How to Invest 10k: 10 Smart Ways to Try Now

During unstable economic times, it’s more important than ever to be smart with money. If you have a fairly large amount, such as 10k, you need to think especially hard about your overall financial strategy.

If you were to save or invest that money, it could make a meaningful difference to your quality of life. But what could be the right investment for gaining the maximum benefit from that $10k?

Table of Contents

1. Bank Savings Accounts

Opening a savings account is the simplest possible way of investing your money, although it isn’t necessarily a bad thing. You are paid a predetermined interest rate, but it isn’t a huge amount. Overall, it’s a good old-fashioned principle of saving money.

The biggest benefit is that hard-earned cash isn’t exposed to fluctuations in the financial markets. So, this makes the risk of losing your investment very slim. Also, your money is protected by the Financial Services Compensations Scheme. That said, there are inherent drawbacks, such as the possibility that your savings may not grow fast enough to offset the inflation loss.

Pros:

Free to open
Any investment amount to start with
Easy access to your money
Money is safe in well-protected vaults
No lock-in period
Automated bill payments

Cons:

Temptation to spend
Rates and inflation can change
Monthly, maintenance, and ATM withdrawal fees
Minimum balances requirements

2. Real Estate

You might think that you need significantly more money to invest directly in the real estate market. However, 10k is enough to get into a real estate investment trust (REIT) or a real estate-themed exchange-traded fund (ETF).

REITs are designed to allow multiple investors to combine their funds in a common pool. The shareholders have a proportional interest in the profits depending on the assets they own. ETFs raise capital to invest in various different things by selling shares to their investors. Both options can help you get into the industry of home flippers, real estate agencies, and rental unit management.

Pros:

Great portfolio diversification
Reduced volatility and consistent ROI
Tax benefits
Appreciation potential
Generates passive income

Cons:

Steep learning curve
Time-consuming property management
Requires you to be a landlord as well as an investor
Can be problematic

3. Equities

Equities is another name for shares, stocks, or securities. This is the first thing that people imagine when they hear the term “investing”. An online broker service can process your transactions, which comes at a cost (but not a significant one). If you work with a full-service platform, there may be higher charges, but also personalized advice.

For example, in 2019 alone, the S&P 500 index returned 31.1%, which made it a pretty attractive investment. That said, one year isn’t a good enough indication as in 2018, the annual returns were negative (around -4%).

Pros:

Possibility of substantial growth
Ability to beat inflation
Easy to diversify stock portfolios
Ownership and influence over companies
Potential income from dividends

Cons:

Associated with higher risk
Subject to severe fluctuations
Takes time to research
Emotional ups and downs

4. Options

Options investing focuses on a yes/no proposition based on an underlying asset performance during a particular time. Unlike traditional investments, trading options allow you to profit while the market moves in any direction. The key is to accurately predict the asset’s movement over time.

Another difference between traditional financial assets is that it’s much simpler to understand as a beginner. The price can either go up or down. So, you may not have a financial background or trading experience but could still do well in the field of options.

Also, there are no liquidity concerns since you don’t actually own the underlying asset. Speaking of the underlying assets, there are numerous asset classes available in financial markets.

Pros:

Possibility of big swift returns
Simple to learn and understand
Different types of binary options
You know both the risk and reward in advance
Exciting activity
No minimum investment balances

Cons:

Poor industry regulation
Risks of speculative activity
Earnings potential is limited

5. Superannuation

In Australia, if you work for an employer, 9.5% of your pre-tax wages goes into an account that accumulates interest. If you’ve worked for multiple employers, you might be charged separate maintenance fees. By consolidating your super into a single fund, you can make more effective contributions and gain higher interest earnings.

It’s important to mention that this one is a very long-term investment strategy. Even if you invest your 10k now, you will be able to enjoy the benefits at a much later time.

Pros:

Lower fees
Side benefits (life insurance and disability policies)
Builds your retirement savings
Lowers your investment tax bill
Allows consolidating for a bigger balance

Cons:

Limited eligibility
Problems associated with bureaucracy
Limited investment choices
Age limits

6. Bonds

For those investors who are looking for long-term opportunities (lasting five to ten years), bonds and cash-equivalent investments are a good choice. Bonds are loans made to large organizations, and most bondholders resell them before they mature at the end of the loan period.

It’s impossible for small investors to buy individual bonds because they are usually traded in large quantities. That said, maintaining a diversified bond portfolio through bond mutual funds or bond ETFs can help investors prepare for market shifts.

Pros:

Less volatile
Low risk of default
Fixed income on a fixed schedule
Good legal protection
Fits different needs of investors

Cons:

Modest returns
Lack of long-term growth
Direct exposure to interest rate risk
Creates reinvestment risk

7. Commodities and Futures

Commodities are raw materials (like oil, gold, sugar, etc.) that can be bought/sold. Futures are contracts to buy/sell a commodity at a predetermined price on a certain date. There are about 50 major commodity markets in the world that offer investment trade in about 100 primary commodities. Bear in mind that this investment type suits more experienced investors.

Pros:

Hedge against inflation
Involvement in the sector without trading individual contracts
Increased portfolio diversity
Only requires a fraction of the contract amount
Access to safe-haven commodities (i.e., gold)

Cons:

Loss potential for profits
Twice as volatile as stocks
Susceptible to quick price changes
Not a core holding

8. Cash Management Accounts

A cash management account combines services and features that are similar to checking, savings, and investment accounts under one product. These accounts pay interest, which is where your gains come from. You might earn the same interest rate no matter how much your account balance is, but some services offer tiered rates.

Pros:

Above-average interest rates
Benefits similar to checking and savings accounts
Simplified account ownership
ATM rebates, mobile deposits, and many other features

Cons:

Opening and ongoing balance requirements
Money is exposed to potential processing errors
No Australian Government guarantee

9. Listed Investment Companies (LICs)

LICs are a subset of what the ASX (Australian Securities Exchange) calls listed managed investments. LICs are essentially funds that have an external or internal fund manager selecting and managing the company’s investments.

You can buy/sell LICs on the exchange through a broker or online trading account. It’s up to you to decide which investment style to choose and to uncover which LIC has a portfolio that suits your objectives.

Pros:

Low-cost option
A broad range of assets
Makes reinvesting your dividends relatively easy
Transparent in disclosing their NTA values

Cons:

Doesn’t show huge growth
Annual management fee
Subject to general market risk

10. Invest in Yourself

Not to sound clichéd, but putting money into your own self-improvement is also a worthwhile investment. For example, you could go back to school or taking online classes, which could improve your career opportunities. Or you could enter other certification programs that can potentially generate more financial benefits in the future.

Alternatively, you can direct 10k into paying off your debts if you have any. Even though you’re not gaining interest or other quantifiable perks, you take the stress off your mind. And when you ready to start with a clean slate, you can invest in the investment alternatives we’ve described above.

Factors to Consider When Making Investment Decisions

Your investment portfolio should only consist of products and activities that suit your needs and contribute towards the attainment of your goals. Before investing, you should first consider these factors to determine when, where, and how to invest:

Your objective for investing – are you looking for higher gains or a moderate but stable appreciation of your investment? There is a difference between needing money to afford necessities and aiming to earn extra money for a decent lifestyle.
Your age – in investing, being young gives you an advantage. Here, you can afford to choose lower gains, which will accumulate over time. If you’re middle-aged and thinking about retirement, you might need something more aggressive.
Time before you need the money – this point slightly ties in with the previous one. However, even when you’re young, you might need to multiply your funds quickly. Short- and long-term goals require different strategies. Also, you should take time to assess the tax implications of withdrawing your investment.
Risk tolerance – the higher the risk, the more potential there is for higher returns. In any case, you should invest and risk only an amount of money which won’t cause you stress in the middle of the night.
Your understanding of financial products – be sure you know where you’re heading. Most people find financial products complicated. But it’s important to have at least a general idea of how they work.

The key to financial stability isn’t only in making money, but in keeping it and growing it. The same principle goes for any amount – whether you have $10, $100, or $10,000. If you treat both large and small amounts with equal care, you will develop wise financial habits, which will certainly have a positive impact.