7 Best Ways to Invest $10,000 in 2022

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Maybe you’ve been diligently saving a little each month for a few years, or maybe you’ve recently received an unexpected sum of money, like a bonus at work. Either way, you know he got $10,000 and wants to invest it to make even more money.

Read more: 5 things to do when you reach $50,000 in savings

7 ways to invest $10,000

Here are some smart ways to put your $10,000 to good use.

1. Set up

The first thing you want to do is make sure you have enough money in your emergency fund. It’s money that will cover you for three to six months if something happens to your income. I have.

2. Pay off debt

This may not be the first thing that comes to your mind when you think of investing, but if you have a balance on your credit card, paying it off can potentially give you the best return you can get anywhere.

Think about it like this: Let’s say your credit card balance is $10,000 and your APR is 25%. By paying off that balance, you can get a 25% return. Certainly not from banks, bonds, or stock market CDs.

3. Donate to your retirement account

If you have a 401(k) at work and haven’t given the maximum amount you can give ($20,500 in 2022, or $6,500 catch-up donation if you’re 50 or older), increase your donation by up to $10,000 .

Another option is to contribute to the Roth IRA. If you have a 401(k) at work, you can also contribute to a Roth IRA. The maximum contribution to the Roth IRA is $6,000 annually, plus a catch-up contribution of $1,000 if you are 50 or older. Please note that this contribution limit applies to all Roth or regular IRA accounts. Therefore, if you have a Traditional IRA and a Roth IRA, you cannot over-stake either or both. A 401(k) is a different animal, but with its own contribution limits.

4. Contribute to HSA

A health savings account can save you pre-tax amounts on medical expenses if you have a health insurance plan with a high deductible. Up to $3,550 if he’s the only one on the insurance plan, up to $7,100 for the family plan.

Money deposited into HSA is tax-deferred and tax-free when withdrawn to pay for eligible medical expenses. You can also carry over from one year to the next. Until I retire.

5. Buy Series I Savings Bonds

Savings bonds may seem like a boring, outdated investment, but these periods of instability show that there is a time and place for stragglers. And private bonds are not your grandfather’s savings bonds. It provides a hedge against inflation as interest rates are indexed to inflation.

Here’s how it works: You can purchase up to $10,000 worth of I Notes in a calendar year. Government bonds pay interest for 30 years. The interest rate is based on two interest rates. A fixed interest rate for the life of the bond and an interest rate that changes every six months depending on inflation. Fixed interest rates and inflation rates are released on May 1st and November 1st each year.

Interest on I bonds is compounded semi-annually. When you redeem a bond, you get the principal amount plus any interest earned for as long as you hold the bond. You must wait one year after purchasing I bonds before you can cash them in, and you will have to pay a three-month interest penalty if you cash out before five years have passed.

To purchase Series I Savings Bonds, please visit Treasury Direct’s website.

6. Ladder some CDs

Like all fixed rates, CD rates are rising. But interest rates could, and probably will, fall again, and CDs lock in money for a period of time. The longer the term, the higher the interest rate, but the higher the risk that interest rates will rise, and the lower the return than otherwise.

The answer to this dilemma is the CD ladder. To create a CD ladder, buy CDs of various maturity levels.

For example, $10,000 buys four $2,500 CDs. 1 year, 2 years, 3 years, 5 years. If you think interest rates will continue to rise when your 1-year CD matures, you can invest that money in a long-term CD. Once it matures, you can make decisions about whether to hold the money short-term or long-term. can be suppressed.

7. Invest in the market

If you are new to investing, start slowly. Experienced people can join immediately. Here are his three ways to put $10,000 into the market.

index fund

An index fund is a collection of stocks that attempt to replicate an index or investment benchmark. For example, you can buy an index fund that includes the Dow Jones Industrial Average or his S&P 500 stock. For example, you could invest in a fund that tracks the performance of an index of semiconductor stocks or retail stocks.

Index funds are passively managed. In other words, investments in the Fund are bought and sold only to stay true to the index. An index fund is designed to provide the same return as the index it follows and therefore will never outperform its benchmark.

Many index funds are exchange traded funds. Exchange traded funds (ETFs) are mutual funds that trade like stocks. This means that prices change throughout his day and the fees are usually very low.

mutual fund

A mutual fund is a “basket” of stocks, and investors buy stocks in the fund. Mutual funds are more diversified than individual stocks because the basket has a wide variety of stocks. Mutual funds are actively managed. That is, there is a portfolio manager who monitors the fund and buys and sells positions as it sees fit.

Individual stock

Picking your own stocks involves more risk than buying an index or mutual fund, but it also has the potential for greater returns. The best advice for new investors may come from legendary investor Warren Buffett. Think of the stock of the company that makes the product that you use and, ideally, can’t live without. Especially if it’s a new product that’s just starting to take off.

If you want to invest in individual stocks, manage your portfolio yourself with an app like Robinhood or E-Trade, or use a discount broker like Fidelity, Charles Schwab or Edward Jones. Some companies offer both discounted and full-service options.

Full-service brokers charge higher commissions and fees. In exchange for that cost, you get advice on what to buy, sell and keep.

final take

There are many things you can do with 100,000 yen. Have an emergency fund, invest in guaranteed and safe investments, or dabble in the stock market. What you do with your $10,000 savings should be something that makes sense to you and will help you achieve your financial goals.

Information is current as of October 21, 2022.