How to Invest $10,000
Having $10,000 to invest is exciting, because it allows you to start building a Tooltip on your own. By diversifying, you're spreading your money around different types of investments. This helps cushion against wild market swings and can help provide more consistent performance over time.
How to Invest $10,000
You've got $10,000 and you’ve decided to invest it.
How do you put that money to work?
A diversified portfolio of investments is a good place to start.
So what exactly is that, and why would you start there?
A diversified portfolio should contain a mix of stocks, bonds or other investments.
This way, it’s less likely that the fate of your portfolio will hinge on a single investment.
By diversifying your investments, you can find a mix of risk and likely reward that suits your needs.
How you invest depends on your goal.
Are you saving for a house? College for your kids? Retirement?
If your goal is a long way off, you could consider more aggressive, riskier investments.
If you'll need the money sooner, consider lower risk investments.
The idea is to invest in a way that fits with your goal, timeline and tolerance for risk.
If you're saving for retirement, consider a target date fund.
Simply pick the year when you plan to retire, and the fund managers handle the rest.
Or you could consider a robo-advisor.
This is the name for a variety of online investment services that can build and manage a portfolio of funds for you.
Once you’ve settled on your approach, keep investing.
Even small, regular contributions can add up over time.
Your portfolio can be put in a variety of different accounts, depending on your goal.
- If you're investing for retirement, consider tax-advantaged retirement accounts. A traditional or Roth IRA can help supplement other tax-advantaged accounts you may already have, like a 401(k).
- For college expenses, a 529 plan, Education Savings Account (ESA) or custodial account might be right for you.
- For other situations, consider a traditional brokerage account.
Regardless of the amount you have to invest, Schwab's Investing Principles can help you achieve long-term success. In a nutshell, start early, create a financial plan and build a diversified portfolio to help reach your goals.
Let’s get started.
The first step is to zero in on your goal. What are you investing for? Are you saving for retirement or a down payment on a house? Schwab recommends that investors have a financial plan to help define goals, set priorities and lay out concrete steps to get there.
Select the appropriate account.
Once you've identified your goal, it's time to select an account.
There are many types of investment accounts but here are some of the common ones—organized by goal.
A range of goals
A brokerage account can help you save and invest for a broad range of goals.
Schwab One® Brokerage Account
Allows you to invest in everything from stocks and bonds to mutual funds, ETFs, and more.
Tax-advantaged accounts can help you save and invest for educational expenses.
529 College Savings Plan
Allows you to save for college and qualified distributions are tax-free.
Choose your investments as part of a diversified portfolio.
Once your account is open, you'll want to select investments to build a diversified portfolio. Here's how to create one:
StepDetermine your asset allocation.
Asset allocation is the way you divide your money among groups of similar investments or "asset classes." The three main asset classes are Tooltip , Tooltip and Tooltip . In general, if you're a conservative investor looking for income and stability, you may want to hold more bonds than stocks. But if you're a long-term investor looking for high-growth potential and less concerned about immediate income, you may want to invest more aggressively by holding more stocks. See our model portfolios for sample asset allocation plans.
StepDiversify within asset classes.
Stocks and bonds can be broken down further into different types. For example, you can invest in stocks that represent large companies (large-cap), small companies (small-cap), international companies and everything in between.
StepDiversify within sectors.
You can break down your investments even further. For example, with large-cap stocks, you can invest in different sectors (like technology, health care and communications). Within each sector, you can also invest in different industries. For example, within the health care sector, you could consider pharmaceuticals, biotechnology or equipment industries.
You also want to select short- and long-term investments. Your timeline for an investment is also called your time horizon.
If you'd prefer to have a portfolio set up for you, consider a robo-advisor. This service provides you with a diversified portfolio of low-cost ETFs based on your preferences. All you have to do is fill out a questionnaire about your goals and risk tolerance, and the service will assemble and manage a portfolio for you.
Consider making regular contributions to your account. Explore investing a set amount of money every month (or at any regular interval), regardless of how the stock market is performing—a strategy known as dollar cost averaging. When the market is down and prices are low, you can buy more shares for your money. When the market and prices are up, you'll buy fewer shares. While dollar cost averaging doesn’t protect you from the ups and downs of the market, the net effect of this strategy is that it helps you minimize downside risk.
The idea is not to try to wait for the perfect time to invest, as that’s very difficult to do over time. Get in the habit. Even small amounts add up over time, thanks to the power of compounding.
Take the next step.
Take the next step.
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