How to Invest: 10 Smart Ways to Invest $10,000 Like a Pro

What would you do with $10,000? Here are 10 great ideas on the best way to invest $10,000 and responses from the Dough Roller community who were asked this very question.

best way to invest 10000

A few weeks ago in the Dough Roller weekly newsletter, I asked the following question:

“What would you do if you came into $10,000?”

I received a lot of answers.  What surprised me about the responses were how similar they were.  They varied in the specific details of how people would spend $10,000, but they shared one thing in common–most would use the money to improve their finances.

Most people would pay off debt, put the money into an emergency fund, or invest the money. Some invested for short-term goals, some for long-term goals. In almost every response there was at least one purpose that would improve the person’s overall financial situation.

The responses got me to thinking about another question that I didn’t ask: What would you do with $10? How would the answers be different?

The Power of Consistent Investing

Why do we treat large lump sums of money different than small monthly amounts? We tend to treat larger amounts in a more thoughtful way. Perhaps that’s why it’s easier for some to save a tax refund even when they struggle to save money month to month.

Maybe we need to treat small amounts of money more thoughtfully, too. After all, how we handle small amounts of money has an impact on the bigger picture.

Here are some reasons why we don’t take smaller sums of money more seriously:

  1. It’s hard to internalize compounding–we just can’t imagine $10 growing in any meaningful way.
  2. Spending small amounts doesn’t feel like it’s “bad” like blowing $10,000 would.
  3. Delayed gratification is required when saving small amounts of money.

Consider how you handle small amounts of money and how small daily decisions could improve your finances over the long-term. You may be surprised.

The Best Ways to Invest $10,000

Learn MoreWealthfront Review

If you are really eager to start investing, one of our recommended choices is Wealthfront. They have an easily attainable minimum balance, low fees, and a simple, convenient interface. They’re a great choice to start investing easily and quickly.

Now let’s look at some ideas on how to invest $10,000:

1. Invest With Betterment

Betterment is one of several robo-advisors offering an easy and inexpensive way to invest. You can open a taxable account with Betterment. It’s an ideal way to get started because there are no minimum requirements and Betterment walks you through the step-by-step investment process. Once your account is set up, Betterment rebalances it automatically and reinvests your profits.

2.Invest with LendingClub

Invest in LendingClub notes. LendingClub enables you to invest as little as $25 in loans to other people. You can pick the risk and return you want based on the creditworthiness of the borrower. LendingClub also makes it easy to diversify a large investment across dozens or even hundreds of loans. This diversity protects you against any single default on a loan. I’ve invested in LendingClub for years. To date, my return is 8.09%.

3. Invest in a 401k to Get the Company Match

Without question, the best investment is an employer match of a 401k, 403b, or other workplace retirement plan. This is the closest thing to a free lunch you can find. If your employer matches a portion of your retirement contribution, make sure you invest enough to get 100% of the match.

4. Max out an IRA

This won’t take up all of $10,000 (the IRA contribution limits are lower), but it’s an excellent start. The great thing about an IRA is that you are in total control. You decide where to open the account and what to invest in. And that brings me to number three.

5. Invest in a taxable account

Once you’ve maxed out your retirement plan contributions, open a taxable account. My favorite options are Vanguard (See Podcast 73) and Betterment. With Vanguard, you can invest in a target date retirement fund (yes, you can own these funds in a taxable account). Similar to a robo-advisor, Vanguard rebalances for your and reinvests your dividends. Alternatively, you can use Betterment much the same way you would with an IRA.

6. Pay off high-interest credit card debt

Paying off a credit card that charges double-digit interest is a guaranteed excellent return. There is no risk of an investment going down in value. You can also save a small fortune in interest. To supercharge this investment strategy, take advantage of a zero interest rate balance transfers if possible.

7. Increase your emergency fund

This may not be the sexiest way to put $10,000 to work. But it sure is a smart way. Living paycheck to paycheck is never fun. Aim for at least three months worth of expenses in your emergency fund. We recommend keeping your emergency money in a high yield savings account to maximize your earnings.

8. Fund an HSA account

If you have a high deductible healthcare plan, be sure to fund an HSA account (see Podcast 67). Contributions are tax-deductible, and your money grows tax-free. If you spend the funds on qualified medical expenses, there is no tax on withdrawals either. It’s like getting the advantages of both a traditional and Roth retirement account.

9. Fund a 529 account

A 529 account is a tax-advantaged way to save for a child’s education (see Podcast 113). Not all 529 programs, however, are created equal. Keep in mind that you don’t have to use the one in your state, although there could be good tax reasons to do so. Regardless, a 529 account is a great way to put some of your $10,000 to work.

10. Start a CD Ladder

CD ladder enables you to increase the yield you can earn on an FDIC-insured bank account. By staggering the maturity date of 5-year CDs, you get both higher rates and access to your money. Check out our 5-year CD rates for some of the best offers available today like Barclays, Synchrony or Discover.

EXTRA. Buy Worthy Bonds

Worthy Bonds can be purchased in amounts of just $10 and are used to fund qualified U.S businesses.  The rate of return on a Worthy Bond is a fixed 5%, which means that after one year, your $10,000 in bonds will have yielded a cool $500.

The term of the Worthy Bond is 36-months but it can be cashed in at any time, without penalty.  Interest is paid weekly and all U.S investors are welcome to buy Worthy Bonds.  Funds raised from Worthy Bonds are used to help fuel small businesses via asset-based loans

Bonus: Automate your Investments

Robo advisors are a great way to make sure your money is working for you without the hassle and stress of actively managing it. Below is a list of our favorite robo advisors and some information about each. If you’re interested, here’s a more in-depth breakdown of each robo advisor and how they can help you put your finances on autopilot.

Betterment: If you prefer a hands-off approach, Betterment does most of the work for you by automatically reinvesting dividends and rebalancing your portfolio. When you use an automated service like this, you’re likely not checking it everyday and won’t be tempted to make any major changes that could cost you money. Having a service like Betterment manage your investments could allow your money to grow more quickly over time.

Wealthfront: For young adults new to investing, Wealthfront is a robo-advisor worth a look. Wealthfront stands out in being a true robo-advisor with a fee structure suitable for investors with less than $2 million to invest.

Pesonal Capital: Personal Capital provides you with a dedicated investment advisor that you can reach by phone, web conference, online chat or email. While their Wealth Management service is available for a fee, one of the best features of Personal Capital is their free financial dashboard. You can always sign up for Personal Capital for free and then decide to add their Wealth Management service later. In the meantime, you can take advantage of the following features: 401k fund allocation analyzer, retirement planner, investment checkup tool, net worth calculator, and cash flow analyzer.

TD Ameritrade: TD Ameritrade is another option and overs both self-directed investing and professionally managed investing, or a combination of both. You can learn all about TD Ameritrade here.

Wealthsimple: For new and small investors, Wealthsimple lets you open an account for as little as $1 and also features a Socially Responsible Investing Portfolio (SRI). SRI Portfolio allows you to invest in companies with low carbon emissions, companies that support gender diversity and businesses that support affordable housing.

Ellevest: For a female-focused approach to investing, check out Ellevest. There are no fees for opening or closing your account and there’s no minimum to start. There’s a large mix of asset classes available to invest in and Ellevest can tailor a portfolio just for you.

Read More: The Best Robo Advisors – Find out which one matches your investment needs.

Other Ways to Invest $10,000

Those are my ten choices. Here are the responses from the Dough Roller community:

Larry: That’s a no brainer. Buy stock in a quality dividend paying company. (A great way to invest, but he didn’t say which quality dividend paying stock–Larry, please email me and let us know!)

Karen: I would pay off any outstanding debt that I had and put the rest in savings.

Robert:

  • $2,500 in the checking account for cash flow
  • $2,000 split between two children’s UTMA accounts
  • $2,500 to Vanguard Global Minimum Volatility
  • $2,000 to Fidelity investment account for future investments NOS
  • $1,000 to I bonds

Paolo: If I were given $10,000, I would…

  • Use $5,500 of it to contribute to my Roth IRA contribution for 2015,
  • $3,350 of it to max out my HSA contribution for 2015,
  • $1,000 to pay down my mortgage principal,
  • And the remaining $150 will go towards a trip down to Legoland San Diego for my wife and three kids!

William: Invest.

Jeff: If I came into $10k right now I’d probably put it into one of my Vanguard Index funds. I’m debt free, have my needs covered, and anything else would be just wasting the money.

Christina: I would drop it right into my daughter’s 529 plan!

Sachin Shenoy (Right way to pronounce my first name is Such-in): With $10K there are couple of investment options…

1. The conservative investment option – Put it all in Vanguard 500 Index Fund Admiral. At 0.05% expense ratio its a no-brainer (May be able to convert non-Admiral shares to Admiral if you were already invested in investor shares)
2. Crazy investment option–Invest in USO ETF… Crude should be hitting the bottom sometime soon.

Other options include… Pay off the car loan and redirect the monthly payments to option 😉

Patrick: $7,500 minus expenses at the craps tables in Vegas. $2,500 in baby furniture since the wife is having twins….unplanned btw.

One other note–as a former USAF Capt, Navy Federal (Credit Union) doesn’t hold a candle to USAA. Besides the great insurance, banking and customer service, USAA gives out distributions to their members. Mine was 50 bucks. I don’t have insurance through them presently because I’m living outside the USA.

Donna: I would apply it on my son’s private school loan after I take out taxes to lower his debt.

Stephanie: If I received $10,000 I would give $1,000 to charity, put $2,000 into my dream vacation fund (actually into my savings until I actually am ready to take that dream vacation). I’d use the rest to max out my ROTH 403b (instead of my traditional 403b).

Prime: Spend it on an engagement ring.

Larry: I would buy $10,000 in mutual fund shares in energy/oil companies, such as VGENX.

Jeff: I try to live by the 10-20-70 rule. So I would give $1000, save $2,000, and spend the rest 😉 But in reality, I would probably save most of the $8,000 too. I bet a lot of your answers for this will be based on personality type (nerds versus free spirits, etc).

Guadalupe: Use $7,000 to consolidate debt and the other $3,000 to invest in my network marketing business. Thank You!

Earl: Pick 5 charities that I think need the help and give $2,000 to each.

Joe: Invest part in blue chip oil company stocks. The rest in short term high quality bonds.

Kyle: Buy back the years of service in my pension. The first six months of employment, nothing went onto my pension. I can now buy those months back to add to my service.

Max: I would pay off my credit cards.

Erin: If I were given $10,000, I would put it away for my emergency fund–still working on reaching that goal. I’d put it in a credit union checking account that accumulates exceptional interest.

ACE: Put it towards the mortgage.

Lysa:
Ok- easy :

  • $3k savings–I need a lot more!!!
  • $3k on my c/c that would put a small dent in my debt and lower payments
  • $3k to my mom (unfortunately insulin is not covered with her Medicare, that would hold her for a while)
  • $250–Go Red For Women (American Heart Association)
  • $250–Step Out for Diabetes (I walk in honor of my Mom)
  • $500–Fun Money/Day spa

That’s my personal breakdown. I’ve been hoping for that kinda windfall! Would be nice.

No name given: Spend half on a vacation and half to retirement fund. That what I do with my bonuses.

Mary: If we were given $10,000, I would use $7,000 to pay off my husband’s car loan, and put the remaining $3,000 into our emergency fund.

Logan: I would max out my ROTH ($5,500), put $2,000 in my son’s 529 plan (in GA you can deduct up to $2k off your taxes), and put the rest in cash reserves. Well, I would also buy a nice bottle of bourbon.

No name given: If I was given $10,000, I would use half of it to pay down debt, and the other 1/2 to start saving for a down payment for a house.

Rhea:

  • Express gratitude to whoever provided the $10k,
  • Pay off. or pay down debts,
  • Put 20% into an emergency account,
  • Reserve a small amount to make a special meal with my family,
  • Re-organize/plan/implement a new long and short-term budget.

(Rhea was the only one who mentioned thanking the provider of the $10,000! I didn’t say what the source of the money was, but it certainly could have been a gift. Good catch, Rhea!)

Jessica: Pay down my debt.

Bill: Reduce credit card debt.

AJ: I would use around 5k to invest and build positions and the other 5k to pay down debt.

Ben: If I were given $10,000 in a lump sum, I’d throw it at my fiancée’s student loans. They are at 6.625% through SOFI. Historically would stocks outperform that by half a percent or so? Yes, but gaining freedom by lowering debt is worth half a percent to me. That being said, I don’t know what the breaking point would be. Off the top of my head maybe two percent, but it’s definitely something I’m going to put some serious thought into.

(The best financial decisions aren’t always the ones that make the most mathematical sense, and Ben has provided an example of where this can happen.)

No name given: Ah. $10,000? Tithe, savings, and maybe something towards a long hoped for a visit to friends and family in Italy.

Sandra: What I would do with 10,000? If I wasn’t in financial restraints I would start an IRA (and) emergency fund.

Claus: I would take $6,500 and put it into the Roth for next year, the rest will go into the savings, adding to the reserve fund.

Kelly: Invest it – wherever my allocation needs it!

Jacki: What would I do with 10k? Pay down some credit card debt. Or maybe redo my driveway.

Erik: If I had $10,000, straight to a 25K balance HELOC (Home Equity Line of Credit) at 4.25%.

So there are your responses to my $10,000 question. Thanks to everybody who responded.

What would you do with $10,000?  Leave a comment below.

Listen to the Podcast of this Article

Topics: InvestingPodcast

16 Responses to “How to Invest: 10 Smart Ways to Invest $10,000 Like a Pro”

  1. Mantis Toboggan

    I’m reading a lot of “I would invest X amount” but without specifics. I’m certain we all came here because we searched how to invest 10k. I would love to read specifics. I would strongly suggest veering away from lending club. Stock has plummeted from $25/share in 2015, less than three years later 2.70 a share. Also I just read the FTC filed suit for hidden fees. Doesn’t sound good to me but what do I know. Gooduck out there ☘

  2. Ok… I’m actually coming across this and need advice. My mother wants to give $10k to each of her grand kids. The no brainer, for my kids, 5 & 7, I’m going to get a 529. Now for my niece who is 14. Would this be a good option, or should I get her a high yield CD? I will be in charge of the accounts.

  3. JC Webber III

    I’ve been investing in Lending Club since Feb 2013 (and in Prosper since Nov 2006). I’ve been making 8.06% in Lending Club and 8.6% in Prosper. Here’s my Lending Club progress (I quit contributing to both of them a couple of years ago around the time I hit $10K in each, but still re-invest payments).

  4. Elizabeth

    1. Pay of debts, not including mortgage
    2. Invest in yourself ! (surprised no one mentioned this) . Take some classes to learn a new skill that you can use to get a raise or a new job, start a new business/whatever. Take a class (or classes) to learn to be able to cook from scratch (vice prepared/takeout restaurant) and do home repairs to save money (the ROI may be very high).
    3. If you own your home, use some of the funds to do repairs/improvements that will increase its value.
    4. Donate a portion. Yes, you won’t have a ROI but I found that when I donate my time and/or money, I am not only more relaxed and giving but better able to focus PLUS less inclined to spend money elsewhere – and my net worth goes up by more than the donation amount.
    5. Hire someone to do the chores that keep you from earning more money. If cleaning the house costs $300/month but you use the time saved to generate $400 extra income (or many more hours with family), you have a great return!
    5. Invest in your health. Get a personal trainer, food/vitamins or whatever to get in better shape. this may not only lower medical costs and extend your life but also since you will feel better, you may be able to work better and get more money too.

  5. Invest 1000 on a regulated Peer to Peer lending organisation. Investing in 100 different enterprisesw, that offer to pay back with an added compounding interest, for a period of 6 months. 1000 will clear all my debts. 8000 invest on Bonds.

  6. I would give at least $1k to charity, put away $1,000-1,500 in a mutual fund for my daughter, and put the rest into real estate (either part of a down payment for a rental, or towards improving my home in a way that will improve my quality of life somehow). But charity and my kiddo are absolute certainties!

    • Rob Berger

      Doug, you are absolutely right that you have to have earned income to contribute to an IRA. But assuming that you do have earned income, it doesn’t matter whether the money you contribute literally came from your job, a gift, or money from your savings account.

  7. Hi Rob: thanks for your excellent site; always food for thought here.

    Check out Barclay’s new “Dream” savings account: 1.00% APY, no minimums to open, and bonus interest paid if 6 months consecutive deposits with no withdrawals made. Looks like a good deal!

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