How to Invest $50,000? When you think of investing, the stock market may come to mind as a popular place to put your money. Given that 52% of households worldwide have some type of investment in the stock market, this makes sense.
However, if you have saved up $50,000 for your next investment, you don’t have to put all of it in the stock market. There are plenty of other opportunities available to you. Some types of investments can be a better fit for you than others, depending on your risk tolerance and investing preferences.
How to Invest $50,000: If you have $50,000 to invest, these are some of the best uses for your money.
A financial advisor can also help you get your finances in order and plan for the future. Google “financial Planner” in your local area will come up with a choices for you to contact.
How to Invest $50,000 Starting Today
Technically speaking, an “investment” is something that gives you money back in return. We’ll include some of those on the list, but we’ll start with other “investments” that are also important for your long-term wealth.
1. Top up Your Emergency Fund
Risk level: Low
If you don’t have a fully-funded emergency fund, this should be your top investment priority.
A survey conducted in 2022 by the Federal Reserve and made public in 2022 found that four out of ten people wouldn’t be able to cover even a tiny emergency expense of $400 in cash, and this was long before the epidemic even begun.
If the year 2020 has taught us anything, it is that your entire financial life may be turned upside down in an instant. In a situation like this, the money you have set up for emergencies is figuratively and practically your financial lifeline.
Your emergency fund should be kept in a high-yield savings account. You can readily access the money if you have a savings bank account. Keeping part of it in cold, hard cash, say $500 or $1,000, is also advised in case of an emergency that brings down the electrical system and, consequently, ATMs.
The current low interest rates on savings accounts are the sole drawback to this strategy. On the other hand, if you store cash in your home, it won’t earn any interest and you run the danger of losing it or having it stolen.
However, having an emergency fund in some shape or another is essential for maintaining financial security. For your needs in online savings, we advise you to check out your local financial planner or bank for the latest rates and products that may be available to you.
2. Paying Off Debt
Risk level: Low
According to a poll conducted by Experian in 2021, the average amount of debt carried by an American was $90,460. Prior to investing money in the stock market, you should think about paying off any debt you may be holding, notably credit card debt or other high-interest loans.
While paying off your debt won’t precisely provide you with a return on investment, it will allow you to save more money for the future. By using a debt payoff calculator, you can determine exactly how much money you will “make” by paying off your debt today, making it a pretty secure investment.
Many people find that paying off their debt has a more positive impact on their mental health than it does on their wallet. Knowing that you are not legally obligated to give up your future income feels tremendously liberating.
Since you’ll have fewer bills, it will be simpler for you to navigate through financial difficulties in the future.
3. Top up Your Retirement Contributions
Risk level: Varies, according to which investments you choose.
Retirement savings of Americans are insufficient. According to 2019’s top studies, 15% of Americans have no retirement savings at all, while 22% have less than $5,000 saved for retirement.
But chances are that you’ll retire sometime, either by necessity or choice, and you’ll need money to support yourself unless you have grand plans to leave the world in a flash.
Your choice of investments for your account will determine how risky or safe this is. For a very safe (but low-returning) investment, you could buy CDs, or you could “bet it all at the racetrack” for a very hazardous (but potentially lucrative) stock market return.
Likewise, you can choose from a variety of institutions to house your retirement savings.
If you have a retirement plan via your employer, such as a 401(k), you would most likely deduct money from your paychecks to put money into that account. However, if you are self-employed or run your own business, you can put that $50,000 into an individual retirement account (IRA) or a retirement plan for persons in that situation.
4. Open a Taxable Brokerage Account
Risk level: Varies, according to which investments you choose
A taxable brokerage account functions in the same way as an individual retirement account (IRA), with the exception that you do not receive the additional tax savings.
On the other hand, you are free to withdraw that money whenever you like. You have the option to invest your $50,000 in money market accounts, equities, bonds, index funds, mutual funds, ETFs, etc., just like with an IRA.
That is to say, aside from your 401(k) or other tax-deferred account, you can also use a taxable brokerage account to make market investments.
A taxable brokerage account can aid in the growth of your investment if your emergency fund is already established, you have made the maximum amount of retirement payments, and you still have additional cash.
5. Invest in Real Estate
Risk level: High
America has long had a passion for real estate. Possibly because it is something tangible that you can handle and feel, as opposed to owning a share of a company through stocks or bonds.
Or perhaps it’s because it’s one of the quickest routes to financial success. When compared to other long-term possibilities like savings accounts and stocks, 35% of investors in a Gallup poll believe that real estate is the best long-term investment.
The realm of real estate is another one of those investing categories that covers a lot of ground. You may not be able to purchase a whole rental property with $50,000 unless you live in a location with a very low cost of living; however, you can use that amount as a down payment on your own rental property.
Investing in real estate in this manner is considered to be one of the more time-consuming and risky methods.
REITs (real estate investment trusts), which function very similarly to index funds, are another indirect way to invest in real estate. With REITs, such as RealtyMogul, you still have the chance to earn significant profits without having to worry about fixing a broken toilet in the middle of the night (or shelling out cash to hire a property management to do it for you).
What’s Your Investment Style?
Investing a substantial $50,000 is not as simple as doing the bare minimum first, like building an emergency fund and paying down debt.
For instance, you’ll need to understand what kinds of investments to place there, how and when to alter it over time, if you want to save money in a retirement account or start a taxable brokerage account.
For many people, that part is the most challenging. You can plan your approach by deciding in advance how you want to approach this, or not.
DIY Investor
Investors of all skill levels may find that opening a brokerage account and handling everything themselves is the best course of action if they feel comfortable understanding the ins and outs of various investment methods.
This is due to the fact that you will save the most money on management costs, which might significantly reduce your income. On the other hand, you could also lose a lot if you choose poorly or without sufficient knowledge.
Robo-Advisor
For those who can’t or don’t want to work with a real person and who also aren’t interested in a completely hands-off approach, robo-advisors are an excellent alternative. Like Betterment, robo-advisors typically operate in a similar manner.
They ask you a series of questions to ascertain your financial objectives, after which they use an algorithm to identify and manage your investments.
This typically costs much less than having a financial expert handle it for you, and it also takes sensitive (and expensive) emotions out of the picture.
Hire a Financial Advisor
Your financial advisor might play a variety of functions in your life. Employing a financial advisor can be your best option if you genuinely don’t care how your money are managed.
Throughout the entire procedure, they are there to monitor your assets and respond to your queries; naturally, this is the most expensive choice.
Conclusion
You have a few options if you find yourself in the fortunate position of needing to decide what to do with $50,000. This would mean you are now in a very good position because you now know a few ways listed on this page on How to Invest $50,000.
The reality is that things don’t have to be so binary. There is no requirement that you select one choice at the expense of the others. From this list, you can pick and choose what you want to do: add a little amount here to boost your emergency fund, add some index funds to your IRA there, and so on.
Ultimately, based on your short- and long-term goals, you’ll need to choose which of these options is the greatest use of your additional cash.
We would always advise though that if you have any questions or are unsure in any way, please contact a licensed financial planner for guidance.
