How to Invest 10,000

I get this question a lot from people: What should I do with 10,000?

Wow.

Sometimes I don't know where to begin. Endless possibilities...remember the Rubik's cube? Young people under 25 maybe not, but your parents or older siblings might. Its a cube with 9 sections on each side that you have to turn and swivel so each side is the same color. Sounds easy? I saw a special on the History Channel called 80's tech (and also in my favorite movie: The Pursuit of Happ(y)ness) that it has 43,000,000,000,000,000,000+ combinations! That's 43 quintillion, or 43 million trillion...a huge number to be sure.

Ok, so there's not THAT many combinations or possibilities for investing 10k, but there are a few important questions you ask yourself before investing.

1) What is your investment horizon? In other words, when will you need the money. Generally, you can invest in 'risky' investments if you have a long-term horizon, but remember it is not the investment that is risky, it is the investor's knoweldge that makes the investment risky. Take on the risk you can stomach; don't put your money in stocks if risk makes you feel like you're on a roller coaster, literally.

2) Do you have a decent savings account? I think it is important to have some money in a savings account. 500? 5,000? 50,000? It is completely up to you. Maybe you're renting and don't have a need for a big savings account, or you have a home that's older and is in need of maintanence soon. Keep some money liquid for those planned and unplanned life events.

3) What interests you? This is very important; you need to identify what investments you are interested in, if any. If you don't want to learn about investing, or prefer someone else to handle the investing, be realistic about the returns you will receive. Mutual funds are huge, and can't move as quickly as a small stock portfolio. Bank products will always pay you less than they charge when you borrow, that's their business model.

If you figure out what interests you, your investment horizon, and have some savings, it should be easier to find what to invest in. Just remember that the safety of principal you get from bank products, government securities, your home (usually) is only safe for the principal, but not for your financial future. The safer your investing is today, the more money you will have to save to acheive your goals. Take on all the risk you are comfortable with, and you will stick to your plan. That is the most important thought I can leave you with my friends.