Smart Ways to Invest $10,000 in 2018

Saving money can be a challenge. It’s no secret that many Americans struggle with accumulating savings. If you’ve saved up $10,000, you’re ahead of the curve. If you have an extra $10,000 due to an expected windfall, that’s even better. The next step is to put your money to work with some smart ways to invest $10,000.

Robo Advisors

One of the simplest ways to invest your money is by using a robo advisor. These are investment platforms that do all of the work for you, including companies like Betterment and Wealthfront. You set up a profile, add funds, and select your investment preferences. The company takes care of the investing for a low fee (0.25 percent to 0.4 percent for Betterment and 0.25 percent for Wealthfront).

Robo advisors take care of rebalancing your portfolio and tax optimization. If you’re new to investing or you prefer a hands-off approach, robo advisors can be a powerful way to put your money to work.

DIY Investing

On the opposite end of the spectrum, you have DIY investing. Companies like Etrade and Scottrade make investing in stocks a simple process. You fund the account and then choose your stocks. You pay a small fee per trade.

Online stock trading platforms have tools for you to research and evaluate your stock purchases. If stocks don’t appeal to you, you can also purchase bonds, or invest in ETFs or mutual funds. If you’ve dreamed of day trading and don’t mind an element of risk with your investing, buying and trading stocks can be fun and lucrative.

Savings Accounts and CDs

Savings accounts and CDs might seem a little less glamorous than some other investment options. If you are going to need the money soon or if you don’t want to risk any loss, though, they are worth considering.

Although they have a reputation for having low rates, you can find higher rates by using online banks. Since they don’t have the overhead traditional banks do, they can offer higher rates. Since you’re going to invest $10,000, you will also meet the minimum requirements some banks have to access their accounts with the best interest rates. You can find five-year CDs with interest rates of 2.8 percent or higher with online banks, for example, and savings accounts with interest rates of 1.7 percent or higher.

Open a Retirement Account

Although retirement can sometimes feel far away, it’s important to start saving for retirement as early as possible. In addition to employer-sponsored plans, you can start your own individual retirement account, or IRA.

IRAs can be funded with stocks, bonds, index funds, mutual funds, or just about anything else. You can open an IRA through banks and other financial institutions. When you open an IRA, you can choose between a traditional IRA and a Roth IRA. With a traditional IRA, you can deduct your contributions on your income taxes in most cases, but you pay income taxes when you withdraw the funds. With a Roth IRA, you can’t deduct your contributions now, but you don’t have to pay income taxes on the income when you withdraw the money.

There are limits to how much you can contribute to an IRA. The current limit is $5,500, or $6,500 if you are age 50 or older. You also may have limitations on the amount of your tax deduction if you participate in an employer-sponsored plan. Even with the limitations, though, IRAs are a powerful way to meet your long term goals for retirement.

Invest in EFTs

An exchange traded fund, or ETF, is a popular investment option on sites like Acorn and Stash. ETFs are funds made from different investments that are grouped together and then carved into smaller shares. They can include hundreds of investments, which makes them an appealing part of a diverse investing strategy and the smartest way to start investing in the stock market.

ETFs are professionally managed and traded on stock exchanges. This makes them easy to buy and sell. They are affordable and help reduce your risk since it’s spread across numerous investments.

Peer-to-Peer Lending

Peer-to-peer lending connects people who need to borrow money to those that have the money to lend. There’s no financial institution involved, and you can earn relatively high returns.

Lending Club is the largest peer-to-peer lending platform. You invest a minimum of $1,000, and you choose how you want to invest your money. You can automate your investments or choose loans or notes manually. Notes allow you to purchase fractional portions of loans, which helps you diversify your portfolio. Historically, Lending Club returns have ranged from 3 percent to 8 percent.

Prosper has a similar model for peer-to-peer lending. It has a lower minimum investment, though, of $25.

Real Estate

You might not think you can invest in real estate with $10,000. There are some options for making it work, though. One is by pooling your money with others and investing in a property together. Both residential and commercial properties can provide ongoing returns.

Another option for investing in real estate is utilizing a real estate investment trust, or REIT. REITs own commercial and real estate properties. You can invest your money with the REIT and earn returns from dividends and appreciation.

REITs are perfect for a longer-term investment strategy of at least five years. Fundrise is one example, which you can set up and fund online. The minimum investment is $500, and you pay a 0.85 percent asset management fee and a 0.15 percent investment advisory fee. You get to enjoy the perks of owning real estate without having to deal with tenants.

Paying Off Debt

Paying off debt may not be the most exciting option for investing $10,000, but it may be the most powerful choice. Credit card debt, with its compounding interest, can be difficult to pay off. If you’re just paying the minimum payments, it can take years to pay off your debt. If you’re paying $100 per month on a $5,000 credit card balance with a 10 percent interest rate, for example, you will pay almost $1,500 in interest, and it will take you more than five years to pay off the card.

By paying off credit card debt, you’re paying yourself. You can save thousands in interest and improve your credit score, which makes obtaining credit easier down the road.

Invest in Education

One investment that can improve your income for years to come is education. You can go the traditional route and earn a degree; you can go for an advanced degree in your current field, or you can retrain in a completely different one.

If getting a degree isn’t for you, there are also countless accredited online courses you can take for credit. These can teach you specific business or technical skills that can move you forward in your career. You can learn to build websites, learn how to market a business online, or learn computer animation. Udemy and Coursera are two popular platforms for taking online classes.

Start a Business

Another one of the smart ways to invest your $10,000 in yourself and your future is by starting a business. There are numerous business options that you can kick off for significantly less than $10,000. To start a monetized blog, for example, you just need to pay for your web domain and web hosting fees. You may also need a high-quality camera and microphones if you plan to make videos. With a blog, you create compelling content around a topic you enjoy. As you build an audience, you can utilize affiliate links, add advertising, and sell your products or services. Podcasting uses a similar model for bringing in income.

You can also start an online store. You can utilize Amazon’s fulfillment option to reach a large audience with the products you find. If you have a knack for creativity, you can open and run an Etsy shop. You can also set up a web store to complement your blog or website—there are a ton of east-to.

Although $10,000 may not seem like a lot of money, it’s enough to make a significant difference in your life. Use one or more of these strategies to maximize your returns and let us know how it goes!