The Best Way To Invest $10K Today, According to Steve Chen
Written by
Karen Doyle
Edited by
Jenna Klaverweiden
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Steve Chen, personal coach and self-proclaimed “millionaire teacher,” has over 2 million Instagram followers, and in a recent Instagram post, he shared an easy, effective way to invest $10,000 and turn it into over $1 million in retirement.
Here’s what you need to know about the best way to invest $10,000 today, according to Chen.
What Should You Do With $10K Today?
Chen said there’s an easy answer to this question. He said you should invest it in an S&P 500 exchange-traded fund (ETF) and leave it there. But how do you do that? Which fund? And how much will you have when it’s time to retire?
Here’s how it all plays out.
Open and Fund an Investment Account
Chen recommended going to Fidelity or Schwab and opening a brokerage account. You can do this at many different places, but Fidelity and Schwab in particular do not charge account fees or online commissions. If you choose to open an account elsewhere, make sure it does not charge fees either.
To fund the account, you can electronically transfer the money from your checking or savings account into your new brokerage account.
Purchase Investments
Chen recommended investing in an S&P 500 ETF. These are funds that mimic the S&P 500 stock index, which is made up of 500 leading publicly traded companies in the U.S. There are several S&P 500 index funds available. Chen mentioned the SPDR S&P 500 ETF (SPY), Vanguard S&P 500 ETF (VOO), iShares Core S&P 500 ETF (IVV) and SPDR Portfolio S&P 500 ETF (SPLG).
These funds are all ETFs, which means that, like a mutual fund, the fund invests in a “basket” of securities. In this case, it’s most if not all of the stocks that make up the S&P 500. An ETF is different from a mutual fund in that it is traded like a stock so its price can fluctuate during the trading day. Mutual funds, on the other hand, are priced only at the end of the day.
Additionally, mutual funds can be more costly than ETFs because most of them are managed by a portfolio manager who buys and sells investments according to the fund’s objectives. Since index ETFs simply track an index, no management is necessary.
Watch Your Money Grow
Next, you just need to leave the money in the account. This seems like it should be the easiest part, but for some people, it’s the hardest. You need to leave the money invested and reinvest all your earnings. In other words, just don’t touch it.
Chen estimated, based on the past performance of the S&P 500, that after 30 years, your brokerage account will be worth around $174,494.02. If you leave the money alone for 40 years, you’ll have about $452,592.56. And after 50 years, your initial $10,000 investment should be worth around $1,173,908.53.
He noted that compound interest is responsible for the growth in this hypothetical $10,000 investment. These estimates are based on the historical performance of the S&P 500, so obviously they cannot be guaranteed.
Chen emphasized that risky investments like dogecoin are not the best place to invest your money because they are “like gambling.” Investing $10,000 in an S&P index ETF when you’re young and leaving it there is a smart way to get a jump start on a solid nest egg. Just ask Steve Chen.
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