Edit: update I decided on a CD. I may do an index fund in the future. This was a short commitment and easy to understand. Thanks everybody.
Passive global technology index tracking fund
I’m going to need this dumbed down so I can understand
They have low cost to you
Global means they have stock in all markets, so if us is going bad is not necessarily bad for you
Technology means they mostly have stock in technology
Index funds follow the market. They have stock on everything in a segment or general so if market does well, you du well.
I got a 7k bonus 20 years ago in the military. I seriously considered investing it in the Vangard total stock market index fund. In '04 it was trading at $54 per share, today $282. Had I invested that $7,000 I would have $365,555 today. Instead I “invested” it at the strip club because I was a young dumb E-3 in Pensacola and New Orleans was only a weekend pass away. Long story short, index funds are the way to go.
I was considering spending this $10K on an extravagant, international vacation but am trying to make a smarter investment.
Buy 10 Babies in Arkansas.
it’s cheaper than surrogacy.
Does beer come with that?
If you don’t have an emergency fund, I would put some or all of it into something like a money market account. It won’t grow very much, but it’s safe and is quick and easy to withdraw when needed.
Otherwise depends on your age and situation, but an index fund (S&P 500) is almost always the right choice. It’s flexible, doesn’t usually lock you in, and will generally do very well in the mid-to-long term. If we hit a recession you might get stuck holding the shares for several months to a few years. The last thing you want to do is panic sell in that situation.
If you have any debt, paying that down is a very smart move, especially if the debt is charging more interest than your investment can earn. Future you will thank you.
I have my emergency fund, and no debt. If I were to lose this $10K, it wouldn’t impact my life. I’m comfortable with taking $10K out of my bank account and doing something with it but I don’t know how to go about that. I don’t know how to open an index fund or money market account.
I’m going to second (third, fourth, fifth) the Roth IRA recommendation. You can set it up with Schwab or whoever and can make recurring contributions too (set it and forget it) there are income limits so if you are really raking it in one year you can’t contribute that year but whatever you put in there is still (usually) going to grow in value. If you have an emergency situation and need the money you can withdraw contributions, not earnings, ahead of retirement, so it’s not lost to you, but working for you and much easier at tax time, no worries about how to report it.
Index fund, most definitely. And find one that has low administrative fees, I know that Vanguard has at least a few that are super low.
So from what I’ve read after viewing this thread, I make a vanguard account, either get a money market fund or a brokered CD, put the money in, let it sit for awhile, and then profit years down the line?
Money market or CD is going to have terrible return. You will be lucky to match inflation. Get a low overhead SP 500 index fund. By low overhead I’m taking .15% or less. You should be able to find .125% with a bit of poking around.
5% is terrible? I have 13k in a 9 month CD at 5%
Almost a year and I get like $600, doesn’t seem so great to me but there’s no risk either I guess :/
Low risk but inflation is above 3% so you are looking at less than 2% effective granted it’s a fairly safe investment.
SPY returns an average 12%
Then that compunds year after year.
There is no universally good investment - it all depends on your priorities, risk appetite and timeframe.
There is already some good advise, so I will add some of dubious value that might make sense for some people. Buy a better car (or get a motorcycle). I live in the US, so having private transportation is a necessity. I have a car, but mostly I share it with my parents. I do use a motorcycle as my main commute and it is cheaper than a car’s running costs. Just saying that $10k + sale of your current car could fetch you just about any other car. It is kind of hard to do a whole lot of life changing things with only $10k. Perhaps dental work if you need any.
I like roboinvester accounts. You put money in, it automatically invests in stocks for you based on your current age and risk tolerance (which you can change whenever you like). I particularly like Wealthfront, and their app/website are really good. They’ll manage $10-15k for free, and then above that you pay a small fee out of your earnings for their service. If you use someone’s sign-up link, they’ll bump your managed amount by $5k. Comment back if you’re interested and I can share mine. Good luck with your investment, whatever you choose!
With zero information on your situation, it’s difficult to say. If you have debt, paying that down/off is generally priority one. If you are debt-free, then you have options. Your age, stability, goals, and other factors would generally dictate what type of action to take. Were it me (early 40s, very low interest rate home loan), I’d put it into an index fund where I’ve already got some investments. In my case, I’m investing for retirement in about 25-30 years (as if I’ll be able to do that, but one can hope).
Pay down your debts first.
Vanguard S&P 500 fund.
This. Alternatively, 401K depending on a variety of factors.
Venmo me
But how do we know that you are use it for drugs and hookers and not just some nonsense?
Damn you got me I was gonna be an idiot and put it in an IRA
yeah that’s not good, may get you prosecuted under “material support” laws
Don’t disagree about stuffing it in VTI… But, be aware that things can go up and down, so don’t obsess over the value one you put it in. It’s long term so it should go up over long term, but they’re can be months sheets it goes down and even a year where it doesn’t do well
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pay off high interest debt
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top off your emergency fund so you don’t run into expensive short-on-money situations
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take care of deferred maintenance on your car or house that might turn into an expensive repair
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If you have an employer sponsored 401k, increase the contribution amount to get 10k more tax free into it before the end of the year and use the $10k cash in hand for expenses.
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Open a roth IRA and contribute the maximum amount you can (which may vary based on your income)
VT, VTI, and SPY are good broad-market funds with good historical growth.
Second vote for VTI.
If you qualify for the savers credit you should put $2k into retirement like a an IRA.
1-4 are all taken care of. I need to learn more about a roth IRA and what an index fund is. I’m okay with letting $10K sit somewhere for 5-10 years, possibly longer like for retirement.
Don’t rule out a Roth if you only want to save for 5-10 years. You’re allowed to withdraw the principal (initial 10K) at any time for no penalty/cost, so long as it’s recorded properly with the IRS when you withdraw it.
Read up on Roth IRAs - your future self will thank you! You can open an account anywhere you’d like (Vanguard, Fidelity, Charles Schwab, etc). One thing I’ll mention though: the annual limit is 7K for 2024 (8K if you’re 50+), and you have to have at least that much in income to contribute (i.e., if you only had 5K income for 2024, then that’s your limit).
So, for 10K you’ll have to invest in 2024 and 2025. You also have until tax day to make contributions for the prior year.
I like these points. Preventing a future expense by paying less now is always worth it, if you can afford it.
Being poor is expensive.
It’s much more expensive to be poor now than it used to be!
That depends, how far in the future, how big of an expense, how much interest can you earn, and what’s inflation looking like?
If it’s more than a couple thousand dollars more than a couple years out, you could possibly make useful money with a high interest bearing account provided inflation is expected to be less than about 2/3 of the interest rate of the account.
Time IS money.
This might make sense for people with six+ figures sitting in a savings account, but the average person today doesn’t have enough cash to think about earning interest on it. For them, paying off a debt now would be cheaper in the long run. For the most part, at least.
I used to not have any doubts about a Roth, but I’ve been considering that maybe it’s a little too much like giving the government a free loan. Do you know if there’s a thorough comparison anywhere between a traditional and Roth IRA that takes into consideration the opportunity cost of paying tax on the contributions?
Compound interest will far outweigh paying taxes now for a Roth. Especially if you also have a 401k, the taxes in retirement will be potentially large based on the growth of the fund over decades. A Roth makes it so you pay nominal taxes now for potential large tax free growth later.
The exception would be if you think your income will decrease in your later working years, in which case a traditional IRA could make more sense. That however is a unique case. Generally it’s better to take advantage of a Roth if you can for tax free gains later.
I understand how having a higher income and tax rate in retirement makes a Roth attractive. However, the comparisons I’ve seen don’t fully account for the opportunity cost of paying the taxes up front in the case of a Roth, since a traditional IRA lowers your taxable income by the amount you contribute. This tax break allows for a greater contribution. In other words, I think a fairer comparison would show a greater initial contribution for a traditional IRA.
The biggest question is, do you think your tax percentage will be higher now, or higher in the future? If you think your income might increase later (placing you in a higher tax bracket), or that the government might increase your tax burden later, then it’s better to pay taxes now.
That is a helpful comparison, but it assumes the same initial contribution. I think a better comparison would assume a higher initial contribution with a traditional IRA in order to account for the money being paid in taxes with Roth as being a missed opportunity. The money that went to taxes in the case of a Roth could have been additional investment in the the case of a traditional.
But you will pay taxes on the growth of the account later. Whereas a Roth grows tax free.
Ultimately it depends on what you think you will make in retirement. Both traditional and Roth IRAs are tax advantaged accounts, it just depends on when you want to pay the tax. It also depends on what kind of investments you are doing in those accounts. For something like the S&P 500, you can expect it to grow so a Roth is more tax advantaged than a traditional. However, we also aren’t talking about huge investments either l, so do your own research and see what you want to do.
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Bees.
I do enjoy beekeeping vlogs but I’m more of a gardener.
Beads?
Beads?
Peas.
I’ll reply without knowing your situation fully. If you don’t have an emergency fund that would cover several months worth of expenses that is probably the single most impactful thing you can do with $10k. A few high yield savings account offer rates around 4%, some of them have strings attached, so read how it works carefully. Think of this as insurance against unforseen expenses that you might otherwise have to put on a card and consequently pay interest for. Pick a number and always make sure you keep that account at that number.
If you already have an emergency fund, you have lots of options. Personally, I am onboard with the folks recommending index funds. I have an ETF that tracks the DOW and it has outperformed most of my individual stocks significantly over time.
Most importantly, strangers on the internet are likely not financial advisors and may not even know what they are doing. Take everything with a grain of salt and if you talk to any investment companies make sure you understand the difference and overlap between a financial advisor and a fiduciary.
