7 Ways To Invest $10K In 2022 | 7 Best High Inflation Investments | How To Invest $10,000 Right NowJul 09, 2022
Let’s discuss 7 ways to invest $10,000 in 2022 to help reduce risk of losing money and maximize returns.
These 7 investments are great for those looking to hedge inflation, reduce risk of losing money, or take advantage of long term plays to maximize profits during the downward cycle we are experiencing currently.
If you are investing in the markets currently, more than likely, you’ve seen a pretty big hit to your portfolio
Look at some of the year to date returns of these major companies (as of my video recording)
- Facebook: -53%
- Tesla: - 41%
- Apple: -24%
One of the keys to building wealth is having great diversification and also knowing where to put your money in different market cycles.
So let’s dive into 7 Best Ways To Invest $10,000 to mitigate risk and maximize profits during high inflation
To do this, i’m going to break up these investments into 3 categories:
- Safe Plays (safest and most guaranteed return on your money)
- Moderate Plays (okay with some risk and looking for a little more upside)
- High Risk Plays (lots of volatility and want to try and maximize returns)
#1 PAY OFF DEBTS
When most people think of investing they think of stocks and real estate, not paying off their debts.
However, paying off your debt is a guaranteed rate of return.
If you have debt that is charging 6% interest and you pay it off, that is a 6% return on your money.
As a general rule of thumb, when it comes to paying off debt vs investing, you always pay off your debts AS LONG AS the interest rate on your debt is greater than your guaranteed rate of return on an investment
- Example #1:
According to LendingTree the average new credit card apr is around 20%
Let's say that you have $10,000 in cash as well as $10,000 in credit card debt at 20% interest.
Unless you have an investment that you know for sure will bring you much more than 20% return, you’ll be better off paying your debts.
- Example #2
Let’s say you have $10,000 cash and deciding whether you should pay off your debt or invest
Debt = $10,000 @ 2% interest
Investment = 8% return
In this case, because the guaranteed investment return is much greater than the interest on your debt, you are better off investing.
#2 HIGH YIELD SAVINGS ACCOUNTS
If you don't have any high interest debts to pay off (or you’ve already paid them off) another safe and guaranteed place to invest your money is a high interest savings account.
High interest savings accounts are guaranteed investments that you don’t have to worry about losing your money.
Your money is also much more liquid (accessible) than a CD (certificate of deposit) which makes it great in case of an emergency.
Even though the returns on high yield savings accounts are not that high, this is a much better option than being invested in a stock that drops a large percentage.
If the stock that you invested in drops by 30%, it's going to have to grow by 42% just to get back to where you were.
If that stock is growing at an average of 10% return per year, that means that it could take you
3-4 years before you get back to where you started.
While most high interest savings accounts pay between 1-3%, some can pay upwards of 9% per year.
Here are some great savings accounts to check out and get started with
- Blue Federal Credit Union
- Digital Federal Credit Union
- Outlet Finance
- HM Bradley
- Varo Bank
#3 I BONDS
According the Bureau Of Labor Statistics, inflation is at 8.6% and rising, which is at a 40 year all time high.
The average savings account at a large bank pays around 0.01% and even high yield savings only pay 1-3% on average.
If your money is not earning at least 9% or higher, you are losing money.
If you had $100,000 sitting in a savings account earning 0.01%, in a year with 9% inflation, it would be worth $91,000
This is where I Bonds can be a great solution.
Bond = tool that companies or governments can use to raise some capital and in return they offer a specified rate of return
I Bond = issued by the u.s treasury and it's designed to help keep up with inflation so that you don't lose the value of your dollar…..
…..and it consists of a fixed rate as well as a variable rate to match inflation
As of the recording of this video, the US Treasury is offering a 9.62% through October of 2022.
Things to keep in mind when investing in I Bonds
- Minimum electronic purchase of $25
- Maximum investment of $10,000 per calendar year
- 1 Year minimum hold period before you can cash out
- If you cash out before 5 years, you lose the previous three months of interest payments –meaning that had you had the bond for 18 months you'd only be paid out for 15 months of interest
- You pay federal taxes on the interest earned
You can buy I Bonds through the treasury website here
MODERATE INVESTMENT PLAY
#4 INDEX FUNDS / ETFS
If you are willing to stomach a little more volatility for long term growth and reward, Index Funds or ETFs , exchange traded funds, are a perfect investment.
Be sure to check out my other videos and blogs regarding best index funds, but here is what you need to know
Over a 15+ year period of time, index funds will outperform hedge funds and individual stock pickers 92-96% of the time.
That means that you only have about a 4-8% chance of beating the market long term.
To give some context, you have about a 4% chance of getting 21 in black jack.
While we won’t go into detail in this post about all the best index funds out there, there are two that will help you get started
- SP500 Index Fund
This fund consists of the 500 largest companies in the US stock market and has a 10 year average return of just over 13%.
Had you invested $10,000 10 years ago, you’d have about $36,000 today.
- VTI (Vanguard Total Index)
This ETF seeks to track the CRSP Total Market Index which essentially means you are investing in EVERYTHING - small cap, mid cap, and large cap companies in the U.S Stock Market.
This is one of the highest earning etfs out there with a 10 year average return of 13.25%
While some may argue these stats aren’t very accurate since we have been in a historic bull run market, since 1957 the SP500 has had an average annual return of around 10.5%, which is about 7% when adjusted for inflation.
#5 REAL ESTATE
Real estate is one of my overall favorite investments out there to build wealth over time
That is because of leverage.
Let's say that you invest $10,000 using at 3.5% down payment FHA loan.
This would give you access to a $285,000 asset.
According to studies, from 1929 to 2021 the average annual return for real estate is 4.2%
If my $285,000 home grows at 4.2 percent for the next 30 years it would worth $1 million dollars and would be completely PAID OFF
To take it one step further, after a couple years you could move out, rent it out, and then buy your next property.
If you did this, you would now have tenants paying down your loan, cash flow each month from rents, and TWO properties
This is how you compound your wealth.
Biggest Challenge With Real Estate
While there are countless reasons to buy real estate, there are some reasons for why you shouldn’t
- Loan approval challenges
- Liquidity (accessibility to your cash)
Getting approved for a loan can be tedious and challenging at times.
You may find it challenging to get approved for a loan depending on your income and financial situation
Be sure to check out my video and article on “How To Buy Your First Rental Property In 2022”
The other major downfall is that the money you invest in real estate is not very liquid - meaning you can’t easily access it.
IF you think you’ll need access to that money in the near future, real estate may not be a good option at this time.
In this case I would suggest looking into REITs which stand for Real Estate Investment Trusts.
Doing this would allow you to invest in the real estate market but have much more liquidity / access to your capital.
If you are okay with lots of volatility and are more focused on the potential to get some massive growth, then cryptocurrency could be the long term play for you.
IF you are going to invest in cryptocurrency I would highly suggest you stick to the major coins
These are going to be your least risky plays in this market (though they are all highly volatile and hold a great deal of risk)
When it comes to cryptocurrency the longer you hold onto your investments the less risky they tend to become.
The shorter your time frame, the more risky they become (which is also true for pretty much EVERY asset class)
Bitcoin Returns Based On How Long You’ve Invested
- 1 Year Ago = - 36%
- 3 Years Ago = +69%
- 5 Years Ago = +687%
- Jan 1st 2012 = +388,000% (100-200% compounded annually)
Rules To Follow When Investing In Cryptocurrency (or pretty much any asset class)
- If you're going to invest, don't invest more than you're willing to lose
- If you are going to invest, be sure that you're gonna be holding at least a minimum of 4 years+ (the longer the better)
Anyone who has invested for at least 4 years has never lost money with bitcoin.
#7 INVEST IN YOURSELF
I could say the GREATEST investment you could make with $10,000 is investing in yourself (despite how cliche that sounds)
Let’s say you invest $10,000 into a stock, real estate, or crypto and you hit the JACKPOT
Your investment 10X’s giving you $100,0000
Now let’s say you make $40-50k per year and you decide to invest $10,000 to learn a higher paying skill, build a business, etc
And now you are able to make $100,000+ per year.
Not only did you turn your $10,000 into a $100,000 income, 10X, but now you can earn that EVERY YEAR….
This is exactly what I did.
Before I started coaching, I worked various jobs and made between $40-50k per year living in LA.
I took my time, money, and knowledge, and created a fitness and life coaching business.
My first year I made $100,000 (and i didn’t even spend close to $10,000 to do so)
If you already make really great money currently and are happy with your income, then look at some of the investments above.
IF you don’t make as much as you like, perhaps you should spend your money (or a portion of it)....
And invest in a skill you want to learn.
Sales, Real Estate Agent, Website Designer, Graphic Artist, Computer Coding, etc
You could get a certification, start a side business or side hustle….
It wouldn’t be unheard of to 2X, 5X, or even 10X+ your income by doing so.
In fact, one of my clients, who is a mechanic and has been working with me for almost 3 years now, has gone from $50,000 a year income to almost $150,000 this year..
AS A MECHANIC!
Simply because he got focused, got better certifications allowing him to do more complex jobs, etc.
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