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

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.

What's the best way to invest $10,000?

There are lots of good options. You could fund a 401(k) or IRA, or you could open a brokerage account. That $10,000 is enough to more than meet most online broker minimums.

We'll help you walk through those options below.

Hands-on or hands-off investing?

If you're new to this game, you might not know what your investing style is. So we'll make it easy for you: Are you really looking for someone or something 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 taken a close look at the leading robo-advisors and compiled our favorites, based on crucial factors like fees, investment portfolios and customer service. (Wealthfront, one of the companies that tops that list, charges NerdWallet readers no fees on first $5,000 you invest.)

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

1. Pinpoint your goal

The endgame is important here, because it — and when you want to reach it — is a key factor in how you should 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. So if you don't have an emergency fund to pay for large, unexpected expenses, you might want to put that $10,000 in the bank. Or if your goal for the cash is short-term — a down payment for a house, 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 being the most common in this bucket — you absolutely want to invest, because that time will give your money a chance to grow.

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

2. 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 common range.

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.

3. 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 $6,500 in 2023 ($7,500 if age 50 and older). You can choose to 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.

If you're not concerned about that tax deduction, you might choose a Roth IRA. 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 — 401(k) is matched, IRA is funded — or you're investing for a long-term goal that isn't 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 need to select investments. You can pretty easily piece together a diversified portfolio of low-cost index funds or exchange-traded funds 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.

» Want to know more? Here is our detailed guide for how to invest in stocks

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.

» Check your potential returns: Investment calculator

But maybe you 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.