How to Invest $10,000

Having $10,000 to invest is exciting, because it allows you to start building a diversified portfolio 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.

Video: How to invest $10,000

How to Invest $10,000

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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

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. 

Identify your goal.

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.

  • Three arrows icon

    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.

    Learn more

  • nest egg icon


    Tax-advantaged accounts can help you invest for retirement needs.

    Traditional IRA 
    Allows you to invest pre-tax dollars for tax-deferred growth.

    Learn more

    Roth IRA
    Allows you to invest after-tax dollars, and qualified distributions are tax-free.

    Learn more

  • graduation cap icon


    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.

    Learn more

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:

  • Step

    Determine 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 stocks Tooltip , bonds Tooltip and cash investments 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.

  • Step

    Diversify 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.

  • Step

    Diversify 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.

  • Short-term investments

    Interest-bearing checking and savings accounts, and money market savings accounts, can help you set aside money for an emergency. These should cover three to six months of living expenses, just in case. For slightly higher potential growth, you can consider a money market fund Tooltip . They’re considered a relatively low-risk investment, but can lose value. Certificates of deposit (CDs) may be appropriate if your investment timeline is longer than three to six months, but there may be a penalty for withdrawing money before your CD matures.

  • Long-term investments

    Consider starting with index mutual funds Tooltip or exchange-traded funds Tooltip (ETFs). Both mutual funds and ETFs that track indexes tend to be relatively inexpensive, which can make them an attractive option.

Or let a robo-advisor choose for you.

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.

Stay the course.

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.

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