How to Invest 10,000 Dollars

How to Invest 10,000 Dollars

Step 1

Place your money in a savings account. This is the easiest way to invest that $10,000 and still have it accessible. Find a bank that offers a good interest rate on your money. Many banks use a tier system—the higher the balance, the higher the interest rate, which can be compounded daily or monthly. A daily rate results in a slightly higher return on your cash. There are also some Internet-based banks that offer higher rates than traditional brick-and-mortar institutions because of their minimal operational overhead.

Step 2

Put your money in a certificate of deposit. Decide how long you want to invest it, and investigate a number of banks to find out which offers the best interest rate. CDs are time deposits that can range anywhere from four months to five-plus years. A higher interest rate will obviously make more money, but keep in mind that the rate will likely change when your certificate of deposit comes up for renewal.

Step 3

Look into Roth IRAs. No matter what age you are, investing your money in a Roth IRA is a good idea for those who want tax-free money after they retire. Your contribution is capped per year, depending on your age. The maximum after-tax contribution is $5,000 for 2008 and is set to rise by $500 each year thereafter; if you're over age 50, you can add an additional $1,000. So in a little more than a year, you can fully invest that $10,000. You can withdraw funds from a Roth IRA without penalty starting at age 59 1/2, providing you've had the account for more than five years.

Step 4

Invest in a mutual fund. Rather than picking individual stocks, a mutual fund is a readymade, diverse portfolio of different stocks and bonds managed by a financial expert. This expert buys and sells the stocks in the best interests of his investors, with the aim of getting the best return for their money. Mutual funds are also liquid investments and can be easily cashed out. Any brokerage can help you with this option.

Step 5

Get an account with an Internet brokerage. There are a number of companies, such as E*Trade and Scottrade, which allow you to set up online accounts through which you can buy and sell individual stocks. This is a good way to invest $10,000, as you can do your research and choose the stocks that you feel will give you the best return on your investment. There is usually a per-trade fee for each transaction, so do your homework before joining.