MoneyLife

Best Way to Invest 10k (13 Wise Strategies)

By Grace Kilander
best way to invest 10k

The 2020 global pandemic opened our eyes to the importance of making advantageous financial decisions for the long-term with our futures in mind. Even though investments can be very lucrative over time, many have been wondering if this is the right time to invest because of the economic downturn. 

Wise investors know that periods of economic crisis are actually the best times to invest. There are various ways to invest amid an economic decline, and you can rest assured that you will also receive a high return on your investments. Some examples are as obvious as buying stocks, while others are as sublime as paying off debts and making budgets. 

If you had $10k lying around, what would you use it for? In this article, we’ll outline the best way to invest 10k in 2021.

1. Emergency fund

Consider investing $10k in emergency funds. Just like the name suggests, emergency funds help you in the event of unforeseen emergencies.  

Emergency funds are important because they cater to impromptu cash emergencies where you’re suddenly in need of fast cash. For example, when you have an emergency fund, you can manage a medical emergency or make must-have renovations on your house without having to take out credit loans or drain your retirement funds. 

Emergency funds often come in the form of cash or other liquid assets such as high-interest savings accounts, money market assets, or mutual funds. This is also a good avenue to explore before you commit to more volatile investments like stocks.

2. Pay off credit card debt

Surprised? Don’t be. Paying off debt is essential. The only interests you want are from your ROI, not from credit cards. The latter only makes you poorer. One of the best ways to invest in 2021 is to reduce how much interest you accrue on credit card debt. 

The unfortunate imbalance between debts and investments is that while they both attract interests, debts attract more interest than investments. The more you spend paying off debt, the less you have to live on or save. As a result, you spend more than you earn.

To settle your debts, you should start with the debts that have the highest interest rates. Or you can choose to clear off the weightiest debt first. Either way, you’ll be on your path to financial stability when you pay off credit cards as soon as possible. Don’t waste money on interest rates if you can avoid it. Learn how to keep a credit utilization of 30% or lower.

3. Stocks

Stocks allow you to earn a portion of another company’s profits. When you’re fortunate enough to know when a company does its initial public offerings, you’ll have the privilege to be at the top of the food chain. As the demand of stock increases, so will your earnings.

However, you need to have a good investment strategy if you want to invest in stocks. Ten thousand dollars may seem small if you want to buy shares in reputable companies, like Amazon and Cable One which sell individual shares for more than $2,000, then you should look into fractional shares instead. 

Fractional shares allow you to buy a fraction of their shares. This is certainly a good way to make money off the big name brands. Even so, it is important to do your research because not all companies offer fractional shares and not all fractional shares are the same price.

4. Bonds

Another way to invest $10,000 USD is to put your money into bonds. Bonds are used by the government and big corporations as a way of generating funds for upcoming projects. With bonds, there’s a lower chance of losing your capital. Bonds also help you ensure a steady and predictable income since they are paid every six months.

5. Mutual funds 

Join over 100 million Americans by investing in mutual funds. This is a brilliant and popular way to invest your $10,000 with minimal risk and maximum returns. Mutual funds are funded by pools of investors who put their money towards the same venture. 

Mutual funds are easy to access, simple to purchase, quick to sell, and designed to meet your individual financial goals. Also, mutual funds have a lower risk than stocks because they diversify your investment properties across hundreds of investments. 

6. ETFs

Investing your money into an exchange-traded fund (ETF) has proven to be more appealing than mutual funds. ETFs have a lower cost of transaction and they come with fewer fees. 

They also have greater liquidity since they are traded during exchange hours when the market is open. Trading during open hours also exposes you to even more types of investment that you might not have heard about yet. 

MoneyLion’s fully-managed investment account offers you the ability to effortlessly invest in ETFs and other forms of investment.

7. Continued Education

Another strategy to execute when you find yourself wanting to invest more money is to earn more money. Whether you decide to complete a relevant degree, finish a specialized course, or acquire a new skill through training, continuing your education is an investment that will massively pay off in the long run.

By investing in yourself, you will subsequently increase the value that you bring to the table, which will put you in a position where you can earn more by holding a higher-paying position. However, you don’t need to spend $10k on education as there are multiple ways to get financial support for your classes.

8. 401(k) 

The best time to save for retirement is well before you plan on retiring. With a 401(k) plan, you can channel a percentage of your income towards retirement. 

The 401(k) plan is a tax-advantaged plan that allows employees to contribute to their retirement in the company they work for (if such companies have such offers). This is a great way to invest especially if your employer matches. This means that the more money you put in, the more “free money” you’ll get in the form of your employer’s matching program.

9. Crowdfunding

Rather than allowing your money to sit idle, you can put it towards a course by way of crowdfunding, which involves a pool of people contributing their assets to fund a project or a start-up company.

10. Real estate

You can never go wrong with real estate because land appreciates in value over time. The $168 trillion real estate market is a prime example of why it’s wise to invest in real estate. The dividends are often evident in the long term as the value appreciates.

You can invest in real estate by taking your $10k and buying a home that you can start renovating. After you’ve flipped a low-cost house and transformed it into a profitable resource, you can start building equity by selling it for more than you purchased it initially. Instead of selling the real estate, another amazing option is to hold onto the property and offer it to the public as a rental property through Airbnb or VRBO.

11. Cryptocurrency

You can make your $10,000 work for you by investing in cryptocurrencies. Ever since Bitcoin became popular in 2009, several other cryptocurrencies have emerged and thrived in a similar manner. Before investing in cryptocurrency, look more into what it means to invest in crypto because there’s a lot to learn. 

12. Peer-to-Peer Trading

Although a risky venture, peer-to-peer trading is another way to invest. In this investment plan, you lend your money to a borrower and charge them interest, which ends up being your profit over time. 

13. Roth IRA

Similar to a 401(k), a Roth IRA is another investment opportunity. But unlike a 401(k), a Roth IRA allows you to put aside funds from your post-taxed income for retirement, and the money is not taxable. It’s also available for withdrawal after retirement without having to pay income tax. 

Consult a financial advisor

Investing is a better financial decision than saving. Fortunately, there are numerous ways to invest your money, and you get to decide how much of a risk you take in the process of making a profit. If you need to speak to someone one on one, consider consulting a financial advisor before making any investment decisions. 

It is also wise to remember that the best investments are made with money you wouldn’t mind losing. So, if you’re deep in debts, or your financial game is low, save your money first and wait to invest until it’s affordable for you.

For a more hands off approach, a MoneyLion investment account is offers auto-investing starting with as little as $5 at any risk level you’re comfortable with.

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