How To Invest $10,000

If you’ve got an extra $10,000 at your disposal, then you should feel fortunate.  With that much money, there are a multitude of ways you could start putting it to work for you!

Here are our top seven picks for how to invest $10,000.  Try any combination of these tips, and I’m sure you’ll benefit for years to come.

investing 10000

1-Pay Off A Loan

A good way to invest $10,000? Pay off your loan! For most small loans and debts, $10,000 will go a long way towards either paying it off completely or knocking it out entirely.

If it’s high-interest debt such as a credit card balance, this is for sure a smart way to invest your money.  Let’s say that you’ve got a credit card with $10,000 of debt and it carries an APR of 21.99%.  That works out to $6,165 you’ll owe over the life of that loan.  So, by using this $10,000 to pay off the entire balance all at once, it’s almost like you’re making a 61.7% return on investment by not having to pay back that interest.  That’s definitely a smart move!

Even if your loan carries a smaller interest rate such as ones for your car or student loans, paying them off as quickly as possible is going to also help save you from paying a lot of unnecessary interest.  Plus, not having a loan anymore will free up some extra cash in your monthly budget now that you can now use for whatever you want.

2- Put It In Your 401(k) Or IRA

Anytime you come into extra money, it’s always a wise decision to prioritize investing in retirement.  

The best way to do this is to use a tax-advantaged savings tool like your 401(k) or IRA.  Either option will allow you to invest that windfall into funds that will grow and compound for decades to come.  That $10,000 could easily multiple into six figures by the time you’re ready to retire!

If you haven’t already, you could just put the money directly into your IRA.  However, keep in mind that as of 2020 the contribution upper limit for IRAs is $6,000 (or $7,000 if you’re age 50 and older).  To make sure the whole $10,000 makes it into your retirement funds, you could split the difference by also bumping up your 401(k) contribution.  That way, you’ll spread the money across both accounts.

retirement planning

3- Invest $10,000 In Your Emergency Fund

If you haven’t started an emergency fund already, or it’s not quite as cushy as you’d like it to be, now is the time!  

Most financial experts will agree that your emergency fund could be should cover at least 3 to 6 months’ worth of your living expenses.  For most people, $10,000 would definitely make a significant contribution to get them right into this range.

Put the money into an easily accessible savings account that earns a decent rate of interest (such as an online account with Ally).  Whatever you do, don’t touch this money unless you find yourself truly in an emergency situation!  This fund is intended to help support your time of need and keep you from having to reach out to high-interest credit cards or personal loans.

4- Pay Down Your Mortgage Principal

Want to take years off the life of a mortgage?  Because most are structured for 30 years, paying off just a little bit of the principal upfront can drastically reduce your payment schedule later on.

For example, let’s assume you’ve just taken out a mortgage of $150,000 with an interest rate of 4.5 percent.  Using a simple online mortgage calculator, we can see that a one lump-sum payment of $10,000 towards the principal will knock off 3 years and 10 months.  Also, the total amount of interest you’ll pay over the life of the loan drops from $123,610.07 to $98,435.72.  That’s a savings of $25,174.35!

Mortgage Principal

5- Invest In Dividend Stocks

If you’re looking to start making some money right away from your $10,000 investment, then one thing you’re going want to try are dividend-paying stocks.

With dividend stocks, the company pays you a percentage of the earnings they make every quarter just for simply being a shareholder.  That means for literally doing nothing other than owning the stock, you’ll receive a check payment! 

Plus, since a dividend stock is a stock, it has the potential to increase in value as the company continues to profit.  There’s even a belief that since a business has a strong enough balance sheet to share its earnings that this makes dividend stocks a more reliable investment over other types of stocks.

While the average dividend yield from the stocks in the S&P 500 index fund is approximately 2 percent, with a little bit of research, you can generally achieve a higher return.  If you’d rather own an ETF (exchange-traded fund) instead of researching stocks individually, then here’s a list of dividend ETFs paying between 3 and 5 percent.  That would mean your $10,000 investment could start $300 to $500 per year!

6- Start Your Own Small Business

Have you been thinking about starting your own business?  Creating your own business can be one of the best ways to make your initial investment several times over.  But don’t let anybody fool you.  It could take time and will definitely require a lot of hard work.

Start by drawing up a business plan and deciding where your $10,000 could best be used.  For instance:

  • Do you need to buy materials or special equipment to produce your product?
  • Will you require special software that will aide in the service you’ll provide?
  • Do you need to create a website to let the world know that you exist? 
  • Should you work with a marketing company to get the word out?

Remember that with a business, you’ll want to keep track of all of your transactions.  This is not just important for your taxes, but it’s also useful for understanding the financial health of your business at all times.  Review it often and make sure your $10,000 investment is going towards the things that are going to best help get your business going. Learn more about starting your own business with our guide to the six best books on starting a business.

Start a business

7- Become A Landlord

Speaking of starting your own business, have you ever thought about making money by investing in a rental property?

According to real estate investor Zach Evanish on the Side Hustle Nation podcast, “single-family homes can still be an almost-passive investment”.  And he’s not alone in this opinion.  Take a look at just about any passive income or side hustle website on the Internet, and you’re almost guaranteed to find that “being landlord” is one of the most highly mentioned tips. 

Depending on your area, $10,000 could be a great start to a down payment on your first rental property.  As for the rest of the mortgage, generally most landlords use the revenue from their tenants to cover the payments.  That’s why it’s such a lucrative side hustle.  Essentially, you’re using your tenants to pay for the equity in your rental property!

If you’d rather not deal with tenants or property directly, then you could always invest in a REIT (real estate investment trust).  These are funds where investors pool their money to purchase groups of various real estate assets (similar to how a mutual fund works).  Nearly every major financial service provider such as Vanguard or Fidelity sells shares of REITs.

Final Thoughts: How To Invest $10,000

Now you know seven great ways on how to invest $10,000. Looking to invest a little less or more maybe? If so, you may also enjoy our articles on how to invest $100,000 or how to invest $1,000. No matter the amount, investing is always a good idea!

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DJ Whiteside

DJ Whiteside is a financial enthusiast who believes in helping other people to achieve financial independence. He’s constantly looking for practical ways to optimize savings, reduce spending, and create a lifetime of passive income. DJ holds an MBA from the University of Michigan, which allows him to take an analytical approach to financial topics. He has been a financial writer since 2011 and has self-published 5 personal finance eBooks relating to saving, retirement, and financial independence.

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