If you’ve come into a windfall of money, you might be wondering what is the best way to invest $50,000 (or even more)?
With a large amount of money to invest, you have several different options. There is no single “right answer” that will work for everyone—instead, what works for you will depend on your own unique situation. But being aware of the different options helps you make the best choice.
And note – there might be some things you want to do before you invest such as paying off debt. Let’s talk about some of these options.
Before You Invest
Before you start investing your money, there are a few things you’ll want to make sure of first:
Do you have these three financial to-dos checked off?
1. Emergency fund
Ensure you have an emergency fund where you can handle small and medium unexpected expenses.
2. Pay down debt
Get rid of high-interest debt. Paying off a credit card at 24.99% interest is just like getting a 24.99% return by investing in the stock market.
3. Make a plan
Start a monthly budget, determine your overall risk tolerance and decide what your long-term investment goals are.
7 Places To Invest $50,000 Today
Once you’ve taken care of those steps, here are seven areas you might consider for your next investment:
Invest In An Index Fund
One popular way to invest in the stock market is by purchasing shares in an index fund. An index fund is a type of investment that mirrors the makeup of a particular sector of the stock market.
The S&P 500 is a popular index fund and there are several different funds that mirror its performance. Investing in an index fund can be a great way to diversify your risk while still capturing the broader gains of the market.
Buy Individual Stocks
Another option is to buy individual stocks through a brokerage account. There are several free investing apps that you can use to purchase individual stocks or other types of investments. Keep in mind that buying individual stocks does have a higher risk as well as potentially greater returns on your investment dollars.
Stock market investing doesn’t need to be overly complicated and overwhelming. Get step-by-step instructions about how to invest in stocks for the first time.
Consider a Robo-advisor
Another option for investing in the stock market is to use a robo-advisor. When you start investing with a robo-advisor, you will enter in some basic information about yourself including your age, years to retirement, your financial goals, and how comfortable you are with risk. The robo-advisor will then allocate your portfolio in a variety of investments to help you meet your overall goals.
You don’t want to miss our review for the best robo-advisors. We’ve evaluated them based on products, pricing, and features. Check out our recommendations.
Real Estate
While it makes a lot of sense for most people to focus the majority of their investments in the stock market, real estate can be another avenue towards passive income and long-term wealth.
It is possible to invest in real estate without a lot of money, but if you do have money already, it can make things easier. While $50,000 is probably not enough to outright buy a home, it might be enough for a down payment on an investment property.
Investing in Real Estate Investment Trusts (REITs) is another way to capture the long-term benefits of real estate without the headaches of active property management.
Also, don’t miss our blog post about five great ways to invest in real estate.
Here’s a quick comparison of some of the more popular ways to invest in real estate without owning a physical property.
Save For Your Retirement
While you can invest in the stock market in a variety of different types of accounts, it is smart to invest in a tax-advantaged retirement account. This might include a Traditional or Roth IRA or a 401(k) plan through your employer.
Depending on the type of retirement plan you invest in, you might be able to get a tax deduction this year or have your investments grow tax-free until retirement.
If you’re self-employed, there are also retirement plans that are beneficial to your future. Here are the best ones we’ve reviewed.
Fund a 529 College Savings Plan
Another way to invest in a tax-advantaged manner is with a 529 College Savings Plan. 529 plans are a way to save money for higher education expenses. You can invest money in a 529 plan and have the earnings grow tax-free, as long as you withdraw them for qualifying higher-education expenses. Many states also offer tax benefits for contributing to a 529 plan, so be sure to check the laws in your state.
Pro-Tip:
How much you should have in a 529 plan by age
Start Your Own Business
If you have an entrepreneurial mindset, you might also consider using $50,000 to start your business. If you have a business idea that you’ve always wanted to try, there may be no better time than now.
While it is sometimes possible to create passive income with no money, sometimes it takes money to make money.
Another idea along the same lines would be to use the money to invest in yourself by getting additional education or taking training that would allow you to get a higher-paying job.
The Bottom Line
If you’re fortunate enough to have $50,000 to invest today, you have a multitude of different options available to you. Before you invest, make sure you’ve taken care of the basic steps of financial wellness, like starting a budget, creating an emergency fund, and paying down high-interest debt.
Then talk with trusted friends, family members, or financial advisors to figure out how comfortable you are with risk and which investments might make sense for you.
