When you’ve got 10,000 Euro available in your bank account and wish to invest that money, there are many avenues to consider. But you also have to answer important questions like “Is my money safe?”, “What returns can I expect?”, and “Is the investment bringing me closer to my goal?”.
In this article, you’ll learn about various different approaches to investing your money, so you can decide on the best place to invest 10,000 Euro by yourself.
Things to Buy with 10,000 Euro
Ten thousand Euro is quite a significant amount of money, which you could use for numerous things. For example, you could take a two-week vacation in a luxury hotel in the Caribbean, including flights from Europe. This would allow you to relax and use your hard-earned money to tune out for a few days to recover from those everyday stressors.
You could also go on a shopping spree and get everything you ever wanted, from pretty designer dresses to hand-tailored suits. Spending 10,000 Euro to feel like a million dollars? You’re definitely worth it!
So, why are we talking about all this when you’re actually looking for a place to invest the money? Because it’s essential to keep in mind that it’s easy to spend your money in a heartbeat on things that could potentially wear off very quickly.
The vacation is nice, but it’ll be back to normal after two weeks in the office. The same goes for the clothing – novelty wears off quickly. Now, there’s nothing to stop you making these purchases if that’s what you’ve always dreamt of – just be aware of the long game and keep your goals and priorities in mind.
How Much Money can 10,000 Euro Generate for You?
We’re here to talk about investing – so how much money could you expect to generate if you were to 10,000 Euro to work? This depends on a myriad of factors:
- The interest rate
- The time frame
- Whether returns are compounding or not
To make it relatable, let’s look at three examples with different assumptions. In a later section, we’ll go deeper into where you could achieve these returns. As a side note, inflation will not be included in the following calculations:
Example 1 – 4% return, 30-year timeframe, compounding
If you were to invest the 10,000 Euro over a period of 30 years at a rate of 4% per annum, you would end up with 33,135 Euro if the returns were compounded. This means that all returns are reinvested and not taken out.
Example 2 – 6% return, 10-year timeframe, no compounding
Another possibility is investing the 10,000 Euro at 6% per year and taking out the accrued interest. After ten years, you would end up with 16,000 Euro – so 600 Euro every year. That’s 50 Euro every month, which you could use to treat yourself to a nice massage.
Example 3 – 10% return, 15-year timeframe, compounding
Finally, what could be achieved if you invested it at 10% and chose to stay invested with the returns? The result would be 44,539 Euro, assuming a timeframe of 15 years. In comparison, if you didn’t pick compounding, then after 15 years, you’d only have 25,000 Euro.
Invest in Yourself
One thing many people don’t think about when talking about their wealth is their human capital. A way to view human capital is the monetary value you can expect to make over your working lifetime, which depends on your skills, education, and career.
If you spend time and money honing your skills, then the payoff in many cases is higher than investing solely into money-generating assets – especially if you’re at the beginning of your career.
How to Invest 10,000 Euro for these Returns?
In the following section, we wish to present some asset classes that have historically performed as outlined in the previous section. While performance can vary greatly depending on a multitude of factors, these assets tend to deliver the following returns on average:
1-4% annual return
If you’re aiming for a relatively low return of 1-4% per year, then government bonds are a great way to achieve this. Many governmental bonds delivered returns like this over the past decade, and while yields have decreased in recent years, it’s still possible to attain returns of more than 2% per annum with U.S. bonds.
Bonds, especially governmental bonds, are considered to be a relatively safe and low-risk investment with high liquidity. Many institutional investors place their capital in governmental bonds, which means that you won’t be left holding the bag if you need to sell.
5-8% annual return
While it’s hard to pinpoint an exact figure for expected returns through real estate investing, as geographical factors have a considerable influence, an average lies in the range of 5 – 8% per annum. This includes price appreciation but also rent payments.
Depending on where you live and your housing situation, you could make a down payment for a small house or apartment with 10,000 EUR and start your property portfolio that way.
9–12% annual return
There are two popular options when looking for returns of 9-12%, or even higher. One is investing in the stock market, for example with an index fund. The historical average return of the S&P 500, an index of the biggest 500 publicly-listed companies in the U.S., sits at around 11% over the past 50 years.
Another option would be investing in P2P lending. Many marketplaces and platforms offer loans to invest in where you can potentially earn over 12% per year. The difference between this approach and investing in stocks is that the gains will flow steadily year after year with P2P lending, whereas the S&P 500 could gain 30% in one year and lose 15% in another.
The Best Way to Invest 10,000 Euro
In conclusion, it’s safe to say that the best way to invest 10,000 Euro is the one which makes you feel safe and helps you meet your financial goals. When choosing an investment, you should always do your own research to assess if the asset offers you what you need, both in terms of expected returns and risk factors.
One option that many investors pick is P2P loans with a Buyback Guarantee. These loans offer high returns while also providing a guarantee from the loan originator that they will buy back any loans with outstanding payments over a certain period. If the loan originator has enough liquidity, then the chances are that, in the case of a high default rate, they can pay back the invested amount plus accrued interest payments.