Your definition of windfall may vary, but there’s little argument that $10,000 is a healthy chunk of cash — certainly enough to give you cold feet when deciding how to invest it.
We’ve slimmed things down to five of the best ways to invest $10,000. Feel free to mix and match; there’s no rule that says you have to throw it all into one pot.
1. Get your 401(k) 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 common range. (If you want to do the math to see how much your match could be worth, try our 401(k) calculator.)
This $10,000 windfall may give your budget the room it needs to finally start meeting that match, if you’re not already. The hitch: You typically can’t just make a lump-sum deposit to a 401(k), so you have to get a little creative if you want 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.
2. 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, 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 annual contribution limit is $5,500 right now (with an extra $1,000 allowed for those 50 or older). Max out and then select one of these other options for the rest of your cash.
» MORE: How to invest your IRA
3. Get guidance from a robo-advisor
Robo-advisors are what they sound like: robots — or specifically, computer algorithms — that manage your money. A $10,000 investment is enough to open an account at the majority of these companies, including Wealthfront, which manages the first $10,000 for free.
» MORE: The best robo-advisors
At other advisors, you’ll pay a fee of around 0.25% to 0.35% (Wealthfront’s fee on assets above $10,000 is 0.25%). That fee includes the cost of management, but it doesn’t include investment expenses. Robo-advisors typically use exchange-traded funds and index funds, which are fairly low-cost passive investments that track sections of the market, like the S&P 500.
4. Invest in commission-free ETFs and low-cost mutual funds
If you grimaced at the mention of that robo-advisor management fee, you might be the DIY type. You can pretty easily piece together a diversified portfolio of funds yourself with $10,000.
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. You buy them for a share price — that’s the minimum investment — and it could be as low as $50.
If you also have a 401(k), you might want to use these individual funds to fill holes in the investment choices offered by the plan — 401(k)s have a scaled-down mutual fund selection, and the ones that make the list can be high-fee.
5. Try your hand at investing in stocks
This is kind of DIY turned up a notch — index funds and ETFs 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 maybe you want to invest in stocks. Go for it, with one caveat: For a long-term goal like retirement, it’s best to stick to the options above and limit stock trading to 10% of your portfolio or less. 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.
» MORE: How to invest in stocks
Stock buying requires researching stocks — if you’re going to own a piece of a company, you want to know what you’re getting into. So make sure you’re up to the task and choose a broker that has low commissions, so trading fees don’t eat into your investment.