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Spotlight: I have $10,000 to invest. Where should I start?

How to make the best decisions when it comes to investing.
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If you suddenly had $10,000 cash, what would you do with it?

Would you jet off on an exotic adventure? Buy that motorcycle you’ve always dreamed of? Upgrade your home entertainment system with cutting-edge technology?

Instant gratification purchases often come to mind when talking about the what-ifs of money. Hey, we’re all human and it’s okay to want nice things. But it’s also important to ask; is making the decision to purchase the things you want right now going to be a choice you’re proud of 10, 15 or 20 years from now?

Is buying that new 65’ flat screen really money well spent?

Unless you have the opportunity to pay off any current high-interest debt, a financially responsible strategy for your $10,000 would be to make smart investments and gain more value out of your money over the long term.

In other words, instead of dropping cash on assets that depreciate in value, position yourself for a better outcome where your money works for you and sets the stage for financial freedom later on.

So where should you start when it comes to choosing investment options for your money?

Investing with purpose is a great jumping off point.

“Start by determining the goal for the investment,” says Brendan Colton (CFA, CIM) Investment Advisor at Northern Credit Union’s Sudbury branch. “This will help answer some important questions and narrow down investment options.”

The timeframe of your investment is important to consider as it’s one of the biggest variables when it comes to how much risk you can take on, explains Colton. Longer term investments give you more space to ride out potential market volatility, while investments with a shorter timeframe leave little room to recover from market downturns.

Focus on the safety of your capital, how much risk you’re comfortable with, and what level of accessibility to your assets you may need in the future.

What financial products make sense for a smaller investment?

“For a smaller investment I would typically recommend a product like mutual funds or exchange-traded funds (ETFs) that construct and manage a basket of securities like stocks, bonds and other assets on your behalf,” says Colton. These products are diversified investments that are balanced to meet your objectives and can be purchased for free but include embedded fund management fees.

Before making any decisions about investing, it’s always important to consult an investment advisor about your options and the risks that might be involved.

$10,000 to start investing in your future

If possible, allocating “found money” towards your future is going to be a smart choice. Whether it’s purchasing a new home, tucking money away for your child’s education or saving for retirement, every dollar invested counts.

“Saving for a down payment to purchase a home is typically a shorter-term goal and you’ll likely want to avoid equity exposure,” says Colton. “Focus on short-term fixed income such as term deposits, high-interest savings accounts or short-term bonds.”

If the goal is to grow your child’s education fund, Colton recommends exploring a growth profile at an early age and transitioning to a more conservative profile as your child nears post-secondary studies. Taking advantage of the Canada Education Savings Grant through a Registered Education Savings Plan (RESP) is also a great way to boost education savings.

When it comes to retirement saving, determine your lifestyle goals and explore the best ways to make your money work to achieve them. “The details and parameters of your retirement scenario, combined with your investment personality will help determine risk tolerance, appropriate asset mix and investment selection,” says Colton. “A qualified financial planner can help you explore the best options as you invest.”

The bottom line

$10,000 may not seem like much, but if invested wisely it can pay off big in the future. Before you invest, speak to a Northern Investment Advisor to understand your options, the strategies that work best to achieve your goals and the level of risk involved.