In this world, not all people have the opportunity to own $10,000. But, if by any luck, you are one of those people who have $10,000, then you need to find the smart ways to invest that money. One of the best ways is to make that money work for you. You can take advantage of compound interest and gain significant passive income.
In the simplest way, compound interest is your return on investment from both the original amount as well as the accumulated interest earned on the money.
Take this as the example, you invest your $10,000 with 8% interest each year. After one year, you get $10,800. In the next year, you will get 8% out of $10,800.
Here are the smart ways to invest your $10000.
The Stock Market
In the last 50 years, the average annual total return for the S&P 500 is 9.8%. Thus, the stock market can be a good bet for your investment. In 2017, the return of the S&P even reached 21.8%.
But you have to remember what happened in the past cannot indicate what can happen in the future. Take 2018 as an example, the S&P 500’s yearly return was negative (around -5%).
If you can make a commitment to not touch the money for a couple of years, then the stock market can be a good place to invest your $10,000.
Individual Retirement Account (IRA)
An individual retirement account gives you access to a solid stock and bond market return as well as significant tax advantages. The reason is that the government are happy if you save for your retirement. Thus, it offers significant incentives.
In 2019, the maximum capital someone can put in an IRA is $6,000 for those below 50 years old. If you are over 50 years old you can add $1,000 more.
A Robo Investment Account
A robo or robotics-based investment account offers easy ways for new investors to make his or her $10,000 works. The example of Robo advisor firms is Weatlhfront and Betterment.
They are user-friendly and professionally do most of the investment works for you. You just have to answers some questions they have provided. Then, they will automatically choose your investment. Besides, they also periodically rebalance your portfolio.
Other than that, it also offers lower fees than the traditional advisor. You also do not need to pay the commission.
