If you have $10,000 or more, hopefully you’re already investing at least some of it. But you may be unaware of exactly how many investment options you have. With the many investment platforms available, particularly online, you have practically unlimited options with $10,000.
The main concern should be making sure your portfolio is invested in the right places, and includes the best mix of asset classes for your investment objectives.
In this article, we’re going to take a high altitude view of investing, then drill down into the specifics of where you can invest with $10,000. By the end of it, you should know exactly where you want to invest your money, and how to go about doing it.
Start By Building A Strong Foundation
1) Emergency Fund
Start with the basics. Have an emergency fund that has sufficient liquid cash to cover your living expenses for between three and six months. You can use any of the recommended fixed income investments in this article for that purpose.
2) Pay Off High-Interest Debt
Next, pay off any high interest credit cards you have, or at least have a plan in place for doing so. This is much more important than it seems at first glance. If you have a credit card that charges an interest rate of 19.99%, you’re very unlikely to find an investment that will pay a similar rate consistently. Paying off high rate credit cards is one of the very best investments you can make!
To read more about strategies that will help you get out of debt, click here.
3) Build A Diverse Portfolio
Once you have an emergency fund in place, and your high interest credit cards paid off, you should look to diversify among different asset classes.
Those should include the following:
Stocks. You can hold these as individual stocks, or through mutual funds or exchange traded funds (ETFs). Stocks should dominate your portfolio, because they represent growth assets.
Fixed income assets. These assets add stability to your portfolio. They retain value when stocks are falling. They also act as a store of cash, so you can begin buying more stocks once the downturn is over.
Real estate. With the arrival of real estate investment trusts (REITs) and real estate crowdfunding platforms, real estate is becoming increasingly popular in investment portfolios. It’s a way of adding a hard asset to a portfolio made up primarily of paper securities. As well, real estate often moves in a direction counter to stocks.
Where Can You Invest with $10,000?
Earlier, we listed three asset classes – stocks, fixed income assets, and real estate – as recommended holdings in a $10,000 portfolio. Now we’re going to tell you how to buy those to create the optimally diversified portfolio. In general, there are four avenues to consider – and you should utilize as many as you like.
- Investment brokers
- Real Estate crowdfunding platforms
- Fixed income securities: high yield savings accounts, certificates of deposit (CDs) and US Treasury securities
You’ll most likely want to have your portfolio spread across three or four different platforms to best include all three asset classes. For example, stocks (REITs) are best held through either a robo-advisor or an investment broker. Real estate crowdfunding platforms are where you can invest in specific REITs and individual real property deals. But banks and the US Treasury are the best places for fixed income assets.
Let’s look at all four.
|Robo-advisors||Investment brokers||Real Estate crowdfunding platforms||Fixed income securities|
|Best For||Investors who prefer professional portfolio management at low fees||Those looking to invest in mainly in stocks, and/or in self-directed investing||Those looking to diversify some funds into real estate||Those looking diversify their portfolios by adding safe investments|
We recommend robo-advisors for investors with just about any amount of money. There are enough robo-advisors to accommodate all portfolio sizes.
The primary attraction of robo-advisors is that they create a portfolio for you, handle all the investment management, and do it all at a very low fee. They are the perfect passive way for people to invest in stocks and other assets.
They primarily invest in stocks through ETFs, and focus mainly on portfolio allocation. For example, if you’re in your twenties or thirties, they may hold something like 90% of your portfolio in stock-based ETFs, and 10% in bond-based ETFs. It’s all determined by your age, time horizon, investment goals, and risk tolerance.
Betterment and Wealthfront are the two most popular standalone robo-advisors, and either is a good choice.
- Betterment has no minimum investment, and charges a 0.25% annual management fee.
- Wealthfront has a $500 minimum to invest, and also charges an annual management fee of 0.25%.
But with $10,000 to invest, your robo-advisor options open up considerably.
Most large investment brokers now offer robo-advisor services. This presents an excellent opportunity to have some of your portfolio professionally managed, while also being able to engage in self-directed investing through the same platform.
If you like that idea, Charles Schwab (see below) offers its Schwab Intelligent Portfolios robo-advisor. The minimum investment is $5,000, but there is no annual management fee for the account.
E*TRADE (see below) offers a similar arrangement. You can do self-directed trading on the E*TRADE platform, while also having some of your money professionally managed through E*TRADE Core Portfolios. You’ll need a minimum investment of $5,000, and the annual management fee is 0.30%.
With $10,000 to invest, you can choose just about any investment broker in the industry. We’ve listed the brokers below because each offers features you’re likely to find attractive, either because of the quality of the platform, low trading fees, or the availability of a robo-advisor service.
- Ally Invest, $4.95 per trade, no account minimum. Offers Ally Invest Managed Portfolios robo-advisor with a minimum of $2,500 with a 0.30% annual fee.
- Robinhood, free trades with no account minimum.
- Fidelity, $4.95 per trade with no account minimum. Offers Fidelity Go robo-advisor, with a $10 minimum investment, and a 0.35% annual fee.
- TD Ameritrade, $6.95 per trade with no account minimum. Offers the Essential Portfolios robo-advisor, with a $5,000 minimum investment, and a 0.30% annual fee.
- Charles Schwab, $4.95 per trade with no account minimum. As noted above the platform offers the Schwab Intelligent Portfolios robo-advisor.
- E*TRADE, $6.95 per trade, with a $500 minimum initial investment. As noted above the platform offers the E*TRADE Core Portfolios robo-advisor.
With at least $10,000 you also have more investment options. With smaller dollar amounts, you’re limited to investing with either low minimum robo-advisors, or ETFs. With at least $10,000, you have those same choices. But you also have the ability to invest in mutual funds and individual stocks.
A typical mutual fund minimum investment is $3,000. You can invest in one and still have plenty of money left over for other investments.
And with stocks, $10,000 gives you the ability to invest in several companies. You can spread $2,500 across 10 different companies. That will give you adequate diversification, with money left over for other investments.
Real Estate Crowdfunding
This investment category is a mixed bag. Most real estate crowdfunding platforms require you to be an accredited investor. That requires a minimum annual income of $200,000, a minimum net worth of at least $1 million (not including your house), or both. Even with $10,000 to invest, you may not qualify as an accredited investor.
But you can still invest with real estate crowdfunding platforms that don’t require you to be accredited. Three examples include:
Groundfloor. You invest in property flipping deals (like on the TV show Flip or Flop. You’re not actually participating in the flip directly, but buying slices of flip-related loans, called “notes”. You can spread an investment $2,000 across 200 different loans, at $10 per note.
Rich Uncles. This platform invests in real estate investment trusts (REITs) that invest in commercial real estate. They generally require a minimum initial investment of $500.
Fundrise. This platform also enables you to invest in REITs that invest in multiple commercial projects. The minimum initial investment is between $100 and $1,000, depending on the specific REIT you choose.
One of the downsides to investing with real estate crowdfunding platforms is that the investments and the REITs they offer are private. That means they cannot be sold once you make your investment. You’ll need to stay with your investment until it pays out, and that can be several years.
Publicly Traded REITs
The alternative is to invest in publicly traded REITs. These work much the same as crowdfunding REITs. They’re basically mutual funds for commercial real estate projects. Each fund holds and manages several properties, and they can be segmented based on geography or property type (like apartment complexes, retail, or office buildings).
You’ll be paid dividends, based on both interest or rent income, as well as capital appreciation. And since the REITs are publicly traded, you can sell your shares at any time.
You can purchase publicly traded REITs on any of the investment brokers listed in the previous section.
Fixed Income Securities: Bonds, US Treasury Securities, and High Yield Savings Products
You won’t get rich investing in fixed income securities, but that’s not their real purpose. No, their real purpose is capital preservation. Stocks, real estate, and virtually all equity type investments involve a healthy amount of risk. Fixed income securities need to be included in your portfolio to provide at least some protection from the volatility that’s a natural part of equities.
In other words, this portion of your portfolio is low-risk – so even if the market takes a downturn and you lose some money on your other investments, these will stay safe.
For that reason, you should hold a certain percentage of your $10,000 in fixed income securities. Exactly what that percentage will be will depend on your age and risk tolerance.
If you invest a robo-advisor, a certain percentage of your portfolio will be allocated to fixed income securities automatically. And if you invest through an investment broker, you can hold these securities through either ETFs or mutual funds.
With that information in mind, let’s look at each of the three major categories of fixed income securities.
The term “bonds” itself is confusing. Investors and media sources often lump all fixed income securities under this title. In reality, a bond is a long term that security, usually 20 years or longer. They can be issued either by corporations or government agencies.
Bonds issued by state and local governments are referred to as municipal bonds. They have the advantage of being tax-free for federal income taxes, as well as from state income taxes in the state of issuance. They’re best held in taxable accounts, since they can provide a source of tax-free income. (Conversely, they make little sense in retirement accounts, since those are already tax sheltered.)
Bonds are commonly available through investment brokers. They are generally purchased in amounts of at least $1,000, and often in blocks of $10,000. There’s usually a small fee for the purchase and sale of bonds.
For most investors, especially at the $10,000 level, the better way to own bonds is through either a mutual fund or an ETF. Not only are funds more convenient, but they’re also more diversified. You can invest a few thousand dollars in a fund that holds bond issues from hundreds of companies and governments.
If you want to buy bonds, check out Worthy – they make the process easy, they offer a high return on their products, and they have a very low minimum investment.
US Treasury Securities
These are considered the safest investments in the world, because they’re fully guaranteed by the US government. They offer terms of four weeks to 30 years, and in minimum denominations of $100. They currently pay over 2% APY on all securities offered. They also offer a unique product called Treasury Inflation Protected Securities (TIPS). These
pay interest, and add additional principal to provide protection against inflation.
US Treasury securities are available for direct investment through Treasury
Direct, free of charge.
High Yield Savings Products
These include savings accounts, money markets, and certificates of deposit (CDs). They’re available at nearly all banks and credit unions. But you should be aware of that the vast majority of local banks and credit unions pay only microscopic interest rates. The better option is to invest through online banks, which offer much higher rates.
Investment brokers typically offer CDs, but they charge a fee to purchase them. If you invest directly through the issuing bank, no fee is involved.
Robo-Advisors vs. Investment Brokers vs. Real Estate Crowdfunding vs. Fixed Income Investments
$10,000 is a point at which you can begin spreading your investments across different investment platforms and asset classes. That’s one of the most critical strategies when it comes to investing. Below is a summary table of the four different investment platforms we’ve covered in this article. It should help you too be able to work each category into your portfolio.
|Platform/Feature||Robo-Advisors||Investment Brokers||Real Estate Crowdfunding||Fixed Income Securities|
|Minimum investment||$0 - $5,000 and up||$0 and up||$5 - $10 and up||$0 and up|
|Automatic deposits||Yes||Generally||Varies by platform||Yes|
|Fully designed portfolio||Yes||ETFs and mutual funds are mini-portfolios||Yes, with REITs||No|
|Ongoing portfolio management||Yes||Many brokers also offer robo-advisors||Yes||No|
|Fees||0.25% - 0.50% per year||$0 to $6.95 per trade||None for Groundfloor and Rich Uncles, but most have fees||Free when purchased direct from the issuer|
|Available for IRAs||Yes||Yes||Yes||Yes|
Don’t Forget Retirement Investing
With $10,000 to invest, some of it should be used for intermediate term purposes. This can include investing for any needs that will occur between now and retirement. That can be saving money for the down payment on a house, for a college education for your children, or just to have a growing portfolio available for any need that may arise.
But at the same time, you should also be investing for retirement.
If you have an employer sponsored retirement plan, like a 401(k) or 403(b) plan, you should participate in it. You won’t be able to move any of your $10,000 directly into an employer plan. But you can begin making contributions out of your income. Best of all, some employers offer a limited employer match on your contributions.
If you aren’t covered by a plan at work, you should open an IRA. That can be either a traditional or a Roth IRA. With a traditional IRA, contributions are tax deductible, investment earnings are tax deferred, and the funds are taxable as ordinary income when they’re withdrawn.
With a Roth IRA, contributions are not tax deductible, investment earnings are tax deferred, but the funds can be withdrawn tax-free, beginning at age 59 ½, and as long as you have participated in the plan for at least five years.
Either plan is self-directed, which means you can hold the account with most of the investment platforms included in this article.
If you’re self-employed, you have additional retirement account options, that offer more generous contribution amounts. These include a SIMPLE IRA, SEP IRA, or Solo 401(k). They’re also self-directed, and suitable for any of the investment platforms in this article.
Retirement plans will add tax deductible contributions and tax deferred investment income to your investment mix.
For a complete guide to retirement accounts – and to figure out which one is right for you – check out this article.
Final Thoughts on Where Can You Invest with 10K
If you have at least $10,000, not only should you be investing, but you should also be spreading your money across different asset classes and at least two or more investment platforms. That will give you an opportunity to balance both growth and capital preservation, as well as to take advantage of income opportunities from a variety of sources.
Note: This articles presents the best way to invest $10,000, but the strategies will work just as well if you have $25,000, $50,000, or even as much as $75,000. If the amount you have available falls outside of that range, we recommend you check out one of these articles for more personalized advice.