Smart Ways to Invest $10,000 in 2018

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Not everyone has $10,000 lying around, but if you received a year-end bonus or got a big promotion at work, for example, it’s time to put that cash to work—for you.

That means investing the money, in ways that allow that $10,000 to grow in value, thanks to the “miracle of compound interest.”

In a word, compound interest is your return on investment from the original amount invested (in this case, $10,000), as well as any prior interest earned on the money. For example, if you invest the $10,000 and earn 8 percent on the investment, after one year your total amount from that investment equals $10,800.

Not every investment returns 8 percent on a dependable basis, but there are ample opportunities to make that $10,000 in cash grow, by steering the money into the following investments:

Your 401k Plan

Popping the money into your 401k is always a good idea, as your 401k plan primarily invests money into investment vehicles that generally provide good returns, like stocks, bonds, and funds. Plus, if your company offers a company match up to 6 percent of your contributions, that amounts to $6,000 in free money, thus immediately turning your $10,000 into $16,000.

The Stock Market

The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent—that makes the stock market a good bet. In 2017 alone, the S&P 500 returned 21.8 percent. While past results aren’t indicative of future performance, the odds are with you when you invest in stocks, making the stock market a good place to invest that $10,000.

Real Estate

Although $10,000 isn’t usually enough to invest directly in the real estate market, it is enough to get you into a real estate investment trust (REIT) or real estate-themed exchange traded fund (ETF). REITs and ETF’s both offer benefits any investor would love, including high liquidity (they’re easy to trade in the financial markets), diversification (most funds include a wide variety of real estate investments), and, perhaps best of all, you don’t have to actually get your hands dirty rehabbing or repairing a home, as do most direct real estate investors.

Invest in an IRA

An individual retirement account offers access to solid stock and bond market returns, along with significant tax advantages. With IRAs, you earn a tax deduction when you make a contribution, but you will have to pay taxes when you take cash out of your IRA in retirement (when you’re likely in a lower tax category.) In 2018, the maximum amount you can put into an IRA is $5,500 for people under 50 years old. If you’re over 50 years old, you can make an extra “catch-up” contribution of $1,000.

Open a “Robo” Investment Account 

Ever hear of robotics-based investment accounts? So-called "robos" are a burgeoning industry and are a great place to park that $10,000. Robo-advisory firms like Betterment and Wealthfront are very user-friendly and do most of the investment work for you, like helping you choose investments and periodically rebalancing your account, while significantly reducing the high fees that often come with traditional investment/brokerage accounts.

Invest in Yourself

The financial markets aren’t the only place you can get a good return on your money from a $10,000 investment—not by a long shot. You can go back to school and earn a degree, or take online classes, thus adding value to your career prospects. You can also earn a professional designation (like as a certified financial planner, high-end chef, or as a credentialed tax accountant) that could lead to a higher income and more career satisfaction.

Get Yourself Out of Credit Card Debt 

One last great way to use $10,000 to your advantage is to pay down significant debt. Paying off thousands of dollars in credit card debt alone can help improve your credit rating, curb or even eliminate high interest rates (leaving more cash in your pocket), and add more income to the household budget once that monthly credit card payment is no longer in play. The same goes for other forms of significant debt, like student loans or mortgages. In short, the more debt you pay off, the sooner you’ll be debt free, and more prosperous as a result.

These aren’t the only ways you can put $10,000 to work for you, but all should be at the top of your list. When you do get your hands on that $10,000, use any single vehicle, or any combination of these ideas to start earning some serious cash.