In the United States, investing your money is a tradition that is nearly as old as the laws that govern the country. Trading at the New York Stock Exchange began in 1792, while the U.S. Constitution was effective in 1789.
In the centuries since, investing strategies have adapted, and new investment vehicles have arose (J.P. Morgan Sr. might experience some difficulty in understanding Bitcoin).
In 2018, what does the investing landscape look like? Where do American consumers look to place their money in the hopes that it grows into a small fortune?
What investments are baby boomers making to ensure a comfortable retirement? What aggressive plays are millennials making to grow their wealth while they're still young?
Surveying 1,000 Americans from the general population, LendEDU discovered what the preferred investments are in 2018 and how these investments change according to generation.
10 Ways to Invest $10,000 According to 1,000 Americans
Note: General population (all generations) answers are listed in black. Answers from only millennials (18-34) are listed in blue. Answers from only Generation Xers (35-54) are listed in red. Answers from only baby boomers (55+) are listed in green.
1. If you were given $10,000 tax-free and had the ability to invest all of it in one of the following options, which would you choose?
- 13.5% of respondents answered "Real estate" (15.07%) (14.56%) (11.2%)
- 5.1% answered "A virtual currency (Bitcoin, Ethereum, etc.)" (9.19%) (4.04%) (3.08%)
- 7.2% of respondents answered "Invest it in the stock market through a brokerage account, financial advisor, or robo-advisor" (6.62%) (8.09%) (6.72%)
- 12.2% of respondents answered "Invest it in a high-yielding savings account or CDs" (7.72%) (10.78%) (17.09%)
- .2% of respondents answered "Invest it in peer-to-peer loans" (.37%) (.27%) (0%)
- 9.9% of respondents answered "Invest it in my 401(k) or Roth IRA" (8.46%) (9.43%) (11.48%)
- 3.2% of respondents answered "Invest in my education" (9.93%) (1.08%) (.28%)
- 6.9% of respondents answered "Invest it for my child's education" (6.25%) (11.32%) (2.8%)
- 27.3% of respondents answered "Pay down debt (student loan debt, credit card debt, etc.)" (22.43%) (25.34%) (33.05%)
- 6.2% of respondents answered "Invest it in my own small business" (6.25%) (6.74%) (5.6%)
- 8.3% of respondents answered "None of the above/unsure" (7.71%) (8.35%) (8.68%)
2. (Asked only to those who answered "Real estate" to Q1) Specifically, how would you invest in real estate?
- 28.89% of respondents answered "Through a real estate investment trust (REIT) (39.02%) (27.78%) (20%)
- 22.96% of respondents answered "Pool the $10,000 with other investors and buy an investment property outright" (26.83%) (29.63%) (10%)
- 2.96% of respondents answered "Through an online crowd funded platform" (7.32%) (0%) (2.50%)
- 25.93% of respondents answered "Other way" (24.39%) (16.67%) (40%)
- 19.26% of respondents answered "Not sure" (2.44%) (25.92%) (27.5%)
3. (Asked only to those who answered "Virtual currency " to Q1) Specifically, what is the primary virtual currency you would invest in?
- 66.67% of respondents answered "Bitcoin" (76%) (60%) (54.55%)
- 15.69% of respondents answered "Ethereum" (12%) (20%) (18.18%)
- 9.8% of respondents answered "Litecoin" (12%) (6.67%) (9.09%)
- 1.96% of respondents answered "Ripple" (0%) (0%) (9.09%)
- 5.88% of respondents answered "Other" (0%) (13.33%) (9.09%)
4. (Asked only to those who answered "Invest it in the stock market through a brokerage account, financial advisor, or robo-advisor" to Q1) Specifically, would you invest through a standard brokerage account, robo-advisor, or human financial advisor?
- 30.56% of respondents answered "Standard brokerage account" (27.78%) (26.67%) (37.5%)
- 12.5% of respondents answered "Robo-advisor" (11.11%) (20%) (4.17%)
- 52.78% of respondents answered "Human financial advisor" (55.55%) (46.67%) (58.33%)
- 1.39% of respondents answered "Other" (0%) (3.33%) (0%)
- 2.78% of respondents answered "Not sure" (5.56%) (3.33%) (0%)
5. (Asked only to those who answered "Invest in my education" to Q1) Specifically, what type of education would you invest in?
- 87.5% of respondents answered "Formal college courses and/or graduate level courses" (88.89%) (100%) (0%)
- 9.38% of respondents answered "Non-traditional education-like workshops or bootcamps" (7.41%) (0%) (100%)
- 3.13% of respondents answered "Other type" (3.7%) (0%) (0%)
6. (Asked only to those who answered "Pay down debt" to Q1) Specifically, what is the primary type of debt that you would pay down?
- 12.45% of respondents answered "Student loan debt" (29.51%) (13.83%) (2.54%)
- 48.72% of respondents answered "Credit card debt" (37.7%) (47.87%) (55.08%)
- 9.52% of respondents answered "Personal loan debt" (8.2%) (7.45%) (11.86%)
- 11.36% of respondents answered "Mortgage debt" (9.83%) (12.77%) (11.02%)
- 7.69% of respondents answered "Auto loan debt" (4.92%) (6.38%) (10.17%)
- 7.33% of respondents answered "Other type" (4.92%) (9.57%) (6.78%)
- 2.93% of respondents answered "Not sure" (4.92%) (2.13%) (2.54%)
7. (Asked only to those who answered "Invest it in my own small business" to Q1) Specifically, what type of small business would you launch?
- 14.52% of respondents answered "Retail store" (23.53%) (8%) (15%)
- 22.58% of respondents answered "Restaurant and/or bar" (17.65%) (28%) (20%)
- 35.48% of respondents answered "Online business" (41.18%) (32%) (35%)
- 16.13% of respondents answered "Services business" (5.88%) (28%) (10%)
- 6.45% of respondents answered "Other type" (5.88%) (0%) (15%)
- 4.84% of respondents answered "Not sure" (5.88%) (4%) (5%)
Observations & Analysis
Across All Generations, Paying Down Debt & Investing In Real Estate Are Prioritized
Each generation placed a premium on two of the answer choices: paying down debt and investing in real estate. Regardless of generation, these were the two most common answers, with "paying down debt" receiving 27.3 percent of the vote and "investing in real estate" garnering 13.5 percent.
It was clear that debt burdens each generation; in fact, a higher percentage of baby boomers (33.05%) wanted to use the $10,000 to pay down debt than millennials (22.43%). However, the forms of debt for each generation varied a bit. Each generation prioritized reducing credit card debt first, especially baby boomers. But a healthy number of millennials wanted to reduce their student loan debt first, while only 2.54 percent of baby boomers wanted to pay down their student loan debt.
A solid contingent of both baby boomers and Generation Xers wanted to hack away at either personal loan debt or mortgage debt, while the percentage of millennials who had the same strategy was less.
There was strong enthusiasm for investing in real estate for all respondents. Millennials, with an eye toward the future, were the most likely to invest in real estate (15.07%), with Generation Xers not far behind (14.56%).
How did respondents want to invest in real estate? The plurality of millennials and baby boomers were most interested in investing through a real estate investment trust (REIT), while Generation Xers mostly wanted to invest in real estate by pooling their tax-free $10,000 with other investors and buying a property outright.
Investor Enthusiasm for Virtual Currency Is Strong
It was no surprise that 15.07 percent of millennials wanted to use their $10,000 to invest in virtual currency; younger consumers are the most enthusiastic crypto-investors by leaps and bounds.
However, there was great interest in virtual currency from both Generation Xers and baby boomers, perhaps indicative of virtual currency's evolution into a legitimate investment vehicle. Even more interesting was that the older generations had more of an interest in alt-coins when compared to millennial investors.
A higher proportion of both Generation Xers and baby boomers wanted to invest in Ethereum than did millennials, who were mainly zeroed in on Bitcoin. Baby boomers were the only generation that wanted to invest in Ripple, while baby boomers and Gen Xers were the only two generations to indicate they wanted to invest in a coin not listed.
Another interesting wrinkle from the virtual currency group was the Litecoin was more preferred across all generations than was Ripple. As it stands today, Ripple has a larger market capitalization than Litecoin, yet investors showed more of an interest in the latter.
Human Financial Advisors Vastly Preferred to Robo-Advisors
Of the respondents, 7.2 percent wanted to take their tax-free $10,000 and invest it in the stock market through either a brokerage account, financial advisor, or robo-advisor. This result was not the most surprising outcome as investing in the stock market can be seen as the safe, status-quo play.
However, the lack of investors interested in entrusting that money with a robo-advisor was a bit shocking, especially for the millennial generation. Robo-advisors (12.5%) received the least amount of votes when compared to a standard brokerage account (30.56%) or a traditional, human financial advisor (52.78%).
Robo-advisors, due to their technology, low cost, and low maintenance, have long been though to be the wave of the future, especially among younger investors. However, only 11.11 percent of millennials wanted to put their $10,000 with a robo-advisor, while 27.78 percent preferred a standard brokerage account and 55.55 percent wanted a traditional advisor.
It appears that, when it comes to investing in the market, traditional human advisors are still the most trusted among investors, young or old, looking to diversify a decent chunk of change.
Everyone Wants to Open an Online Business
One of the options for the $10,000 was investing it in the respondents' own small business, which 6.2 percent of participants wanted to do. Across each generation, the plurality of respondents that selected this answer choice wanted that small business to be online.
Of the millennial respondents, 41.18 percent wanted their business to be online, compared to 32 percent of Gen Xers, and 35 percent of baby boomers. The results of this particular question were quite revealing of what the future might hold for so many entrepreneurs, regardless of age.
There was a decent showing for that small business being a restaurant or bar, but starting an online business was still clearly the preferred option.
All of the data that was featured in this report derives from an online poll commissioned by LendEDU and conducted by OnePoll. In total, 1,000 Americans (18+) and from the general population were surveyed. OnePoll draws their respondents at random from the American general population. The poll was conducted over a four-day span, starting on Mar. 9, 2018 and ending on Mar. 12, 2018. Respondents were asked to answer all questions truthfully and to the best of their ability.
The Best Ways to Invest $10,000
If you have $10,000 available to invest, you’re already ahead of many people. Having money set aside is something many Americans struggle with, so not living paycheck-to-paycheck is a big first step toward having a healthy financial life.
While interest rates have risen slightly in recent months, keeping that much money in a savings account is going to erode its value through inflation. The optimal option for many people is to invest, but what are the best ways to invest your first $10,000? Different generations prefer to invest in different ways, but here are a few good places to start.
What’s the Best Way to Invest $10,000?
If you have a 401(k), that can be a good place to put $10,000, and these retirement accounts usually have relatively strong returns and are diversified across different investment vehicles including stocks, funds, and bonds. Many employers also offer 401(k) contribution matching.
If you don’t have a 401(k) or you don’t want to contribute to it, another option is to invest in the stock market. The stock market is one of the best places to put your money over the long-term. If you look at annualized total returns for the S&P 500 over the past 90 years, it’s 9.8 percent.
For people who were invested in 2017, the S&P 500 returned 19.4 percent. Of course, there are always going to be peaks and valleys in the stock market, and you can never guarantee returns if this is how you invest. But by looking at history, it seems to be one of the best options to invest $10,000.
For completely new investors, using a robo-investing platform may be the best way to get started. Betterment is an example of a robo-investing platform, and it’s a simple, easy way to invest.
Of course, if you have significant amounts of debt, you can think of paying that off as an investment as well. When you have student loan or credit card debt, it accumulates interest, and you’re spending more and more the longer you take to pay it off.
How to Grow Your $10,000 Investment Fast
Some new investors wonder how they can grow an investment quickly, and there’s no surefire way to do that. One option that can allow for faster returns is day trading. With day trading, someone who starts with $10,000 might be able to make $1,000 a month, as an example, with a 10 percent rate of return. While 10 percent monthly returns can sound great, day trading requires a lot of skill and knowledge.
Another option to make money quickly from an investment are penny stocks. Penny stocks are also very high-risk, however. Penny stock investing means that you’re putting your money into companies that can’t be listed on the major stock exchanges, and they usually trade for less than $5 a share.
Cryptocurrencies have seen a huge amount of volatility in 2018 but can still be a way to grow an investment quickly.
Playing the Long Game When Investing $10,000
For long-term investors, compound interest is a key concept. Compound interest is interest made on the principal investment amount, as well as accumulated interest on invested money. Basically, you’re earning interest on the original $10,000 and then interest on the interest.
If you were to invest in the stock market, robo-investing, or even something like a peer-to-peer lending site and you received 5 percent on your original $10,000, after five years you would have a total of anywhere from $12,500 to $12,834, depending on how interest was paid.
After 20 years, even if you contributed no more to your $10,000 principal, and your interest was compounded 12 times a year, at a rate of 5 percent, you would have more than $27,000 in 20 years. Now, if you contributed only $1,000 each year to your principal investment, after 20 years your investment value would be more than $61,500. If you invested an additional $5,000 a year for 20 years, you would have nearly $200,000.
Want to see how your money could grow from investing? Check out our Interest Savings Calculator to find the growth potential based on your specific situation.
Do You Really Need to Diversify Your Investments?
Diversification is an important part of being a successful investor. Financial and mathematical models show that having a portfolio of 25 to 30 stocks is the best way to reduce risk and manage costs.
Diversification can be tough to master if you’re a new investor, which is why mutual funds and exchange-traded funds (ETFs) are so popular. Mutual funds and ETFs provide diversification and low costs for the most part, even if you’re not an expert advisor. Then, you don’t have to create your own diversification strategy.
Best Investment Tools for Beginners
Betterment is a robo-investing app, which was mentioned above. Betterment requires no minimum deposit and the fees are very low. Betterment also offers automatic diversification, and you can customize your investment strategy based on your timeframe and your goals.
Another good option for new investors is called SigFig. This portal links users with customized portfolios and the management fee is only 0.25 percent a year. You can also access an investment advisor for this fee.
Finally, even if you don’t have $10,000 but still want to start investing, Acorns is a micro-investing app that can be a great tool for new investors. Acorns lets users invest their change from purchases they make on their debit or credit card to build their investment, little by little.