Where to Invest $10,000 Right Now

October 12, 2021

Got $10,000 burning a hole in your bank account? Hey, stranger things have happened! Maybe you just sold your house and found yourself with a lovely $10K profit after closing out the mortgage. Maybe you came into $10,000 on account of a relative.

Whatever the reason, now is the time to invest it. If you don’t start saving until 45, you’ll need to save three times as much as you would have if you started twenty years earlier. Also, younger generations have less invested on average than older ones—the average 20-something has just $10,711 invested, while the average 60-something has over $210,900 invested.

Just think—if you invest $10,000 right now, you can be on the same track (or better) as the average 20-something, and that compounds over time. So here are a few ways to make the most of that $10K.

Before You Begin

But first, you need to prepare.

That begins with knowing your goal. The exact number and when you want to reach it will significantly shape how you choose to invest your money. As a rule, if you need it in less than five years, it should be in a savings account, not the market. Similarly, if you’re working toward short-term cash, keep it out of the market.

However, if you’re planning for long-term goals, then your money should absolutely be invested, since you have time to make up any losses.

Think about exactly what you’re trying to achieve. Write down a number. Stick it on your fridge. Then, you can start planning.

Hold your horses, though—you’re not ready to invest yet. If you have any outstanding debt, you need to pay it off first. That might sound counterintuitive, but remember, debt is the exact opposite of investing. You’ll spend a small fortune in interest the longer your debt sits there. Do yourself a favor and pay off debt first—that way, you can direct more of your money toward long-term wealth.

Smart Places to Invest $10,000 Right Now

Got that covered? Then you’re ready to do something about that $10,000 burning a hole in your bank account. Here are a few of the best ways to invest that money.

Max Out Your Individual Retirement Account

Okay, we know this piece of advice isn’t as flashy as go buy these stocks, but trust us, it’s an investment in your future that your future self will thank you for.

An individual retirement account (IRA) is a tax-advantaged account that allows individuals to save for retirement. You can do this with either tax-free growth or a tax-deferred basis. There are three types of IRAs:

  1. Traditional IRA
  2. Roth IRA
  3. Rollover IRA

In a traditional IRA, you make contributions with money that may be deductible on your tax return. Any earnings in the account grow tax-deferred until retirement, which is a good thing because most retirees move to a lower tax bracket upon retirement.

A Roth IRA gets contributions from after-tax dollars. That means the money isn’t tax-deductible, but on the other hand, you don’t have to pay taxes on investment gains. You also get tax-free withdrawals in retirement, provided that you meet certain conditions.

A rollover IRA is exactly what it sounds like—it’s a traditional IRA that you contribute to with money that’s “rolled over” from a qualified retirement plan. This typically means moving eligible assets from an employer-sponsored retirement plan, like a 401(k).

Open a 529 Plan for Education

If you have a kid you hope to send to college (or plan on having kids who will theoretically attend college), a 529 plan is the best investment you can make in their future.

A 529 plan is a type of tax-advantaged education savings plan, legally referred to as qualified tuition plans. These are sponsored by states, state agencies, or educational institutions. There are two types of 529 plans:

  1. Prepaid tuition plans
  2. Education savings plans

Most people opt for an education savings plan, which allows you to open a savings account for the beneficiary’s future qualified higher education expenses like tuition, mandatory fees, and room and board.

Buy Index Funds

That’s all about saving for the future. To grow you future wealth on the stock market, your best bet is to invest in index funds like the S&P 500 index fund.

An index fund is a type of mutual fund where the holdings match or track a particular market index. When you buy into one, you buy into every company contained within the index portfolio, typically a sampling across the whole market.

Some common index funds include:

  • S&P 500
  • Dow Jones Industrial Average
  • Russell 2000 Index
  • Wilshire 5000 Total Market Index
  • MSCI EAFE Index

Index funds are an easy way to get involved in the stock market while also creating a diverse portfolio of assets. This means market swings are way less volatile and your whole portfolio is insulated against sharp dips.

Hedge Against Inflation with Real Assets

Finally, for a well-balanced portfolio that’s protected against market volatility, it’s important to have a hedge against inflation. The best way to do that is with real assets.

Real assets are considered a form of alternative investment since they don’t behave in a way that mirrors the market and have a low correlation to the market (in fact, they can often perform opposite the market). Real assets in particular are tangible assets, physical assets with intrinsic value due to their substance and properties.

Some real assets include things like:

  • Art
  • Gold and other precious metals
  • Real estate
  • Minerals
  • Equipment
  • Natural resources

These have complex tax considerations and are not as liquid as financial assets, but if handled properly, you can count on them to insulate your portfolio even if the market gets schizophrenic.

Ready to Build Your Financial Future?

Our favorite real asset is blue-chip art, named for the most valuable chip on the poker table. Why? Well, because blue-chip art is the most successful form of passion investing, outperforming the S&P 500 by 180% from 2000 to 2018 with a total market value of $1.7 trillion.

And with Masterworks, you now have the chance to invest in multi-million-dollar art—without being a millionaire. Instead, we purchase art in high-performing artist markets and allow members to purchase shares, then handle the auction and distribute your dividends. Ready to make your money work harder? Fill out your membership application today.

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.