I Have Ten Thousand Dollars, How Should I Invest It?

Where to start when investing?

This is one of the most common questions that we see asked by beginning investors, especially those who have just come upon an extra ten thousand dollars (wouldn’t it be nice if it happened to more of us!).

Are you ready for an unconventional, but simple answer? Ok, but first let’s be clear about what you don’t want to do!!! Do not put your money in bonds (even if you’re over 50*). Do not put your money into savings accounts. Do not try to play the stock market like a game. Do not overdiversify by spreading your money across too many investments. Don’t invest blindly!

So are you finally ready for the answer? Here it is: spend a lot of time researching great mutual funds that invest in the stocks of well-run companies and select only 1-3 funds with excellent managers to entrust your money to. Now selecting a great fund takes a lot more work than the average person initially thinks. There are a number of criteria to look for and a number of mistakes to avoid when finding a good mutual fund. But it can be done and the payoff will be huge. You want your money to grow as fast as possible, right?

Finding the right mutual fund is the key for an inexperienced investor who finds himself with a stash of cash ($10,000 or so) and wants to use it wisely to maximize profit growth. Investing is not a game of chance. It is not like gambling. It’s really not even like poker where chance supersedes skill. Investing should be disciplined and focused and if done correctly can provide consistent high-yield returns. But as a beginning investor, it is probably best to find a professional who knows how to make it happen rather than trying to work the stock market yourself.

So how do you find good mutual funds? Well you can start from the Money 65 list and narrow it down from there.

One last recommendation. If the stock market’s been hot for a while, consider trickling your money in by way of dollar cost averaging insteading of dumping it in as a lump sum.

Note: we do not consider all the funds on the Money 65 to be good funds, though many of them are.

*We believe strongly that for any period of time greater than three years, the best place for your money is in a well-managed, long-term mutual fund.