How to Invest $10,000: A Step-by-Step Guide

$10,000 is a healthy chunk of cash and enough to give you cold feet when deciding how to invest it. Some of the best ways to invest $10,000 include funding a 401(k) or opening and funding an IRA or brokerage account. We'll help you walk through those options below.

1. Hands-on or hands-off investing?

You might need to learn your investing style if you're new to this game. So we'll make it easy for you: Are you looking for someone to invest this money for you?

If so, you might be interested in a robo-advisor. Robo-advisors offer complete portfolio management through computer algorithms that manage your investments in accordance with your goals. You'll pay an annual management fee of around 0.25% for a robo-advisor to build and manage an investment portfolio for you.

We've examined the leading robo-advisors and compiled our favorites based on crucial factors like fees, investment portfolios and customer service.

If, on the other hand, you want to learn about what to invest this money in yourself, here are some steps to take.

2. Pinpoint your goal

Your endgame matters because it — and when you want to reach it — should factor into how you invest this $10,000. (Learn more about how to prioritize your financial goals.)

Generally, money you need in five years or less should stay out of the market. If you don't have an emergency fund to pay for large, unexpected expenses, you should consider putting that $10,000 in the bank. Or if your goal for the cash is short-term — a down payment for a house or next year's vacation — there's another reason not to invest it. Instead, check out our suggestions for how to invest for short-term goals here.

If your goal is long-term — retirement is the most common in this bucket — you'll want to invest because that time will give your money a chance to grow.

» Saving for retirement? Consult our guide on retirement investments.

3. If you have a 401(k), get your match

A guaranteed investment return is as rare as free money, and a 401(k) match gives you both: When you put dollars into the account, your employer puts dollars in, too. How many dollars depends on your plan’s matching arrangement, but 50% to 100% of your contributions up to a limit of 3% to 6% of your salary is a pretty typical range.

This $10,000 windfall may give your budget the room it needs to start meeting that match. The hitch: You typically can’t just make a lump-sum deposit to a 401(k), so you have to get a little creative to get this cash into your plan and capture matching dollars while you do it. Put the $10,000 into a savings account, then set your 401(k) contribution to the level your employer matches. When that contribution is swiped out of your paycheck, repay yourself from the money in savings.

4. Max out an IRA

An IRA is like a 401(k) you open on your own, which means no match. But it has other benefits, including a wide investment selection, and if you don’t have a 401(k) at work — or you're already meeting your 401(k) match — an IRA is far and away the next best thing.

That $10,000 is more than enough to max out an IRA for the year. The IRA contribution limit is $7,000 in 2024 and 2025 ($8,000 if age 50 and older). You can contribute that to a traditional IRA, which will get you a tax deduction on your contribution. You'll then pay taxes when you pull the money out in retirement.

You might choose a Roth IRA if you're not concerned about that tax deduction. In a Roth IRA, you don't get a tax deduction on contributions, but distributions in retirement are tax-free. Generally, a Roth IRA is best if you think your tax rate will be higher later than it is now.

If you're already on track for retirement — your 401(k) is matched, and your IRA is funded — or you're investing for a long-term goal other than retirement, you'll want a taxable brokerage account, which you can open at any online broker. (Here's how to do it.)

Unlike an IRA or 401(k), there isn't a tax break here. But, a brokerage account allows you to access a wide range of investments, and because there is no specific goal for this account, you can take distributions at any time and contribute as much as you'd like.

» View our picks: the best brokerage accounts

5. Select your investments

The investment account — 401(k), IRA, brokerage — is just a vessel. Once you get that $10,000 in there, you must select investments. With $10,000, you can easily assemble a diversified portfolio of low-cost index or exchange-traded funds (ETFs).

Index funds, a type of mutual fund, typically have an investment minimum, but $10,000 is more than enough to buy into several. ETFs are a kind of index fund that trades like a stock. The minimum investment with ETFs is the price of one share, which could be as low as $50.

Both are baskets full of stocks (or bonds, depending on the type of fund you’ve selected). When you use them, you get exposure to stocks without actually having to pick individual stocks.

But you may want to pick stocks. Go for it, with one caveat: Many financial advisors recommend limiting stock trading to 10% of your portfolio or less (and follow these guidelines to survive). If $10,000 takes a bigger bite, maybe you trade stocks with the portion that overflows your IRA contribution limit or set aside just a small chunk of this money to play the market.

Next steps

• Best brokerage accounts

• Check your potential returns with our investment calculator

• How to invest in the S&P 500 index

• How to invest in stocks