How to Invest $10000 in 2016?




How can you invest 10000 dollars in 2016? Let me present you some of my ideas. People invest to make more money than they can by saving it in the bank. Most invest in “safe” financial instruments, such as certificates of deposit (CDs) which produce an income of under 3% a year. There is nothing wrong with this, but do you know how quickly money grows if you can compound it at 10% a year? Is the additional risk worth it, to obtain that goal? I believe it is because S10,000 grows to 174,494 dollars after 30 years at 10%. At 20% it grows to $2,373,763. That is a shocking difference of $2,199,269.
Investing comes down to two basic strategies. The first one takes advantage of the power of compounding in conjunction with the power of time. The second takes advantage of market knowledge. Albert Einstein called compounding interest the eighth wonder of the world.

With the first strategy, investments are long term in risk free financial instruments, like CDs, and annuities, or financial instruments with a small risk, such as bonds. Financial instruments with a small risk are subjected to price fluctuations. However, by choosing them, interest accrues and grows faster because of higher interest rates.
Let’s analyze together the power of time with the power of compounding. Let’s assume that CDs offer impossibly high 8% annually. $10,000 invested in CDs will grow to $14,693 after 5 years and $100,627 after 30 years. This example illustrates the power of time. If on the other hand $10,000 is invested in bonds yielding 10%, the account will grow to $174,494 in 30 years, or $73,867 more than before. This example illustrates the power of compounding. The same amount of money was invested ($10,000) for the same amount of time (30 years). The difference stemmed from higher interest rates (from 8% to 10%).
All other forms of investment are attempts to beat time. In other words, any strategy for buying stocks or bonds in a bull market and selling them in a bear market or a strategy based on market indicators is an attempt to increase returns based on market knowledge. This strategy is used by millions of individual investors. Some achieve wonderful results. In my opinion, most of them would be better off investing long term and taking advantage of compounding and the power of time.
Which of the two strategies should you use? I use both strategies based on the needs of the client. A strategy based on compounding is boring and requires patience, but it is certain and becomes more attractive with the passage of time. A strategy based on market timing is the most interesting and challenging, but requires excellent market knowledge and the emotional makeup to deal with it.
Table below shows how $10,000 grows at 5% to 26% in intervals of 1% after 5, 10, 20 and 30 years. Examine this table, the differences are enormous and you can arrive at interesting conclusions.

Percent

5 Years

10 Years

20 Years

30 Years

5

12,763

16,289

26,533

43,219

6

13,382

17,908

32,071

57,435

7

14,025

19,671

38,697

76,122

8

14,693

21,589

46,610

100,627

9

15,386

23,674

56,044

132.677

10

16,105

25,937

67,275

174,494

11

16,851

28,394

80,623

228,923

12

17,623

31,058

96,463

299,599

13

18,424

33,946

115,231

391.159

14

19,254

37,072

137,435

509,502

15

20,114

40,456

163,665

662,118

16

21,003

44,114

194,608

858,499

17

21,924

48,068

231,056

1,110,646

18

22,878

52,338

273,930

1,433,706

18

23.864

56,947

324,294

1,846,753

20

24,883

61,917

383,376

2,373.763

21

25,937

67,275

452,593

3.044,816

22

27,027

73,046

533,576

3,897,579

23

28,1 53

79,259

628,206

4,979,128

24

29,316

85,944

738,641

6,348,199

25

30,518

93,132

867,362

8,077,936

26

31,758

100,857

1,017,211

10,259,267

Investing $10k with Possible Profits

Younger investors have the biggest gift of life – time. They can afford to use the compounding strategy. Older investors have less time, and have no option but to attempt to beat it. That means they should look for investments with the potential for producing more than 10% a year. When investing 10000 dollars you need to answer the simple question.
The question remains: “is it easy to achieve that goal?” It depends on the financial instruments and the degree of risk. Buying CDs will not yield more than 3% a year now. The way to reach that goal is to buy stocks, bonds or the even more dynamic but more risky financial instruments, such as options and futures. I do recognize that every investor has different goals as well as a different ability to take risks.

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