While many people can’t afford a $1,000 emergency, there are others hitting their savings goals. “When you see your bank account have five digits instead of four, it’s proof that you’ve already built some great habits already,” Humprey Yang explained in a new YouTube video. “So, it’s important that we build upon the $10k and not risk losing it.”
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To help people make informed decisions based on their financial situation and goals, Yang shared his advice on the five best ways to invest $10,000 this year and ranked each investment option by risk level.
Yang’s top recommendation might sound boring, but he called it potentially the best return on your money. This means paying off high-interest debt and building an emergency fund.
“Having your foundation set should be your highest priority because it can actually be some of the best return on your money,” he said.
Yang explained the math behind this advice. If you have credit card debt with a 20% interest rate, paying it off gives you a guaranteed 20% return on your money. Compare that to the S&P 500, which historically returns about 8% per year on average.
“You aren’t really going to get 20% return on your money investing in the market, especially at a zero-risk level,” Yang noted.
He recommended paying off any debt with an interest rate over 10% immediately. Yang also suggested building an emergency fund of three to six months of living expenses. If your monthly needs cost $1,500, your emergency fund target should be around $4,500.
“Paying off debt, in my opinion, will also free you up mentally,” Yang said. “A weight is like lifted off your shoulders.”
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Yang’s second recommendation focused on long-term, diversified investments that appreciate over time. He specifically mentioned index funds and ETFs as excellent core holdings.
“An index fund and often ETFs are basically funds that you can buy on the stock market that are comprised of a portfolio of stocks,” he explained.
Yang used the S&P 500 as an example. By buying one S&P 500 ETF, you instantly get exposure to the top 500 companies in the United States. He noted that this fund has been up close to 100% over the last five years.
“If you had put $10,000 into the S&P 500 about 5 years ago, it would now be worth close to $20,000,” Yang said.
He recommended using commission-free brokerages to avoid fees that eat into returns over time. Yang emphasized that index funds make great core investments for both retirement accounts and regular brokerage accounts.
Yang said that individual stocks carry more risk but potentially offer higher returns. He used Nvidia as an example of what’s possible with individual stock picking.
“Anyone who’s invested in that company over the past five years is up over 1,500% or 15x the return of the S&P 500 on its own,” he explained. “If you had went all-in, it would be worth well over $150,000 on that same $10k investment.”
But Yang warned about the risks. Individual stocks can be extremely volatile, and day trading isn’t always successful. He recommended diversification as protection against major losses.
“Let’s say you have $10,000 and decide to invest $2,000 each into five different companies, if one of those companies goes bankrupt, at least your total portfolio is not down the full $10k,” he said.
Yang is all about research when it comes to picking individual stocks. He suggested focusing on industries you already understand and learning everything about companies before investing.
“You want to know so much about the company and its competitors in the stock market that you can identify a gap between what the stock is currently trading for and what you think it’s actually worth,” Yang explained.
Yang’s fourth option is to focus on safe investments many people overlook. These include high-yield savings accounts, certificates of deposit (CDs) and Treasury bonds.
“These investments serve a very specific purpose in your portfolio. They’re basically the safety net of your portfolio,” he said.
Yang noted that these options are paying decent rates right now. High-yield savings accounts currently offer 3.5% to 4% APY at many online banks. That’s 10 to 15 times what traditional big banks pay.
“On $10,000, that means you would make $350 to $400 a year in a high yield account versus close to nothing at a big bank,” he calculated.
CDs offer slightly higher rates in exchange for locking up your money for specific time periods. Yang mentioned that one-year CDs might pay around 4.1% to 4.2% right now.
Treasury bonds involve lending money to the government for guaranteed returns. Yang said Treasury bills are currently paying around 4.5%, with longer-term Treasuries offering even more.
“If you don’t know what to do with your money, they aren’t the worst choice to put your money in because they’re paying pretty decent rates right now,” Yang said.
Yang’s final category covers riskier investments that could offer much higher returns. He recommended this approach especially for younger investors who can afford to take more risk.
“If you’re trying to get a much higher return, you may want to go for some swings in some high growth stocks, especially in a tax advantage account like the Roth IRA where the capital gains are tax-free,” he explained.
Yang suggested allocating only 10% to 20% of your $10,000 to speculative investments if you’re comfortable potentially losing that money. He mentioned real estate as another option that uses leverage to amplify returns.
Using a real estate example, Yang showed how leverage works. If you buy a $250,000 property with 20% down ($50,000) and it appreciates 5%, you gain $12,500 on your $50,000 investment. That’s a 25% return because of the loan leverage.
“I’m just simply illustrating to you how the power of leverage works with debt, and that’s what many real estate investors are trying to do,” Yang said.
He also talked about cryptocurrency and angel investing as high-risk options but warned that you could lose everything. Yang advised beginners to stick with safer investments from his list.
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This article originally appeared on GOBankingRates.com: 5 Best Ways To Invest $10K in 2025, According to Humphrey Yang
