7 Ways To Invest $10,000 In 2024

What's up you guys? It's Graham here! So, it's almost that time of year again where people like me can just remake all of their old videos from last year, except now we could put "2020" in the title to make it relevant again. Whoa! That is basically just endless content!

But seriously, the jokes aside, let's go over how you can invest ten thousand dollars in 2020 to really make the most of it, 'cause ten thousand dollars is a sizable amount of money that could end up making a very significant financial difference long-term if you don't mess it up. So, it's so important you utilize this money correctly, like even finding a way just to get an additional 2% return on your ten thousand dollars every year is going to equate to over eight thousand one hundred dollars in extra profit over thirty years.

I'm pretty sure if you watch the video until the very end, you will find a way to maximize that ten thousand dollars to try to get out an extra 2%. So, in a weird way, just watching this video to the very end could end up making you an extra eight thousand dollars. All I ask in return for this video is just smashing that like button and commenting down below for the YouTube algorithm because that helps push the video to a new audience who can then also hit the like button and comment down below for the YouTube algorithm.

So, with that said, let's go over the best ways to invest ten thousand dollars in 2020, and with that, I'll give you a clear-cut guide as to the best ways that you can get the most amount of value from this long term.

First, let's start with one of the most boring, basic, practical, and safest options for the ten thousand dollars, and that would be the emergency fund. Now, for those who don't know, an emergency fund is really just the money you set aside to only be used in case of, you guessed it, an emergency where you have no other place to turn. Ideally, the size of this emergency fund should be equivalent to three to six months' worth of your living expenses and kept easily accessible for, obviously, emergencies.

Now, having this type of three to six month emergency fund means you're not gonna have to rely on credit cards to pay your way through any unexpected event. You won't have to sell your stocks or other investments to pay for it at a time when maybe they've declined in value, and it's not a good time to sell. You won't have to take on any high-interest rate debt anytime something happens.

So, in a way, having this money sitting on the sidelines could end up saving you a lot of money and almost acting as though it's an insurance if anything is to happen. So, if you don't already have an emergency fund, then using some, if not all, of the $10,000 towards building that up would definitely be one of my biggest recommendations.

Now, ideally, an emergency fund is something you want to keep completely liquid, available at any time you need it, and kept very safe so it does not fluctuate up and down in price. For me, I've been recently using Wealthfront and Ally Bank to get myself some of that sweet, sweet interest. But to be completely honest, it does not matter where you go as long as you get more than a 1.7 percent return on your money.

There's a whole bunch of banks out there that fit that description perfectly. So, if you're wondering which ones those are, I'm just gonna link them down below in the description. Inevitably, every single time I mention this, I always get someone commenting like, "But Graham, I would rather just invest the money instead and get a much higher 2% return than put it in the stock market."

Certainly, you could go and do that, but my rationale is that typically, emergencies happen on short notice when you most need the money. If a recession happens, you lose your job, and by the time you need your money, your investments have declined 20% in value, then I have a feeling at that time, you would have wished you had just kept it in a savings account instead.

Then, once you've built up that three to six-month emergency fund, we can go on to the next step. The second, another somewhat unexciting but could be really profitable way to invest ten thousand dollars is to pay down any high-interest rate debt that you might have.

I know somewhere out there, Dave Ramsey would be smiling ear-to-ear if he heard me say this. Now, here's why doing this is going to make you money. Obviously, if you're in debt, whether it be credit card debt, a mortgage, an auto loan, a personal loan, it doesn't matter; if you're in debt, that debt is costing you money.

Now, of course, some debt is good debt. If it's really low interest and that debt is helping you make more money, then sometimes, it makes sense to keep the debt and then just reinvest the money elsewhere. But if you have high-interest rate debt that is not making you any money whatsoever, then that is the debt that needs to be paid down as soon as humanly possible.

Now, here's my reasoning with this one: when you invest your money in a broad index fund or in real estate, your most investments for that matter, on average, you would expect anywhere between a six to twelve percent return on your money. To get that type of return, you're gonna be risking some years in which you will actually end up losing money.

On the other hand, when you have high-interest rate debt, just paying down that debt is like getting a guaranteed instantaneous return on your money at whatever rate the interest rate of the debt is. So, going and paying off a 20% interest rate on a credit card balance is almost like you getting an immediate guaranteed 20% return on your money with no risk whatsoever.

So, here's my basic rule of thumb: if you're paying above a four-and-a-half percent interest rate, then it's probably best you just throw as much money at that debt to pay it down as possible, 'cause you're getting a similar return to what a good investment would generate after paying taxes on it.

For the way I see it, there's no downside in paying off high-interest debt, so you may as well just go ahead and do it. So, if this applies to you and you have any high-interest rate debt, then I would use that $10,000 and put that towards the highest interest rate loan that you have first, and then work your way down from there. Consider that a risk-free guaranteed return on $10,000 and a really good use of your money.

Then after that, we can go on to the next steps. The third—here's where the fun part comes in—once you've done your emergency funds and paid off all high-interest rate debts, now you could use that $10,000 and invest it within your retirement accounts.

When it comes to this, we're gonna be going over three main accounts, and then afterwards, we're gonna be discussing some specific investments that you can make within those accounts depending on how much risk you want to take and how much money you potentially want to make.

Now first, I think it's a surprise my favorite retirement account overall for some of that $10,000 is using it towards a Roth IRA. Now, this is a retirement account where you can contribute after-tax money, and then all the profit you generate within that account becomes completely tax-free by the age of 59 and a half.

Think of it this way: just like you have a bank account that has access to your savings and checking accounts, a Roth IRA is an account that gives you access to your investments. The term "Roth" just means you've already paid taxes on the money you contribute to the account.

Now, here's how a Roth IRA works: you’re able to open up one of these accounts and contribute up to $6,000 a year if you're under the age of 50, and if you're over the age of 50, you're able to contribute up to $7,000 a year. Now, the massive advantage to doing this is that all the money you contribute to that account will grow entirely tax-free.

That means that if you invest $1,000 into this account and it eventually grows to $10,000, well eventually, if you were to sell that investment, you would normally have to pay taxes on it, and taxes make me very sad. But with a Roth IRA, you're not going to have to pay a single dollar in taxes, no matter how much money you make, as long as you sell it after the age of 59 and a half.

So, a $10,000 investment means you can max out your Roth IRA contribution for the entire year of 2020, and you could have money left over for these next options. Secondly, a 401(k). This is an account that you invest pre-tax money into, and then you pay taxes on it after you sell it and withdraw the money from the account after the age of 59 and a half.

The benefit to doing this is that whatever money you put in this account is not going to be taxed upfront, which means you have more money left over to go and invest with. So, for example, if you contribute $10,000 to a 401(k), you're gonna be taxed as though you just made $10,000 less, and if you're in a 22 percent tax bracket, that's a savings of $2,200 extra that you now have to go and invest with.

In 2020, they've raised the contribution limit to a 401(k) and increased it to $19,500 per year. Now, unfortunately, the catch here is that you end up paying taxes on this money when you take it out of the account in retirement, so it's not exactly completely tax-free.

Really, from my perspective, the 401(k) only makes sense in a few scenarios. The first is when your employer offers what's called a 401(k) match. This is where they will match your contribution to a 401(k) dollar for dollar up to a certain amount. The rule of thumb with doing this is always do it! Don't hesitate! Don't wait on doing this—just always contributes the maximum to your employer match on the 401(k). Always! Under every single circumstance, no exceptions whatsoever.

Secondly, a 401(k) makes a lot of sense if you're in a really high tax bracket right now and you expect to retire in a lower tax bracket in the future. The variable here is that if you end up making more money in retirement, then unfortunately, you're gonna end up just paying more taxes later than you would have just paid right now.

Also, if tax rates end up going up in retirement, then also you will end up, unfortunately, paying more in taxes again. This all depends on your own situation, and there are so many variables that are unknown when it comes to this, but generally, my role of advice is always contribute up to the employer match at a 401(k) no matter what, always!

Then, use whatever money is remaining after to max out the Roth IRA if at all possible. If you've done all of that so far and you still have some of that $10,000 remaining, then you could look into contributing some of that to what's known as an HSA, which stands for Health Savings Account.

This is really one of the best-kept secrets out there, except it's not really a secret; it's just not many people know about it, and not many people seem to talk about it. Now, there are some qualifications you must follow in order to do this, which you could find out very easily on a Google search, but assuming you qualify, you can contribute up to $3,500 per year completely tax-free into this account with pre-tax money.

Now, this account is specifically used to pay for any out-of-pocket medical expenses that you might incur. If you don't use that money that year, it's totally fine; it just rolls over to the next year. Now, this one is really great because, in my opinion, it's probably one of the best tax-advantaged accounts in the entire world.

First, you don't get taxed on any money you contribute to that account, so just right off the bat, that money, that $3,500, is completely tax-free. Secondly, you don't get taxed on any of that money when you spend it on medical-related expenses, so again, that's also tax-free. It's basically like you're getting completely tax-free money that you're never gonna have to pay taxes on ever as long as you spend it on any health-related expenses, which it's inevitable—we're all going to have some sort of medical expense at some point or another.

So again, there's almost no reason you shouldn't be doing this and using some of that $10,000 towards looking into an HSA and contributing up to $3,500 a year. Now, forth, assuming you're already way ahead of the curve, you have your emergency fund, you've paid off all high-interest rate debt, you've maxed out your retirements, and now you want to know what to do, here's what I would do with $10,000 if you're saving up for a larger investment or don't want to take a lot of risk.

That would be using either a CD, a savings account, or investing in a bond. Now, this one might seem completely counterintuitive because after all, the entire point of this video was to find a way to maximize your investment. But sometimes, you want to save up for something that's gonna cost you more than $10,000, like buying real estate, investing in a business, or putting your money somewhere else that's just going to require more.

So that's where this strategy comes into play. It's low risk, low reward, but it's safe, steady, consistent, and you could continue saving knowing that that $10,000 is not going to go anywhere. First, a high-interest savings account is probably the most obvious choice, and there's really no shortage of high-interest rate savings accounts out there to pay you higher than a 1.7 percent return on your money.

If there's a lot of options out there, I'm not going to spend too much time on this, but I will link to a few of them down below in the description. Secondly, if you know for sure you're not going to be needing that money anytime soon and you need to save up a certain amount in the future, you could look into putting that money in a CD, which will give you a slightly higher return.

This sort of CD just stands for certificate of deposit, and it's basically a savings account with a fixed date for a withdrawal, meaning you're gonna lock up your money for a specified period of time, usually 1 to 5 years, and in return, they're gonna guarantee you a set interest rate during that entire time. Now, most short-term CDs right now are paying anywhere between 2 and about two-and-a-half percent, which is okay.

I would only recommend it though if you are 100 percent certain you're not going to be needing the money; otherwise, it's probably best you just use a high-interest savings account instead. And third, if you want to take a little bit more risk with your money but you also want to play it kind of safe at the same time, you also got bonds.

A bond is basically an IOU from a city, state, or government, and for the most part, bonds are fairly safe. For instance, we have the Vanguard High-Yield Corporate Fund Investor Shares that pays you a whopping 5.45 percent right now, which works out to be 5.22 percent after fees. Now, this is not a risk-free return because the value of the bond could end up going down, and the payout could go down because of that. But you could also end up making a little bit more money if it ends up going up.

But for someone willing to take slightly more risk in exchange for a slightly higher payout, then this might be a decent option. Nonetheless, one of those three investments would be a great way to spend ten thousand dollars in the event you really just want to keep your investment safe and don't want to risk it while you're saving up for something much larger in the future.

Now, let's assume you want to do something big with your $10,000. You want to make some moves, and you want to turn it into a small fortune in the future, but you also don't want to be stupid with it. If that's the case, you have index funds. An index fund is basically just something that tracks the overall market, and you'll be able to own a small amount of everything for just one low cost.

Since index funds track the overall market and not just one specific stock, it ends up giving you a lot more diversification and a lot more growth long term. Historically, on average, the most popular of the index funds, which would be the S&P 500, has produced about an 8% return annually adjusted for inflation with dividends reinvested.

Now, for most people watching this video, I would probably recommend this route. It's probably the best risk versus reward in terms of how much money you're going to be making. Not only that, but index funds also have a very low fee to them, which means more money back in your pocket. That's because indexes are very easy to put together; there's not a lot to manage, and there's not a lot of overhead, and those savings just get passed on to you.

The other advantage of doing this is that most individual investors will end up making more money long term investing in index funds than they will by investing in individual stocks on their own. Several studies have also suggested that 92 to 95 percent of portfolio managers could not outperform the stock market index over a 15-year period.

The third advantage of going this route and going with index funds is just diversification. Even if you own 10 or 15 stocks within your portfolio, having one of them do really poorly could end up costing you a lot of money. On the other hand, if you buy into an S&P 500 index fund, you're gonna be owning a small amount of 500 different companies, only three of which account for more than 2% of the entire index.

Lastly, the final advantage of index funds is that it's just easy. You don't need to spend hours of your time trying to find an undervalued stock. You don't need to try to wait and try to buy in at the lowest price and try to sell at the very height. All you need to do is really just click a few buttons, buy a total stock market index fund, and really, that's it. You're done.

For anyone who wants to know which specific index funds to invest in, I highly recommend all you got to do after this video is go on Google what is called the "3 fund portfolio." That means there's only three different indexes that you'll have to buy, and you're entirely covered: just a total stock market index fund, international stocks, and bonds. And that's it! Boom, you're done! Ten thousand dollars well spent.

Number six, if index funds are just a little bit too boring for you and you want to take a little bit more risk for a potentially higher reward, you could use that $10,000 and invest it in individual stocks. Now, this one is by far the riskiest of any of the investments I've mentioned in this video, but also, the payout could potentially be the highest.

This is because you're placing all of your money within a few specific companies, and your entire invest is really just dependent on how those businesses do. So, if you have a knack for picking stocks and you're not trading emotionally, then this could end up working out really well for you.

I personally recommend, if you're gonna be doing this, to do this within a Roth IRA or a 401(k) so that that way you're not losing a lot of money to taxes. But this is not required; you could just as easily open up a free account with Webull, which by the way, they'll give you two free stocks when you deposit $100 on their platform. One of those stocks is valued up to $1,000.

Link in description! Then you can invest completely commission-free and trade stocks on that if you so choose. Some of the returns that you can get trading individual stocks could greatly outpace anything you could get in an index fund if you pick correctly. Like, Amazon is up 16 percent this year, AMD is up a whopping 116 percent, Apple is up 71 percent.

But just remember to keep in mind that this is also significantly riskier, and you could end up losing a lot of money doing this as well. But if you have an interest in learning the stock market and learning how to trade, and you don't constantly check stock prices and lose sleep over it like I do, then maybe picking individual stocks could work out really well for you.

Lastly, seventh, $10,000 is potentially enough money to get started in real estate investing, depending on the price point in the area you want to invest in. Now, of course, realistically, chances are if $10,000 is all you have to your name and that's it, you're probably not going to be investing in real estate with it. There are so many additional expenses that could come up from this and so many things that could go wrong out of nowhere.

So it's so important that you already have a cash buffer in place, also known as an emergency fund, to hold you over in the event something happens. But if you have $10,000 to use specifically towards the down payment, that means you could potentially buy a property maybe up to $100,000 or so, and then rent it out, and that could end up making you money several different ways.

The first advantage is that you're gonna get to borrow most of the money needed to invest. This means you could leverage your money and potentially control a $100,000 investment for the low price of $10,000, and then you get to keep all of the profits that property generates. Like, if the property goes up in value 10 percent next year, that just means you've made a 100 percent return on your $10,000 investment, and there you go, you doubled your money because that's how math works.

In addition to that, if you go and rent out the property for, let's say, nine hundred dollars a month, after your mortgage, property taxes, insurance, and repairs, you might be left over with an extra $150 per month, and cash flow is profit from a $10,000 investment that works out to be an 18 percent return on your money. Not to mention all the tax benefits associated with depreciating the property, writing off your expenses, building equity in the property, and also seeing property appreciation.

So, obviously, the downside here is that real estate is a lot riskier, and the barrier to entry is a lot higher. You're gonna have to have a really good credit score; you'll have to have the income needed to actually sustain that loan, and you're gonna have to be very careful about which property you buy.

This is also an actively managed investment, which means it's going to take work on your part. But if real estate is your thing like it is with mine, you have a lot of control over your investment, you get a lot of tax advantages from doing so, and you can end up making a lot of money in the process.

So, there you have it! Those would be my top ways to invest $10,000 going into the year 2020. It really just depends on your risk tolerance and how long you want to invest for, but I guarantee one of these ways is going to help you maximize the return on your money when you have it, so that way you could turn it into something huge in the future.

And so that also you could smash the like button for the YouTube algorithm. So, with that said, you guys, thank you so much for watching! I really appreciate it. If you have not already subscribed, make sure to subscribe. Also, feel free to add me on Instagram—I post there pretty much daily. So if you want to be a part of it there, feel free to add me there.

Also, make sure to add me on my second channel that is called The Graham Stephan Show. I post there every single day I'm not posting here, so that means if you want to see a brand new video from me every single day, make sure to add yourself to that! And then lastly, if you did want the two free stocks, use the link down below in the description, and Webull will give you two free stocks, one of which is going to be valued up to $1,000 when you deposit $100 on their platform.

Plus, for a limited time only, they're gonna give you a $5 gift card to a coffee shop that I cannot name because they said I can't name that anymore. So anyway, if you guys want that link down below in the description. Thank you so much for watching, and until next time!