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How To Invest 20k
Do you have AU$20.000 or more to invest and you are from Australia? We’ve go you covered in this article. We will show you the best 20k investment ideas for new investors.
The entire premise of investing rests on the concept of trying to earn as much profit from the money that you initially invested. This is why most experts would suggest that $20,000 is a good amount to start with.
Now, when you do have that amount in hand, your next question may be, how do I invest $20K in Australia?
Luckily Australian investors have a lot of investment choices to choose from.
This is what I recommend:
- Go and register on highlow.com (Highlow is a trusted Australian broker)
- Make a small deposit ($500 if enough to start with)
- Work on your strategies and deposit more later on
This is the most simple, easy and hassle free way to get started with investing. If you need more info read our Highlow review.
Well, this article seeks to answer that question and to help you determine the best way to invest your money. This will help you make a considerable return. Here is what you need to do:
1. Determine Your Financial Goals
One of the first steps is to take a close look at your current financial situation and then determine your overall goals. This information will make it easier for you to figure out just how much risk you can incur with your investments. Thus, by examining your financial status and understanding where you want to end up, you can identify which investment opportunity is best for you. Let’s take a closer look at this phenomenon.
For instance, are you someone who may need access to money urgently, even though you do have $20,000 to invest? In this scenario, you may not be able to withstand a great deal of risk. This is because if you were to experience a small loss, this would affect your monetary situation, particularly if you required the money for an emergency.
On the other hand, if you are someone who does not need to touch your investment money, you can handle some risk. So, look for long-term investments that will allow you to garner considerably higher yields, even though there is some uncertainty involved.
Now, when considering financial goals, you also need to focus on how much money you would like to make within a certain period of time. For instance, if you are relatively young and have a long time until retirement, you can opt for a financial avenue that offers lower yields but also with less risk involved. In the event that you are rather close to your retirement age, it makes sense to invest in higher yield financial structures.
2. Which Type of Australian Investment Ideas Are Right for You?
Once you are a bit clearer on your current and future financial aspirations, it is time to move onto the investment ideas that are best for you. There are a few options available, depending on the type of risk you can accept as well as your preferred return on investment. Here is what they are:
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A) The Moderate Risk, High Yield Option
Imagine that you don’t mind experiencing small losses as long as you are likely to get a good return on your investment. Here, you will find that equities such as shares are your best option. Australian shares, in particular, have a history of offering long-term, high yields on your investment. While there may be highs and lows during that period, it is still a great way to multiply your original 20K.
Of course, this does depend on you choosing the right stock, at the right time. So, if you don’t have too much experience in the stock market, it can be helpful to get some guidance in the form of a financial advisor. This is especially true if you are looking to invest most of your savings in shares and stock.
When investing in stocks:
- you can expect a return per annum that ranges from 4 to 7 percent, and even higher.
- To enjoy better results, it is important to focus on companies that will do well in the future.
- You should keep in mind that previous fiscal performances of a company may not have a significant bearing on their future position.
If you don’t want to go through the trouble of choosing the stock yourself, you can invest in an Exchange Traded Fund or ETF. In this instance, your money is pooled together in a fund, along with other investors, and a manager will invest them in various assets. So, the ownership of the asset, here, is indirect. If you want to learn about trading, you can read some trading success stories here.
Although you can make quite a large profit with an ETF, there are also some downsides to consider such as underlying fluctuations and a lack of liquidity. This is why you need to be careful about which fund you join. Now, to avoid any negative tax implications, you will find it best to opt for an Australian ETF that more or less deals with local investments.
B) The Low Risk, Moderate Yield Option
If you don’t want to incur too much risk but still want a decent return on your investment, then you may want to consider Australian government bonds. These can be traded on the Australian Securities Exchange (ASX) and can be either Exchange-traded Treasury Bonds or Exchange-traded Treasury Indexed Bonds.
With Exchange-traded Treasury Bonds, there is a fixed face value – this is the amount that you will get back once the bond has matured. These will have the same annual interest rate until maturity and this will be payable every six months. Now, the face value for Exchange-traded Treasury Indexed Bonds is adjusted for the movements in the Consumer Price Index (CPI). You will be paid a fixed interest rate that is based on the adjusted face value. The payments will be made on a quarterly basis.
It should be noted that although Exchange-Traded Treasury Bonds are impacted by inflation, Exchange-Traded Treasury Indexed Bonds are not. The main advantage with bonds is that there is little risk involved but you do get paid on a regular basis. However, these may not be the most liquid options as the market value of the bonds will depend on the time that you are attempting to sell the bonds.
C) The Low Risk, Low Yield Option
While investing, there are certain ways to mitigate the level of risk that you are exposed to. Nevertheless, the downside with this option is that there is also a limit on how you can expect as a return. Still, if you are someone who can’t deal with losses or want to have access to your money with little notice, here are the best avenues in Australia for you:
- First, there are high-yield savings accounts but the name is somewhat deceptive. This is because, when compared to stocks, these accounts don’t actually produce very high yields. They do, however, allow you to earn more interest than traditional deposit savings accounts. The main benefit of high-yield savings accounts is that they keep your money safe so you won’t have to worry about losing it. You could also take a look at vanguard.
- Then, there are money market accounts – although these may not be the most interesting investment option around, they can offer you some advantages. Much like with high-yield savings accounts, money market accounts provide you with greater financial stability. As such, you can be certain that your money will not disappear at any point. This is especially true if you have around 20K to invest, as these accounts typically require higher minimum deposits to get started with.
These accounts are not just suitable for investors looking for lower levels of risk, they are also right for anyone requiring a more liquid investment option. You will find that, within reason, you are able to withdraw your money from these accounts when needed.
3. What to Consider When Investing 20K – Investment Ideas
As you can imagine, it isn’t enough to just narrow down the type of investment you want to engage in. You will also have to figure out what sectors and industries to focus on, giving you more investment ideas. This is rather significant as it can determine whether or not you can actually turn your initial investment into a long-term profit. You will need to do some research to figure out what these top-performing sectors are.
Often, it is a matter of figuring out what sectors are performing well in your own country. For instance, at the moment, Energy, IT, Materials, and Health Care are the best Australian sectors of the year. Nevertheless, Financials, Utilities, and Telecommunication are at the bottom of the heap. Thus, investing in the better-performing sectors gives you some protection from risk.
Of course, you can’t be certain whether a sector that is currently doing well will continue to do so in the future. Here, you will need to determine how a sector has been performing over a period of time. By looking at these various intervals, you will be able to see whether the performance is increasing or decreasing. Furthermore, you should also be able to make an educated guess regarding the growth or depreciation of the sectors over the next few years.
4. How to Spread Your 20K Around
It has already been mentioned that there is a certain level of risk involved when it comes to investments, especially if you are hoping to make some real gains. This is why investors constantly need to be on the lookout for a way to minimise this level of risk. The most useful way to do this is to diversify your investments.
By doing this, you spread your money across sectors and asset classes. The main concept behind diversification, though, is to invest in assets that perform contrary to one another. This way, if one of your assets are performing poorly, you can be fairly certain that the other set of investments will be making you a profit. You are then able to balance out your losses.
This leads to the question of how you should diversify your portfolio – namely, how much of your 20K should you place with each of your investments? In this situation, there may be a rule of thumb that you can follow, at least to a certain extent. So, subtract your age by 100 and the answer will tell you just how much to invest in at each opportunity. If you need more, here are 50+ passive ideas and examples.
For instance, let’s imagine that you are 30 years old. This gives you:
100 – 30 = 70
This means that you should put around 70 percent of your 20K towards riskier, high yield investments such as stocks.
You could invest the rest of the money in:
- or low yield, stable options like bonds and savings accounts.
As the numbers show, when you are younger, you can handle more risk as it has time to even out during your lifetime. So, your investments in the high yield investments can offer a better profit. On the other hand, if you can’t afford to lose too much since you are nearing retirement, you need more low-risk investments.
Age is not the only factor. It is also about how much risk you are open to and even how much of your $20,000 you can afford to lose at any given time. If you want a more cautious financial plan, even out your investments between the high and low-yield options.
5. Growing Your Portfolio
Just because you started off investing $20,000, doesn’t mean you should be content with this amount. A good way to continue contributing more and more to your future wealth is by reinvesting any dividends or profits that you make on your initial investments.
As long as you don’t need to utilise these profits straight away, it can be helpful to reinvest them either in the same company or sector or to try another option. After all, the more you are able to invest, the greater your wealth will be by the time you are ready to retire.
In this article we answered the question: how to invest 20k Australia?
This is all you need to know regarding investing 20K in Australia. We’ve shown you the best AU $20k investment ideas we know. So, if you do have this amount saved up, you are now aware of all of the right moves that you need to make to multiply this amount. The only thing left for you to do is to actually start investing.
12 smart investment options in Australia
There’s more to investing than super and property. Take a look at the different investment options available in Australia which you might consider when creating a portfolio.
While property seems to get the lion’s share of attention when it comes to investing money in Australia, a 2020 study by the Australian Securities Exchange (ASX) revealed that shares, along with other investments traded on an exchange, were in fact the most popular investment choices among Aussies 1,2 .
What different assets can you invest in?
If you’re interested in seeing what your investment options are outside investing in property and super, here’s a list of some of the common investment options in Australia you could consider when building your own investment portfolio.
If you put your money into cash investments (such as savings accounts and term deposits), the returns will often be lower in comparison to other investment products. However, these types of investment options typically provide stable, low-risk income in the form of a regular interest payment, so they may be a good option if you’re risk averse or working to a short timeframe.
Fixed interest or fixed income investments
Fixed interest investments (also known as fixed income or bonds) usually have a set investment period (eg five years), and provide predictable income in the form of regular interest payments. They tend to be less risky when compared to other types of investments, so can be used to provide balance and diversity in an investment portfolio. Fixed interest investments are issued by governments and companies in Australia and internationally.
A government bond is one example of a fixed interest investment. It provides the holder with regular interest payments, and once matured, the amount originally invested (known as the principal) can be returned to you. However, the value of the investment doesn’t increase with inflation.
There are also different types of fixed interest investments with different investment timeframes and different risks – for example, a fixed interest investment issued by a company can be risker than one issued by the Australian government.
If you purchase shares (also known as equities or stocks) in Australian or international companies, you’re essentially buying a piece of that company, making you a shareholder. If the shares of the company grow in value, the value of your investment will also increase, and you may receive a portion of the company’s profits in the form of dividends. However, if the share price falls, the value of your investment will also fall. If you manage the shares yourself, you’ll have to decide when to buy shares, and when to sell them. It’s also worth keeping in mind that you may not receive any dividends at all.
If you’re looking for how to invest in shares, get in touch with an AMP financial adviser who can guide you through the process.
In a managed fund (also known as a managed portfolio), your money is pooled with other investors on your behalf by a fund manager. A managed fund can focus on one asset class, for example, an Australian shares managed fund will only hold shares in Australian companies. Or, it can be a diversified managed fund and include a mix of cash, shares and property. One of the benefits of pooling your assets in this way is that it can also give you the ability to gain access to investments and a level of diversification that isn’t usually obtainable by an individual.
The amount of money you invest is equal to a set number of units, and any growth or earnings are then divided among all investors depending on how many units each investor owns. Any income generated on these earnings will also be subject to tax based on the individual income tax rate of the owner.
Because investment returns are tied to movements in investment markets, it’s important to keep in mind that putting your money into a managed fund won’t necessarily guarantee you a positive investment return.
Exchange traded funds (ETFs)
An ETF is a type of managed fund that can be bought and sold on an exchange, such as the Australian Stock Exchange (ASX), and which tracks a particular asset or market index. ETFs are usually ‘passive’ investment options as the majority of these investment products aim to track an index, and generally don’t try to outperform it. This means the value of your investment in an ETF will go up and down in line with the index it is tracking.
ETFs tend to be easy to buy and sell and have lower fees than some other types of investment products. They form part of a larger class of investment products called exchange traded products, or ETPs, which can be bought and sold on an exchange.
Like a managed fund, if you decide to put money into an investment or growth bond (also known as an insurance bond), your money will generally be pooled with money from other investors, with an investment manager overseeing the funds and making the day-to-day investment decisions. This makes for a hands-off approach for the investor, which can be helpful if you’re too busy to oversee your investments, or prefer to have a knowledgeable manager making the decisions.
The main point of difference with investment bonds is the way earnings are taxed. If you hold onto an investment bond for at least 10 years, you won’t have to pay additional tax on any profits that you’ve made when you eventually sell (or redeem) your investment. That’s because such investment bonds are seen as ‘tax-paid’ investments, where earnings are taxed within the bond along the way at 30%. If you’re paying more than 30% in income tax, an investment bond may be a tax-effective structure to help you invest.
A popular option for retirement, annuities provide a guaranteed income regardless of what’s happening in financial markets 3 . These can be in the form of a series of regular payments either over a set number of years (fixed-term), or for the remainder of your life (lifetime annuity). The payments you receive will depend on things like the amount you put in and actuarial calculations, which estimate future outcomes by looking at economic and demographic trends.
You can purchase an annuity through your super or with ordinary savings. It’s important to note though, that if you’re using your super money for the purchase, you won’t be able to access the funds until you reach your preservation age and retire.
Listed investment companies (LICs)
LICs are a type of investment vehicle which are incorporated as companies and listed on a stock exchange. Most LICs operate in a similar way to a managed fund with an internal or external manager responsible for selecting and managing the company’s investments on your behalf to provide diversity. LICs commonly invest in shares in other companies.
It’s important to note that LICs are ‘closed-ended’ investments, which means there’s a set amount of shares available that does not change. Shareholders can come and go, but the amount of capital in the LIC doesn’t change as investors change. This means the investment manager can focus on managing the investment, rather than trying to raise funds if a shareholder exits the investment or making additional investments if more investors come on board.
Real estate investment trusts (REITs)
A REIT is a type of property fund listed on a public market, such as the ASX, in which investors can purchase units. Similar to a managed fund, your money in the fund is then pooled and invested in a range of property assets, which may include commercial, retail, industrial, or other property sectors.
REITs can provide investors with exposure to the property market in a way that is more diversified – commercial and industrial property and potentially more cost-effective – than buying a single property.
As a precious metal, gold is a commodity that can be bought or sold based on set market value. Some people like to invest in gold as a way to hedge against inflation. However, investing in physical gold bars can be cumbersome. Other ways to invest in gold include buying derivatives, gold receipts, gold ETFs and gold mining stocks.
Australia’s alternative finance market has grown by 53% in the 12 months to September 2020 as investors continue to tap into emerging trends and explore new ways to grow their wealth 4 .
In addition to the investment options listed above, there are a number of emerging trends you might consider when building your wealth.
Peer-to-peer lending (P2P)
P2P lending is a way you can borrow money without going through a traditional lender (such as a bank). It operates by connecting investors with companies or people looking for a loan.
Most P2P lending is run via an online platform that acts as an intermediary between investors and borrowers and charges a fee-for-service. Through the platform, the lender will be able to see what loan they would like to fund, and, the borrower must pay the loan back over time with interest.
Some platforms also allow investors to diversify their investment across other assets (such as a managed fund). The details, including the amount of control a lender has, length of the loan and at what interest rate, varies between P2P providers.
Unlike regular currency like coins and notes, cryptocurrency is a virtual currency that exists as a digital token5. The most well-known type of cryptocurrency is Bitcoin, but there are hundreds of others including Ethereum, Litecoin and Ripple.
Cryptocurrencies are kept in a digital wallet and can be used to pay for real goods and services. Transactions are recorded using a vast digital ledger called a blockchain. It’s most commonly used for online payments but can in some cases can be used in stores. However, because cryptocurrency is not legal tender, it’s not accepted everywhere and is not backed by any government.
Factors to consider when making investment decisions
Before putting your money into any investment option it’s important to make sure you understand, and are comfortable with, the level of risk involved, the investment timeframe, any potential costs involved, and how the product could help you reach your financial goals.
It’s also important to look into any potential legal and tax implications, as these can vary depending on the type of investment you make.
Risks involved with investing
Different types of investments carry different levels of risk which can influence the returns you may receive. People tend to have different appetites for risk, so it’s important to understand yours before investing. The AMP Investment Style calculator can help you to understand your risk appetite..
Generally, investments that carry more risk are better suited to long-term timeframes, as these often come with greater short-term volatility, which means they can change rapidly and unpredictably. However, being too conservative with your investments may make it harder to reach your goals.
A good way to manage risk can be to spread your investments across different asset classes. This is known as diversification, and is one of the first things you will learn about when looking into how to invest for beginners.
Diversification reduces your overall investment risk and leaves you less exposed to a single economic event. So if one sector or asset performs badly, the other areas of your investment may not be as badly affected.
It can also be a good idea to diversify within asset classes. For example, a share portfolio may hold shares across different sectors such as banking, resources, healthcare and technology, and across both domestic and international markets.
How to start investing
If you’re interested in building your investment portfolio, you can use these tips to help you get started:
- Do your research – think about how much you can afford to invest, what your options are, and what types of investment products you could use to help you reach your goals.
- Know your risk profile – work out how much risk you’re willing to take and what types of investment products might fit within this. Different investment products carry with them different levels of risk, so it’s important to understand the risk involved in each investment product or strategy you’re considering.
- Speak to an adviser – if you have any questions or want more help or information, speak with your financial adviser. If you don’t have an adviser but would like more information, you can call us on 131 267 to find an adviser near you.
How to invest $20,000 – And Grow It!
Last Updated: February 12, 2020 By Paul Moyer
Whether you are investing $20,000 for the first time or you have some experience investing your money, you are facing a very common dilemma.
While $20k is a sizeable amount of money, it isn’t enough to get the level of service from financial planners that you are hoping to get.
This has probably left you doing all your own research and if you are like most people, swimming in a sea of information about different investments and possible interest rate returns on those investments.
Ways to Invest $20,000
Before we get started I want to be clear that with an investment of $20k I would do a very broad mix of these investment options. I would also diversify inside of each investment.
All of these options will help you diversify broadly so all your eggs are not in one basket.
This may not seem like a top place to invest your 20,000 dollars, but bear with me. While savings accounts are one of the most boring investments, what you really want to be investing in is financial security.
If you do not currently have an emergency fund of three to six months of your family expenses, then I would put that amount of my $20k into a high yield savings account.
This way when an emergency happens you have cash on hand to make sure you do not have to go into debt to handle the situation. The top savings accounts will get your more than 1% on the money you store there.
I have become a huge fan of Betterment because of how easy they make it to invest in a broad range of stock investments.
Instead of you picking the stocks yourself, Betterment asks you a series of questions to assess your tolerance for risk. They then mix your portfolio based off that assessment.
You can learn more in my Betterment review or go straight to the website to open a Betterment account. The process of signing up and funding your account takes less than 15 minutes.
I am not a big time real estate investor, but the prospect of owning investment properties is something I have explored and will try my hand at at some time in the future.
The problem is that with only $20,000 to invest, you aren’t going to be able to buy a nice property unless you take out a large loan. This is where I turn to Fundrise.
Fundrise is a real estate investment platform where you can purchase small parts of large real estate investments. It is a great passive way to invest in real estate without having to take on all the research and risk yourself.
Exchange Traded Funds (ETFs)
ETF’s have become a popular choice for diversifying your stock investments, but they can have super low fees and are just as easy to purchase as stocks.
They work just like a mutual fund, but they are traded on the major exchanges and have stock symbols just like corporations you can purchase individual stocks in (Netflix, Apple, etc.).
This makes them very easy to purchase and they have good historical information to see how the funds have done over time.
My favorite place to buy and ETF is M1Finance, because they offer over 2,000 commission free ETFs and make it super simple to start your ETF investing.
There are a bunch of different places you can buy ETFs, but M1 Finance definitely has the most commission free options.
If you are willing to do the research, there is no greater way to maximize your earning than trading individual stocks.
The drawback for most people is that if you don’t do proper research, there is no faster way to lose money investing than individual stocks.
If you are looking for the full feature online brokerage, then Ally Invest is my top pick. Ally bank bought out Trade King and converted the name to Ally Invest. They have changed pretty much nothing about the brokerage and even kept their low fees of $4.95 per trade.
If you are OK with a more limited selection of stocks to invest in, M1 Finance allows you to invest in over 4,000 different stocks for FREE (It’s my favorite word).
They also give you the option of buying fractional shares so you can buy small dollar amounts of individual stocks instead of ponying up more than $100 a share for some of the largest corporations on the market.
Lending Club is a peer-to-peer lending platform where you can invest in loans that go out to other individuals. What makes this one of my favorite investments because of how broad I can diversify my peer-to-peer account.
With LendingClub you can invest as little as $25 into a single loan. Once there are enough investors for the loan to be funded, the person taking out the loan begins paying it off in monthly installments and you gain back your principle plus interest.
Since the minimum is $25 that means you can invest in 40 different loans when you start with a $1,000 investment into your account. This way if one loan doesn’t get paid off, you only lose a very small portion of your overall investment.
Index funds are an amazing way to diversify your stock holdings allowing you to own up to thousands of stocks in a single fund.
Instead of having to own individual stocks that could cost hundreds of dollars each, you own a small share of a whole bunch of stocks.
The most popular ways to invest in index funds are through ETFs because they are traded like stocks and have a much lower cost to get started.
Since we are talking about a $20k investment, that is not really necessary and you can invest in index funds using your favorite discount brokerage. As I said above M1 Finance is going to be my choice for anything ETF related.
Certificate of Deposit
CD’s may be the most boring type of investment on this list. What they are is SUPER safe. Similar to a high yield savings account, CD’s are FDIC insured and are issued by various banks.
CD rates typically offer rates a few tenths of a percent higher than the highest interest savings accounts. but they have one major drawback; you lock your money in for a specified period of time.
So instead of having easy access to your cash, your money is stuck in the account and can only be withdrawn, without penalty, once the agreed upon time period has lapsed.
Right now one of the best companies for CD rates is CIT Bank. They even offer a CD where you can witdraw your funds without a penalty.
Mutual funds are similar to index funds in that they invest in a large number of stocks without having to pick them individually.
The difference is instead of following an index, the stocks are picked by a fund manager. So you get the advantages of having someone else invest the money for you without all the fees of a financial advisor.
When I look for a mutual fund I want funds that have been successful for a long period of time (think 50-75 years) and have returned at least 10% a year during that period.
This means the fund has made it through some tough economies and still managed to make a good return for the investors.
The top rated mutual funds will require anywhere between a $1,000 and $5,000 investment to get started. Since this is still 25% or less of our overall investment, it is a great place to turn with a portion of our 20,000 dollar investment.
I personally use an Ally Invest account for my mutual fund trading, but TD Ameritrade also has a great platform and very low fees.
Pay Off Debt
Most people looking for ways to invest don’t come up with paying off debt as a top options, but take a second to do the math.
If you have high interest debt, like a credit card, can you get a better rate of return on that money than paying off your debt?
For example, many credit card will charge you 21% or higher for carrying over a balance from month to month. If you have $10,000 of that toxic kind of debt, a $10k investment in getting that out of your life will pay the biggest dividends.
Start Your Own Business
Do you have a business idea you have been dying to give a shot, but haven’t had the financial backing to make a move? 20,000 bucks could be the seed money you need to make that happen.
Make sure you have a good business plan, do the research to make sure that plan has a good chance for success.
Also, make sure not to spend all $20k on just getting off the ground so you have some operational money to keep it afloat while you build momentum.
If your idea for a business becomes a success, this 20k dollar investment could end up being a complete game changer for you and your family.
Sell Stuff for a Profit
If you like going out and finding bargains, then you can turn that obsession, er, good shopping sense, into a side business.
While Ebay is definitely a good option, if you can get in and undercut the Amazon prices, I would look at Amazon FBA.
With this service by Amazon.com, not only are your items listed on their site, but they are eligible for Prime member shipping rates. You don’t even have to ship the items to people. It is a great way to get in on selling stuff online.
Pay for College
I have three children and one of my goals for them is to exit college with zero student loan debt. That means a portion of any windfall I get will be going to their college savings. Make sure you notice the word “portion” is in that sentence.
That being said, if this is paying for my own, or my wife’s, college degree, I could see spending the entire amount. My wife can make an additional $5,000 a year as a teacher by having her Master’s degree.
That means that $20,000 investment would pay itself off in four years and add a nice sum to her teacher retirement plan for the rest of her life.
If you are in a situation where a college degree of any sort can propel you to new financial security then this can be a great place to invest your money.
Take Online Courses
Investing in yourself is a great way to invest your money.
Consistently building new skills that allow you to be competitive in the job market will ultimately lead to better employment or even self employment. Udemy offers more than 25,000 course on tons of different topics.
Cryptocurrency trading has become a big business. There is definitely money to be made, but be prepared to do your research and understand which currencies are actually going to stick around.
I started my investing with Coinbase. They currently allow you to purchase three of the most popular crypto coins on the market and are FDIC insured, so if they were to fail your coins are backed up to $250,000.
I would not make this a major part of my investment since it is VERY speculative and requires understanding this new marketplace as well as each individual coin.
How I Would Invest 20,000 Dollars
I love working these kind of scenarios. Not only has it helped tons of people, it puts my mind in the right place for if (when) this kind of money comes my way.
The first thing I want to be clear is that you should never put this large of an investment all in one basket.
If you are wanting to make it simple then I would look at a brokerage like Betterment that will diversify your investment through multiple ETFs and keep them balanced.
I like to have an even greater diversity by investing across multiple options.
Betterment – $4,000
We have my wife’s Roth IRA with Betterment and I am impressed with how this robo-advisor is run. Not only do I not have to think through all the investments, but the diversification in different ETFs is really amazing.
We are still early in our investment lives so we have a very aggressive portfolio and have consistently outperformed the S&P 500 since we opened the account.
Fundrise – $4,000
Unless you are already have a home that has a specific project that can make it more valuable when you sell, Fundrise is going to be your best option for diversifying into real estate.
The low cost of entry and high returns make this an easy choice.
Index Funds – $5,000
Index funds are one of the easiest ways to diversify the stock portion of your portfolio. I highly recommend doing your research.
Since this is a $20k investment scenario, I chose to make a $5000 investment here because I want to make sure I have enough to invest in several funds. Most funds will require you have a minimum of $3,000 to invest, but there are a good number that will allow you in at $1,000.
When I go this route I would probably choose an index ETF with M1Finance, because of their zero fees for trading more than 2,00 available ETFs.
Lending Club – $3,000
I have been using Lending Club for investing for two years now and have gotten a very favorable rate of return (currently 11% which is not common). With $2,500 I could invest in 100 different loans at $25 a piece.
This gives my portfolio diversification outside of the stock market and in a market I really want to be a part of, small business investments and individuals trying to get their finances in order.
This Website – $2,000
Through small ads on this site I generate a nice side income. This is my current venture into entrepreneurship and making an investment of $2,000 could push what I want to do with the site forward a lot faster.
Cryptocurrency – $1,000
This is a real speculative play and that is why I would only put 5% of my total investment in Crypto Currencies. I currently use Coinbase for my cryptocurrency brokerage.
They give you a variety of coins you can invest in. In order to find coins that are going to go up in value you will have to do some serious research, but the opportunity to take a 1,000 dollar investment and make real money in the smaller (not Bitcoin) coins is there.
Final Thoughts on Investing 20K
Whether you are ready to jump in with your $20k or want to start investing with $500, the time to get started is right now.
Compound interest doesn’t work in your favor if you are not investing. So get started investing today with even a low risk investment or two and start seeing your money grow!
First Published January 2, 2020 Filed Under: Investing
About Paul Moyer
Paul Moyer is the owner and Founder of SavingFreak.com. He is a licensed insurance agent, personal finance blogger, and financial coach. With the help of with his wife Amy, Paul has been debt free since 2006.
Alice C Cassell says
Thank you so much– many great ideas. I realize I need to pay my credit card debt- about 6000, And make a emergency fund (maybe not 6mos lol.).
My question- I have 28800. from a retirement account that I must take- either lump sum (which I will do) or not. How can I have the least income tax in New Jersey burden?
IF you have a retirement account, you should be able to roll that into an individual IRA. If you plan to take some out to pay off your debt, then take out the absolute minimum because you pay a penalty on top of income taxes.
How can I invest 20,000.00 ?
My idea is to eventually be chef/owner. However I don’t think it’s the right time.
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