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How to invest $10K in 2024

Explore some of the best ways to to invest $10k today.

Ten thousand dollars in investable cash can provide a healthy boost to your portfolio, and it opens the door to a large number of investment options. So where should you allocate your money? Let’s look at five options for how to invest $10K.

6 best ways to invest $10K

  1. Buy stocks
  2. Max out an IRA
  3. Invest in an index fund
  4. Hire a financial advisor
  5. Fund a 529 account
  6. Ladder CDs

1. Buy stocks

Stocks are considered to offer the greatest potential for growth over the long term. Historically, the stock market has delivered annual returns of about 10%. In the last two and a half decades, technology stocks like Google (GOOGL), Amazon (AMZN) or Microsoft (MSFT), in particular, have offered some of the best returns of any financial asset. However, with these high returns comes greater volatility, making these stocks better for long-term investors or investors with a high-risk tolerance.

Investors with a lower risk appetite may instead favor dividend stocks like Coca-Cola (KO), General Mills (GIS) and Procter & Gamble (PG). Stocks that pay dividends tend to be less volatile and typically provide stability to a portfolio. Dividend investors give up the outperformance that comes with many high-quality growth stocks for the reliable income stream of dividends.

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While individual stock picking requires time and research, stocks are highly-liquid assets. Since there’s almost always a buyer, it’s usually quick to cash out your shares if and when you’re ready to sell. Most brokerages don’t charge stock trading fees, and holding shares gives you voting rights in the company.

Stock trading is more accessible than ever before. And with the advent of fractional shares, you don’t have to save up enough to buy whole shares of blue chip stocks like Tesla (TSLA) or Walmart (WMT). Many brokers let you buy shares for as little as $1.

Pros

  • Great performance over time. The average annual return of the stock market has been around 10% historically. Dividend stocks provide the added benefit of income.
  • Variety of options. More than 4,500 companies are listed on the New York Stock Exchange and Nasdaq, from small-cap companies to large blue-chip stocks.
  • Fractional shares. Trade stocks for as little as $1 with many brokers.
  • High liquidity. Buy or sell most stocks during market hours without limitations.

Cons

  • Volatility. Stocks can be volatile — some more than others. If you don’t plan to hold the stock for the long term, you could end up selling for a loss.
  • Stock picking requires time. While you can pick stocks willy-nilly, developing a strategy and performing proper research on companies takes time and effort.

1. Max out an IRA

Individual retirement accounts (IRAs) are versatile investment accounts that offer tax benefits for saving for retirement. These tax-advantaged accounts let you invest in many of the same assets available to you in a taxable brokerage account but with the addition of tax incentives, making them a foundational account for all investors.

The traditional IRA offers upfront tax benefits through deductible contributions, and you pay taxes on your money when you withdraw it in retirement. If you think you’ll be in a lower income tax bracket later in life, investing through a traditional IRA could be advantageous. Roth IRAs, on the other hand, let you pay taxes now to withdraw funds tax-free later on. If higher taxes are likely in your future, you may benefit from paying taxes today at a lower rate.

Federal law permits most types of investments in an IRA, including:

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Meanwhile, self-directed IRAs let you diversify even further with alternative assets, including real estate, gold and other precious metals, cryptocurrencies and pretty much every other investable asset out there. The best traditional IRAs of 2024 and the best Roth IRAs 2024 offer plentiful investment options, low fees and a trading platform suitable for your investing experience and needs.

In 2023, the contribution limit for all your traditional and Roth IRAs is $6,500 ($7,500 if you’re age 50 or older). If you’re married and you and your spouse file a joint return, you can each contribute to separate IRAs. With $10K, you could max out one spouse’s IRA and use the remainder to fund the other.

Pros

  • Tax benefits. Choose from a tax deduction today or tax-free withdrawals in retirement, or both.
  • Wide range of allowable investments. Invest in traditional assets like stocks and bonds in a regular IRA or alternative assets like real estate and crypto in a self-directed IRA.

Cons

  • Contribution limits. The maximum you can contribute to an IRA in 2023 is $6,500 ($7,500 if age 50 or older).
  • Withdrawal penalties. Withdrawals before age 59 and a half will be subject to regular income taxes and a 10% early-withdrawal penalty.

2. Invest in an index fund

Index funds are ETFs and mutual funds designed to track and achieve roughly the same return as a particular market index, such as the S&P 500 or the Nasdaq Composite. To accomplish this, fund managers invest in the securities of companies included in the selected index. For instance, the Vanguard 500 Index Fund ETF (VOO) invests in all the stocks in the S&P 500. This gives you instant diversification across various stocks and sectors. And since index fund managers only need to passively track a fixed index of securities, it involves fewer fees and expenses passed on to the investor.

Index funds are a great option if you’re looking for an effortless investment for your $10K. Billionaire investor Warren Buffett owns at least two — VOO and the SPDR S&P 500 ETF Trust (SPY) — and he recommends index funds for most investors.

Pros

  • Uncomplicated investing. No need to research and analyze individual stocks or other assets.
  • Broad market exposure. Invest in numerous assets through a single fund purchase.
  • Lower risk through broad diversification. A single fund purchase can provide instant diversification.

Cons

  • No potential to exceed market returns. If you invest in a whole market index fund, there’s no potential to beat the market.
  • Lack of control. Though you can choose which index funds to invest in, you have no say in which stocks the funds track.

3. Hire a financial advisor

Managing your own investments takes time. And whether you don’t have any or simply have no interest in spending it picking your own investments, hiring a financial advisor may be a worthwhile investment.

A financial advisor can help educate you about your investments, retirement plans, taxes and wealth management options and build a custom plan to help you achieve financial goals. They typically charge either an hourly fee of between $100 and $300 or a fixed fee to implement and maintain your financial plan. This can be anywhere from $1,000 to $3,000. They may also charge a fee of between 0.25% and 1% per year to manage your investments. Even a one-time consult to help you put a plan in place can deliver significant value.

Pros

  • Saves you time. Outsourcing your portfolio management can save you time from researching and choosing your own investments.
  • Personalized financial plans. As an advisor gets to know you and your financial goals, they can build a personalized plan catered to your specific needs.

Cons

  • Costs. Financial advisors can charge one-time planning fees, ongoing planning fees and investment advisory fees.
  • Lack of control. You give up a certain degree of control when you hand over your portfolio to an advisor and there’s no guarantee the advisor will be successful in their strategy.
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4. Fund a 529 account

State 529 plans are tax-advantaged investment accounts that you can use to pay for future education costs. Earnings grow tax-free, and withdrawals are tax-free if you use the money to pay for qualified education expenses, such as tuition, books and school supplies. Contributions are made after-tax, and though they’re not federally tax-deductible, many states offer deductions from state income tax.

Most 529 plans come in two options: prepaid tuition plans and education savings plans. As the name suggests, prepaid tuition plans let you prepay for your kid’s college. So long as you save enough to cover today’s tuition rate, you’re typically guaranteed to have enough to pay future tuition rates. With prepaid plans, the state typically invests your money on your behalf.

Education savings plans, on the other hand, put you in charge of managing the investments. You typically get to choose from a list of available investments, but index funds are often one of those options.

Pros

  • Tax benefits. Investments grow tax-deferred, and distributions are tax-free when used to pay for qualified education expenses. Many states also offer tax benefits for 529 contributions.
  • Tax efficiency. The first $17,000 contributed to each beneficiary during 2023 is excluded from gift taxation.
  • Two types of plans. Invest on your own through any of the plan’s available funds or let the state invest on your behalf.

Cons

  • Penalty for non-qualified withdrawals. Distributions of 529 money for anything other than qualified education expenses will likely be taxed as ordinary income and could incur a 10% federal penalty.
  • Fees. Typical fees can include program management fees, state administration fees, fund expenses and more, which can add up over time.

5. Ladder certificates of deposit (CDs)

A certificate of deposit (CD) is a savings vehicle that lets you save a fixed amount of money over a set period and earn interest for tying up your funds. CD terms can range from a few months to five years.

The best CD rates are usually around the rates you’ll find with a high-yield savings account. As of August 2023, many CD rates exceed 5% APY, depending on your chosen term. The longer you agree to lend your money, the higher the APY you can typically earn.

Now, a CD ladder is a savings strategy where you spread cash equally between several CDs to take advantage of the highest rates while also freeing up money in shorter intervals.

With $10,000, a CD ladder might work like this:

  1. Open five CDs between one- and five-year terms and deposit $2,000 into each.
  2. Reinvest the money when a CD matures into a new five-year CD to continue earning the highest rate offered.
  3. Continue as long as you want to keep your money invested in CDs.

If rates go up, you can take advantage of the higher rates when the shorter-term CD matures. Since CD rates are locked in for the duration of the term, a drop in rates won’t affect your return. If rates are too low for you when a CD matures, you don’t have to reinvest it in CDs.

Pros

  • Low risk. CDs are federally insured bank deposit products.
  • Consistent returns. Lock in a fixed rate of return.
  • Laddering strategies. CD laddering can keep you invested in the best rate available while creating liquidity.

Cons

  • Withdrawal penalties. Withdrawals prior to maturity may be subject to penalties, such as a loss of interest gained.
  • Lower return potential. Investing in riskier assets, such as stocks, can generate higher returns.

How $10,000 can grow

If you’re still unsure how to best allocate your money, here’s a look at how $10,000 might grow in three common investment classes.

$10,000 saved or investedCDBondsStocks
1 year$10,506$10,533$11,000
5 years$12,799$12,965$16,105
10 years$16,382$16,808$25,937
15 years$20,968$21,791$41,772
20 years$26,838$28,252$67,275
25 years$34,351$36,627$108,347
30 years$43,967$57,486$174,494

For this table, we assumed:

  • An APY of 5.06%, based on the average APYs of the maximum possible rate of 11 CD rates as of August 2023.
  • An average bond return of 5.33%, based on Vanguard’s historical return data.
  • A 10% return on stocks, based on the market’s average long-term annual return.

Bond returns vary widely based on bond types, and the stock market has down years while individual stocks can go to zero. So consider these benchmarks only, and consider risk as well as return.

Money moves to consider before you invest $10,000

Put it toward a down payment for a house. If you’re ready to enter the real estate market, consider putting the $10,000 toward a down payment. Mortgage lenders typically require a down payment of at least 20% of the mortgage amount, or you’ll need to pay for private mortgage insurance.

Add sweat equity to your house. If you currently own a home, $10,000 is a good chunk of money you can put toward improvements or expansions that increase your home’s value.

Pay down high-interest debt. Considering putting some of your $10K toward eliminating debt that’s racking up interest. If you have a credit card with a 15% annual percentage rate (APR) and are only earning 5% on your investments, you may be better served to put that money toward repaying debt.

Other investments options

Not all the investments listed in this article will be right for you, so here are a few more investments to consider:

Start or grow a business: According to recent estimates, microbusinesses cost around $3,000 to start. This can vary depending on the type of business and whether it is based in a physical location or online.

Build out your home office: If you work from home full-time, consider investing in building out your ideal workspace. Having the right desk, chair, computer and other technology can do wonders for productivity.

Free your time: While you don’t need to drop the entire $10,000 to accomplish this, freeing up your time to be used on more important matters can be a worthwhile investment. If you can hire a cleaning service to clean your home, you can spend that time working and making more money. And if you can make more than what you’re spending on the help, then you’re coming out on top.

Ultimately, the best way to invest $10K depends on your investment strategy, financial goals, risk tolerance and time horizon.

Compare investment platforms

However you choose to invest, you’ll need a trading platform that handles that asset. A few popular ones are listed below.

1 - 6 of 6
Name Product Ratings Available asset types Minimum deposit Stock trade fee Cash sweep APY Signup bonus
SoFi Invest®
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SoFi Invest®
★★★★★
Stocks, Options, ETFs
$0
$0
0.01%
Get up to $1,000 in stock
when you fund a new account within 30 days
tastytrade
Finder Rating: 4.6 / 5: ★★★★★
tastytrade
★★★★★
Stocks, Options, ETFs, Cryptocurrency, Futures
$0
$0
N/A
Get $100-$5,000
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Public.com
Finder Rating: 4.3 / 5: ★★★★★
Public.com
★★★★★
Stocks, ETFs, Cryptocurrency, Art, Treasury Bills, Collectibles
$0
$0
5.1%
N/A
2.5% fee applies to all alternative asset transactions.
Robinhood
Finder Rating: 4.2 / 5: ★★★★★
Robinhood
★★★★★
Stocks, Options, ETFs, Cryptocurrency
$0
$0
1.5%, or 5.25% with Robinhood Gold
Get a free stock
when you successfully sign up and link your bank account.
Make unlimited commission-free trades, plus earn a 5.25% APY on your uninvested cash through January 31, 2024, with Robinhood Gold. Subscription fees apply.
Fennel
Finder Rating: 4 / 5: ★★★★★
Fennel
★★★★★
Stocks, ETFs
$0
$0
N/A
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when you you sign up with Finder
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eToro
Finder Rating: 4.2 / 5: ★★★★★
EXCLUSIVE
eToro
★★★★★
Stocks, Options, ETFs, Cryptocurrency
$0
$0
4.9%
FINDER EXCLUSIVE: Get a guaranteed $15 bonus
when you sign up and deposit $100
Not available in NY, NV, MN, TN, and HI.
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