How Millennials Can Invest $10,000

A young woman checks her investments on a tablet.

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If you are a millennial and earning the average income for this group, you should be investing aggressively. Now is the time to begin accumulating money and putting it to work to save for the future.

For those who haven't invested anything before, the sheer number of investment choices is overwhelming. The impulse to delay decisions and keep your money in cash is understandable, but strive to overcome it.

Let's assume you have $10,000 you can set aside. What should you do with that money? Well, it partially depends on how long you plan on letting that money grow. Here are some popular investment options, broken down by the time you should expect to leave the money alone.

Key Takeaways

  • Millennials should be aggressively investing their money at this time in their lives.
  • While millennials should set money aside they will need in five years or less, they should also put money towards long-term investments that can ride out the ups and downs of the market.
  • Short term investment opportunities include Treasury and other bonds, broad index funds, and peer-to-peer lending.
  • Long-term investments options are important for building wealth and include individual stocks, growth index funds, ETFs, and target-date funds.

Short-Term Options (5 Years or Less)

If possible, millennials should be focused on investing to save for retirement, so those funds can grow for several decades. The $10,000 you invest now can grow to hundreds of thousands of dollars, but only if it's invested well and left alone long enough.

However, you may have some good reasons to want to access your funds sooner. Perhaps you are saving for a home, car, education, or another big expense.

If this is the case for you, some investment options allow you to preserve your savings while enjoying modest gains and income.


As a millennial in your 30s or late 20s, you have time to ride out the highs and lows of the market and invest in some riskier investments that will yield a higher return.


The U.S. government always pays its debts. That’s why U.S. Treasury Bonds are some of the most sought-after investments for people looking to preserve their savings and earn some passive income as well.

You will not get rich through Treasuries alone (interest rates for a 30-year U.S. Treasury bond so far in 2021 have ranged from a low of 1.66% to a high of 2.33%) but they are a good place to put money that you may need within a relatively short time horizon. You can purchase Treasury bonds that pay out as quickly as one month and as far out as 30 years. 

Other Bonds

Treasury bonds aren't your only option for bonds. There are plenty of other bonds that pay higher interest rates. Bonds from overseas governments may pay more, and corporate bonds may offer higher returns, depending on their creditworthiness.

Keep in mind that bonds with higher interest rates are more likely to default (higher risk comes with a higher reward), so you will need to have a good grasp of your risk tolerance. Consider building a portfolio of bonds with varying interest rates and risk levels. You could also let professionals balance your portfolio with a mix of risky and safe bonds by investing in bond mutual funds.

Broad Market Index Funds

Conventional wisdom suggests that you should avoid investing in stocks if you think you’ll need the money within five years. That’s because any five-year period could include a sizable stock market dip.

If you need your money back soon after a dip, you may not have had time to recover your losses, and you could ultimately take out less money than you put into the market. That said, if you were to select any five years of stock market performance, you’d find that most investors will have made money by investing broadly in the S&P 500.

If you decide to go this route, consider buying shares in low-cost mutual funds that invest in a wide variety of popular companies without putting too much money in volatile stocks. With mutual funds, your money is invested with others in a pool of investments designed to mirror or beat the overall stock market or a specific index. You'll find no shortage of financial companies offering mutual fund options, including Vanguard, Fidelity, T. Rowe Price, and Franklin Templeton Investments.

Many of these funds are passively managed and have ultra-low fees. Even funds that seek to “beat the market,” or do better than the overall stock average, often have relatively low expense ratios.

If your investing timeline is short, avoid putting all of your money in index funds. Even half of your total may be too much. But investing in the stock market this way will usually be a boost to your savings.

Peer-to-Peer Lending

An increasing number of investors have been finding success through platforms such as Lending Club and Prosper, which allow individuals to lend money to others who are seeking loans to pay off debt without the use of a bank. Peer-to-peer (P2P) lending is generally less risky than stocks, but it’s possible to get returns that are higher than bank savings or even bonds. This can be a great source of passive income.

Long-Term Options (Beyond 10 Years)

If you can afford to leave your investments alone for a decade or more, you should. Long-term investing almost always performs better than short-term investing. It also allows investors to take more risks. For those looking to minimize their tax liability, retirement accounts offer significant tax breaks for investors who don't touch their money for multiple decades.

Individual Stocks

If you have a long time to invest, you can take on some additional risk and purchase shares of specific companies. Beginning investors should look for companies with the potential for solid, steady growth.

One strategy is to look for companies with high valuations and good cash flow. That means they're already worth a lot ("valuation") and they have lots of money coming in every quarter ("cash flow"). It's also a good idea to look for a company with a diverse range of products and services. Purchasing shares of smaller, more volatile companies can be quite profitable, but it comes with additional risk.

Growth Mutual Funds

You can save yourself the trouble of selecting stocks by instead looking for a mutual fund designed to match your investment goals. Millennials should consider mutual funds consisting of growth companies, including large blue-chip stocks that offer exposure to a wide range of sectors and industries. It may even make sense to invest in some international stocks through mutual funds.

A well-managed growth mutual fund can average annual returns of more than 10%, making it a tremendous pathway to wealth. Be sure to keep an eye on fees. In general, avoid funds with an expense ratio above 1%.

Exchange-Traded Funds (ETFs)

ETFs are much like mutual funds, but they trade more like stocks. They generally have lower expense ratios than mutual funds, and the minimum investment may be lower than that of some mutual funds. Millennial investors have been driving the popularity of ETFs in recent years.

Target-Date Funds

As you get older and approach retirement age, it is sensible to shift some investments from riskier stocks to more stable investments such as bonds and cash.

A target-date fund will do the work for you. Target date funds operate with a specific retirement year in mind. A 2045 Fund, for example, will be designed to grow and protect the nest egg of someone hoping to retire in 2045.

These funds can be a great way to invest in a hands-off way. Some critics say target-date funds are too conservative in their investing approach, and they can charge higher fees than other funds.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
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