How to Invest Your First $10,000 in the Smartest Ways

Saving your first $10,000 is a huge milestone. What you do with that money can make a big difference in your life. It can, for instance, bring you a lot closer to your financial goals if invested wisely. Deciding exactly what to do with the money to maximize its benefits is not always easy. To help you with that plan, here are eight smart ways to invest your first $10,000.

1. Mutual Funds

Mutual funds are a great investment vehicle for several reasons. First, they offer diversification. An S&P 500 index fund, for example, instantly diversifies your investments across 500 of the largest companies in the world. Second, if you pick the right type of mutual funds, mainly index funds, the costs are extremely low.

The only research you have to do is in deciding which mutual funds to buy. Here it’s important to start with an asset allocation plan. It sounds complicated, but it’s not. In fact, a plan can be as simple as investing ⅓ in U.S. companies, ⅓ in foreign companies, and ⅓ in bonds.

Related: Check out these sample investment plans and specific mutual funds options

Once you decide on the strategy that best matches your preferences, all you have to do is purchase the mutual fund from a reputable fund company. Some trustworthy places to begin are T. Rowe Price, Vanguard, and Fidelity. Most banks also offer investment services where you can put your money into a mutual fund.

2. High Yield Certificates of Deposit

Certificates of deposit (CDs) are similar to savings accounts, except that they come with certain terms that limit when you can withdraw money without incurring a penalty. With a savings account, you can deposit and withdraw money freely. With a certificate of deposit, you agree to keep your money in the account for a certain period of time in exchange for a guaranteed interest rate that is often higher than what a typical savings account would offer. Generally speaking, the longer you agree to keep your money in the account, the higher the interest rate will be.

To find high yield CDs, you should consider keeping your money with an online bank. They typically offer higher interest rates than what traditional in-person banks offer. For example, current rates on a 5-year CD fall in the range of a 2.00% Annual Percentage Yield (compounded daily). If you put your $10,000 in this CD today, you will have $11,052 after the fifth year. It may not be the most lucrative investment, but it is a guaranteed $1,052 in returns.

3. Peer-to-Peer Lending

If you prefer fixed return investments and can tolerate a little more risk than what a CD poses, peer-to-peer lending may be a good option for you. In the peer-to-peer lending marketplace, companies connect investors with borrowers to create a lending environment that does not involve banks directly. Borrowers are attracted to this type of marketplace because it often offers lower interest rates on loans. Meanwhile, investors get monthly returns with a guaranteed interest rate.

Lending Club and Prosper are two reputable peer-to-peer lending sites. On each site, you decide which loans to give based on risk. Risk is determined by the borrower’s credit score. Higher risk earns you higher estimated returns. On Prosper, the average total return is 6.8% – much greater than that of a comparable CD and similar to the returns you would get from a mutual fund.

Related: Read our comparison of LendingClub and Prosper

4. Individual Stocks

Investing in individual stocks can be daunting, but it offers great potential for returns. The biggest challenges are choosing the right ones and sticking with your choice. To get started, ask yourself which industries you are most familiar with. Then, follow a few companies in those industries, making sure to read news articles on their performance.

In addition to following the companies in the news, read the annual reports that detail their financials from year to year. You may want to invest in companies that have steady earnings and have not had any negative attention in the media. Or you may want to invest in companies that are showing growth from year to year and are constantly in the news for launching new products or services.

Once you have narrowed down the list to companies you believe in and will continue to watch, it is time to purchase shares. The least expensive way to start investing is through an online brokerage. Below is a list of reputable online brokerages and the fees per trade.

Investing in stocks should generally be a long-term plan. Do not become discouraged if the value of your shares decreases one day. Focus on the increasing value over a period of years.

5. Professional Certification

Investing money does not always mean putting that money in the stock market or into a savings account. You can invest money in yourself as well. If you work in an industry where having a certification will increase your earnings, getting the designation is a wise investment. In addition to the salary increase, you will increase your own knowledge and credibility.

A prime example is becoming a Certified Public Accountant. Going above and beyond the bachelor’s degree will make you more attractive to employers and give you the skills and resources you need to offer additional services. Find out which certifications are valuable in your industry (or check out this list for some good ideas) and use your first $10,000 to invest in yourself and your career.

6. Strategic Coaching

Another way to invest in yourself is to get a strategic coach. When you invest in yourself, the outcome should be improved skills and increased knowledge that is applicable to your goals. Coaches are great at helping people hone in on the skills and knowledge they need to take things to the next level. You can get a coach in just about any field. Strategic Coach, Inc. has been providing career coaching for 26 years now, offering a number of services and programs to help you plan your path, narrow your focus, and gain the advantageous edge along the way.

If you are interested in real estate investing, you can hire a coach to help you navigate the market and make the best investment decisions. If you would like to work in a completely different industry but find it difficult to land jobs, you can hire a career coach to perfect your résumé and help you find job leads in your desired field. The Professional Association of Résumé Writers and Career Coaches (PARW/CC) provides you with a network of certified résumé writers, interview professionals, and career coaches in one place, so that you can pick the perfect person to help you plan your future. Focus on very specific goals, then choose a coach who has achieved those same goals and helped their clients do the same.

7. Publish A Book

Publishing a book is a great way to establish yourself as an authority in a field, launch your career, and make some money. The biggest upfront investment will likely be your time. It takes research and dedication to write a compelling book that people will actually want to read. Pick a topic that you know well and that people are willing to pay to learn more about. Set a deadline for finishing the first draft. Work backwards from there to figure out how many pages/words you have to write each day to meet your deadline.

Then comes the money investment. Hire an editor to review your book and polish the writing. Hire a formatting expert to make your book available on all reading platforms. Hire a graphic designer to design your book cover. Lastly, hire a publicist to market your book.

Once your book is ready for the masses, you can also self-publish a digital version with ease. While this can be done via your own website using an e-commerce tool, the easiest method is probably on Amazon through Kindle Direct Publishing (KDP). It is free to upload your book file, and authors typically get royalties of 35-70% of the sale price.

8. Save For Future Goals

If none of the above options for investing your first $10,000 match your preferences, you may just want to save it for future goals. Do you want to get married soon? Save the money for all the costs associated with a wedding. Do you have children? Put the money in a 529 account for their college expenses. There is no hard and fast rule that dictates how you must invest your money. The key takeaway is to make sure your money is serving your goals, whether they are purely financial or more personal.

Other Alternatives

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.

Wrapping Up

This list includes just a few great ways to invest your money financially and in yourself. Remember, investing money is not all or nothing. You can choose to split your $10,000 between individual stocks and mutual funds if you like. You can choose to save $5,000 for future goals and use $5,000 to start your own business. Just make sure your decisions are calculated and relevant to your ultimate goals.

Looking for a detailed investing guide? Check out our Guide on How to Start Investing.

Topics: Investing

Leave a Reply