return on investment than the High Yield Savings Account, CD, and IRA.
Try Out Peer-To-Peer Lending
Peer-to-peer lending is a pretty recent concept in which people borrow from others through an online marketplace rather than a traditional bank. This means that anyone with expendable money can now fully or partially fund a borrower’s loan amount. Peer-to-peer lending typically yields higher than your more traditional and conservative methods of investing, but it is also riskier. Since you, the investor, are lending the money, you run the risk of the borrower defaulting on the loan, causing you to lose money on your investment. This is why you diversify your investments in your peer-to-peer lending: If some loans default, the expectation is that others will perform to balance out your return in the end.
While there is no guarantee for return on investment in peer-to-peer lending, you have the potential to earn a 3-7% return. The leading peer-to-peer lending marketplaces are Lending Club and Prosper.
How Would You Invest $10,000?
So we ask the question again…How would you invest $10,000? Are you the conservative investor utilizing the High Yield Saving Account, CD, or IRA? Or are you the riskier investor willing to risk more to make a better return on investment?
Brian’s Choice: High Yield Savings Account
I am a conservative investor and prefer not to have any risk in my investments. I like to see my money steadily grow over time without dealing with the roller coaster ride of risk.
Liann’s Choice: Invest in Real Estate
Yes, this was not on the above list because I believe $10,000 is a low threshold to get started in Real Estate. I’m not saying there are not ways to do it, but you may need to be more creative to make it work. Plus, Liann doesn’t like being confined to options, so she is rebelling against me.
Don’t forget to share your responses below!