How To Invest $10,000 Wisely: 8 Best Ways

Cheerful young woman working with laptop and documents.
BartekSzewczyk / Getty Images/iStockphoto

Maybe you’ve been diligently saving a little every month for a few years, or you’ve recently come into some money you didn’t expect, like a bonus at work. Your emergency fund is fully funded. Now you’ve got $10,000, and you want to invest it so you can make even more money.

See: 3 Things You Must Do When Your Savings Reach $50,000

How Can I Invest $10,000?

When deciding how to invest $10,000, consider your personal finance and retirement goals — the best investments are the ones that can help you meet them. You could play it safe and park the cash in a high-yield savings account, where it could earn a few hundred dollars in a year as long as interest rates stay up.

Alternatively, you can try one or more of these smart ways to put $10,000 to work for you:

  • Contribute to a 401(k) or an individual retirement account
  • Contribute to a health savings account
  • Invest in real estate
  • Buy Series I savings bonds
  • Ladder some CDs
  • Invest in index funds, mutual funds or stocks

1. Contribute to a 401(k) or an IRA

If you have a 401(k) at work and you’re not contributing the maximum amount you can — which is $22,500 in 2023, plus a $7,500 catch-up contribution if you’re 50 or older — increase your contributions by up to $10,000.

Another option is to contribute to an individual retirement account. An IRA is a tax-advantaged savings account similar to a 401(k). You can also contribute to an IRA even if you have a 401(k) or pension available through your employer. Contributions to a traditional IRA are tax-deductible, and you pay taxes on the withdrawals you make after you’ve retired. A Roth IRA lets you contribute taxed funds now so the withdrawals in retirement are tax-free.

Investing for Everyone

If you need the deduction to lower your taxable income now and expect to be in a lower tax bracket after you retire, a traditional IRA may be a good place to invest some of your extra $10,000. If you’d rather not worry about paying taxes on the withdrawals in the future, a Roth IRA may be a better idea.

Contribution limits for both types of IRAs are $6,500 per year, plus an additional $1,000 if you’re 50 or older. Note that these contribution limits apply to all IRAs — whether Roth or traditional — combined. So if you have a traditional IRA and a Roth IRA, you can’t contribute more than the limit to either or both. The 401(k) is a different animal, however, with its own contribution limits.

2. Contribute to an HSA

A health savings account lets you save pretax money for medical expenses if you have a high-deductible health insurance plan. You can contribute up to $3,850 if you’re the only one on your insurance plan or $7,750 if you have a family plan. In 2024, these limits will increase to $4,150 for an individual with self-only coverage and $8,300 for an individual with family coverage. After you turn 55, you can contribute an additional $1,000 per year.

The money you put into an HSA grows tax-deferred, and the money you take out is tax-free if you withdraw it to pay eligible healthcare expenses. And you can roll it over from one year to the next — all the way up to and into retirement. When you consider that the average 65-year-old should have around $157,500 set aside to cover healthcare expenses in retirement, according to Fidelity, an HSA can be a smart investment.

Investing for Everyone

3. Invest In Real Estate

Although you likely will not be able to buy a house or building with $10,000, you can still invest your cash in real estate. One option is to buy vacant land that you could later build on or sell for a profit. It’s a low-maintenance investment, but one that can be hard to convert to cash when you need it.

Of course, you can invest in real estate without putting your name on a deed. Real estate investment trusts give you access to commercial real estate investing. A REIT is actually a company that owns office buildings, apartments and other types of property, and you can buy or sell shares of the company like stock. REITs tend to pay dividends that can produce an income stream.

4. Buy Series I Savings Bonds

Savings bonds may seem like a boring, old-fashioned investment, but they can be useful in volatile markets. And I bonds are not your grandfather’s savings bond. They provide a hedge from inflation because the interest rate is tied to inflation.

Here’s how they work. You can buy up to $10,000 worth of I bonds in a calendar year. The bonds pay interest for 30 years. The interest is based on two rates: a fixed rate for the life of the bond, plus a rate that changes every six months with inflation. The fixed rate and the inflation rate are announced every May 1 and Nov. 1. I bonds purchased between Nov. 1, 2023, and April 30, 2024, are currently paying a rate of 5.27% interest.

Investing for Everyone

Interest on I bonds is compounded semiannually. When you cash in your I bond, you get the principal plus all the interest earned for as long as you’ve had the bond. You must wait at least one year after buying an I bond to cash it in, and if you cash it in before five years have elapsed, you’ll pay a penalty of three months’ interest.

To purchase Series I savings bonds, go to the TreasuryDirect website.

5. Ladder Some CDs

Like all fixed interest rates, certificate of deposit rates are going up. But rates can — and probably will — fall again, and CDs lock in your money for a fixed period of time. The longer the term, the more risk that rates will rise and you’ll earn less than you otherwise could.

The answer to this dilemma is a CD ladder. To create a CD ladder, you purchase CDs with varying maturities.

For example, with your $10,000, you could open four $2,500 CDs, one for each of the following terms: one year, two years, three years and five years. When your one-year CD matures, you can put that money into a longer-term CD if you think interest rates will continue to rise, because you’ll have another CD coming due in another year. When that one matures, you can make the decision about whether to put that money away for the short term or the long term. Because you have some of your money maturing every year or two, you minimize your interest rate risk.

Investing for Everyone

6. Invest In Index Funds

An index fund is a collection of stocks that seeks to replicate an index or an investment benchmark. You can buy an index fund that includes the stocks in the Dow Jones Industrial Average, for example, or the S&P 500.

Index funds are passively managed, which means that investments in the fund are bought and sold only to remain true to the index. An index fund is designed to provide the same return as the index it follows, so it won’t outperform the benchmark.

Many index funds are exchange-traded. Exchange-traded funds, or ETFs, are funds that trade like stocks. This means that their prices change throughout the day, and they typically have very low fees.

7. Invest In Mutual Funds

A mutual fund is a “basket” of stocks, and investors purchase shares of the fund. Because there are different stocks in the basket, a mutual fund provides more diversification than an individual stock. Mutual funds are actively managed, meaning that there is a portfolio manager who watches the fund, buying and selling positions as they see fit.

8. Invest In Individual Stocks

Picking your own stocks entails more risk than buying index or mutual funds, but there is also the potential for a greater return. For a new investor, the best advice may come from legendary investor Warren Buffett: Buy what you know. Consider the stocks of companies that make the products you use and, ideally, can’t live without. If it’s a newer product that’s just beginning to take off, so much the better.

Investing for Everyone

If you’re going to invest in individual stocks, you can manage the portfolio yourself with an app like Robinhood or E-Trade, use a discount broker like Fidelity, or get some help from a full-service broker like Charles Schwab or Edward Jones. Some firms offer both discount and full-service options.

Keep in mind that you get what you pay for — a full-service broker will cost you more in commissions and fees. In exchange for that cost, you get advice on what to buy, sell and hold.

Final Take

If you’ve fully funded your emergency fund, you’re ready to deal with surprise expenses. Once you’ve done that, it’s time to put your money to work. Whatever you decide to do with your $10,000 in savings, it should be something you are comfortable with and something that furthers your financial goals.

Allison Hache contributed to the reporting for this article.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.


See Today's Best
Banking Offers