Imagine you wake up tomorrow, and you’re given $10,000. The giver, however, doesn’t want you to spend this money on frivolous things. He wants you to invest it. You don’t have a clue where to even start, and he gives you no advice. What do you do? Here are five ways to invest it best – and five of the worst.
Five of the Best Ways to Invest $10,000
One of the best investments is your home. If you don’t own a house, you might want to consider purchasing one. If someone were to hand you $10,000 and you had a steady job with which to pay the mortgage, it would be in your best interest to purchase a home. The price of your home will rise and fall with the economy, and if you plan it right, you can sell that big empty house when you retire and buy yourself a nice, little condo with money to spend after.
This investment form isn’t for everyone. You have to have a strong character and be willing to make the tough decision of evicting tenants that don’t pay. If you can afford to purchase a property to rent out, your tenants will usually end up paying off that mortgage for you. Just like residential housing, the best way to get the best deal is to purchase when the market is low. If you’re interested in either real estate investment idea, you should take this zero risk real estate class to learn how to make the most out of your dollar.
These kinds of investments have a double benefit. For one, they act as insurance coverage. For another, insurance products like annuities and whole-life insurance can be great supplements to retirement funds.
Company Retirement Plans
An investment like this is usually tax deferred, meaning any money taken from your paycheck to go into this retirement plan is put there before any taxes are taken from your check. Also, depending on where you work, businesses usually have a matching funds program based on the percentage that you invest personally.
In layman’s terms, the idea of mutual funds is a bit like starting a lemonade stand with your friend when you were a child. You both share the profits, and you both share the costs. Mutual funds involve pooling the money of many small investors to purchase stocks or other securities so the risks are spread out.
Five of the Worst Ways to Invest $10,000
Usually, a tax shelter is used to delay income taxes. In this way, they’re not really seen as an investment because of their low economic value. However, you might consider tax shelters as a way to help curb the cost of taxes you’ll be paying as your fortune grows. Otherwise, you should pass on a tax shelter investment.
For the most part, any gemstones you might have are not for investment purposes. They’re usually keepsakes. Few people make money off of investments in gems, and you usually have to put a lot of money out there in order to get any kind of return. It’s best to pass on this one and just consider purchasing a nice ring to pass down the generations.
If you know what to look for, old coins and stamps and other items can be a great investment. However, you’ll be putting in a lot of time and energy into something that might not pay off right away or at all during your lifetime. If you have the money to purchase collectibles, you might consider doing it as a hobby and not as an investment or source of income.
The stock market is a fickle mistress, and unless you have some experience or a professional investor guiding you, the stock market might not be your thing. Most people tend to stock hop, moving their money from stock to stock trying to keep up with trends and get the most for their money. However, if you do plan to invest in stocks, your best bet would to purchase some stocks and let them sit for ten years or more.
When investing in partnerships, the most common ones are limited partnerships. This involves a contract between a general partner and one or more limited partners. The idea of this contract is to limit the liability of the limited partners. However, there is usually no return on the initial investment in the time proposed by the contract if ever.
One last piece of advice…
If you are seriously considering investing money, whether it be $10,000 or less (or even more), your best bet would be to find an expert that could help you make the right decisions. You might think you know what to do best with your money, but you could learn the hard way that you actually don’t. Rather than risk losing a lot of money by making mistakes, find a reputable investor to work with.