The girl is holding 10 $100 bills

Whether you have been saving money diligently in a savings account or received a cash windfall of $50,000, you now have a tidy sum to grow. Making investments is one of the smartest decisions you can make.

After all, an “investment” is something that gives you money back.

However, something that comes with the decision is the dilemma of the best way to invest 50k.

The options available are so many that it can be overwhelming.

But before you freeze up, not make a move, and miss out on an opportunity to grow your wealth, make sure you read this.

Below are things to think about before making your investments and the top strategies for investing your $50,000.

 

What to Do When You Have 50k

Here are some basic tips to consider for investing and to ensure you are making a wise decision.

Stay Calm

The best investment strategy is staying invested in times of volatility. So, do not jump out of markets when they hit a rough patch or you risk locking in losses or missing out on gains.

Consider your investments as long-term plans for financial freedom.

Don’t Be Risk and Volatility Confused

Did you know that risk and volatility are two very different things?

Well, volatility relates to the fluctuations in the value of investments. Risk is the overall quality of your investments and their ability to stay competitive.

For instance, purchasing shares in a startup can be high-risk but may give you high returns when the firm does well.

If you intend to cash out your investments in less than five years, risk and volatility are interchangeable. It is advisable not to invest in the stock market in such a case.

Drip-Grow Your Portfolio

An excellent way to mitigate uncertainty is by investing a set amount of money regularly. Instead of investing the entire $50,000 as a lump sum, drip grow your investment portfolio.

The strategy removes the risk that comes with committing a single large amount just as the markets are plunging. Further, the strategy also takes away the temptation to try timing the market.

A drip-feed money strategy is also the opportune moment to benefit from dollar-cost averaging by adding more units to your portfolio when the prices are lower.

Reinvest Income

Reinvesting your income lets you benefit from the power of compounding. This is a snowball effect where reinvesting the returns allows you to grow them so they generate their returns.

Return reinvestments can boost your portfolio significantly. Small but consistent financial commitments eventually snowball into a significant amount.

Market Corrections May Offer Attractive Investment Opportunities

Always keep a watch out for opportunities. Be ready to purchase into investments that seem to suffer but with a potential for vigorous growth.

Volatility is your best friend for picking out promising opportunities at bargain prices.

Dividend-Payers are Preferable if You Seek Income

Dividends depend on performing investments, so you expect a payout even during volatile markets.

Further, dividend-payers are robust vehicles that generate profits from a wide range of services and products. This means they suffer less from the movements of a specific market and also bring in some critical portfolio diversification.

Don’t Follow Sentiment

Following what other people are doing can work against you. Just like music and fashion trends, investment trends can fall in and out of favor.

Be selective and don’t let your judgment be clouded by the market euphoria.

Now that you have a handy checklist of what to do before investing 50k, what next?

calculator and pen on tax documents

It is a smart idea that you want to invest money rather than spend it. But before you start, here are three first steps you should consider.

Get Rid of High-Interest Credit Card Debt

The average credit card interest rate is over 14.56%, and credit cards can have an Annual Percentage Rate (APR) of 20% and higher. These figures underscore why repaying your credit card takes precedence over investments.

Other debt forms with high-interest rates include payday loans, vehicle loans, and personal loans. It is advisable to pay off these and any other debts with an interest rate higher than 8% as soon as possible.

Build on Your Emergency Fund

The COVID-19 outbreak has taught people one of the most significant personal finance lessons ever—always have an emergency fund. You never know when an unforeseen event will reduce your income or cause a lack of work entirely.

Consider putting up an emergency fund of at least three to six months’ worth of your spending. However, retiring or self-employed individuals should put aside more money.

Determine Your Investor Profile and Risk Tolerance

Think about your risk tolerance. The following are the three most prevalent risk tolerance categories:

  • Aggressive—These are investors who want to take on high-risk levels to maximize their returns. Aggressive portfolios feature investments in equities, especially high-volatility growth stocks. 
  • Moderate—A moderate investor accepts some short-term risk for long-term, larger potential gains. The portfolio boasts a balance between low-volatility assets, such as bonds and stocks. 
  • Conservative—Conservative investors place a high value on the capital appreciation and low-risk tolerance. Conservative portfolios lean towards bonds and other fixed-income assets. 

 

Top 12 Strategies on How to Invest 50k

Are you looking for ideas of what to do with 50k?

Well, start by determining your time frame, prioritizing your goals, and knowing how much risk you are prepared to take.

Fortunately, there are several viable methods for investing $50,000. Here are eight smart ideas to consider.

Invest Using a Robo Advisor

One of the easiest methods to invest money is a robo advisor. Robo advisors are financial products that invest on your behalf in a range of ETFs based on your risk tolerance and needs.

Some robo advisors will also rebalance your portfolio, so you can relax and let your 50k work for you.

The best thing about a robo advisor is that it is inexpensive. The average cost is about 0.20% but others will charge an advisory fee of just 0.15%.

Invest in the Stock Market

Another best way to invest 50k for many Americans is the stock market.

Plus, you do not require a stockbroker to trade stocks these days. Instead, use an online brokerage account. But make sure the company features a simple interface and offers resources for new investors.

Create your account and funds. Before you choose your stocks, make a plan and understand how much you can lose.

Pick stocks by reading the financial news, learning more about the stock performance histories, and looking up professional forecasts. Try choosing stocks within your risk tolerance range and avoid investing too much until you are comfortable with the process.

Invest in Index Funds

Investing in an index fund is like investing in the stock market with minimal risk and potentially massive benefits. The trick is diversifying your stocks by purchasing the largest companies through an index fund.

Mutual Funds

One of the best ways to invest 50,000 in the stock market is via mutual funds. The fund is an investment vehicle with a portfolio of securities, such as bonds and stocks.

Mutual funds hold multiple securities, making them the perfect choice for anyone looking to invest 50k. Investing your cash in a money fund helps diversify your portfolio, but at a lower cost.

But what is the difference between mutual funds and index funds?

An index fund only covers market-average returns that are safe, while mutual funds have fund managers trying to outperform the market. The fees for mutual funds are higher and the returns are less predictable.

Max Out Retirement Accounts

Investing in mutual funds and index funds in your retirement accounts can help you max the latter out.

Use your 50,000 to free up some space in your budget if your employer has a 401(k) matching employee contributions—and you are not contributing enough to earn the match.

You can also contribute up to the following amounts in common retirement accounts:

  • SEP IRA—25% of your business compensation or $57,000—whichever is higher.
  • Roth IRA and Traditional IRA—Contribute $6k or $7k if you are older than 50 years.
  • Solo 401(k)—Contribute 100% of your business compensation or $19,500, depending on which is less.

Open a Taxable Brokerage Account

Taxable brokerage accounts work like an IRA, without the extra tax savings, and take out the money anytime you want.

Like an IRA, a taxable brokerage account lets you choose whether you want to invest your 50k in mutual funds, index funds, bonds, stocks, money market accounts, and others.

The account offers another place to invest in the market, besides your retirement accounts. After setting up your emergency fund and maxing out your retirement accounts, consider investing the leftover money in a taxable brokerage account.

How to Invest 50k in Real Estate

condominiums in the light of a beautiful dawn

Real estate is one of the first investment vehicles most Americans consider. Perhaps it is because real estate is a tangible asset or one of the fastest ways to gain wealth. 35% of Americans consider real estate the best long-term investment.

Unfortunately, $50,000 may not be enough to purchase a rental property unless you are looking at areas with very low costs of living. However, you can use the amount as a down payment on a rental property. Learning how to invest 50k in real estate is one of the time-consuming and riskier strategies.

Real Estate Investment Trust (REIT)

Another way to invest in the real estate market is by putting your money in real estate investment trusts. You will find most REITs available in open spaces like stocks on the stock exchanges, but some are confidential.

Examples of REIT assets you can invest in include mortgages, residential properties, retail space, office buildings, or a combination of all these.

Mutual funds and Exchange-Traded Funds (ETFs) cover REITs too. You can invest as low as $5,000 in private property deals. Other platforms allow you to put down as little as $500 in a commercial real estate property via REITs.

Start a Business

Starting your own business is a favorite means of generating wealth because of the amount of money you make. Invest your $50,000 in a promising business venture to increase your cash flow.

Make sure you research the business, seek advice from experts, and develop a solid business plan before you start.

The amount of cash you can invest in your own business depends on the business model you follow and the industry. Alternatively, you can also start a business with no money.

Peer-to-Peer Lending (P2P)

P2P lending is an emerging investment approach that can broaden your financial portfolio.

You can make direct loans without involving banks. So, you are lending money to an individual, or “peer”, and get interest when they payback. All the parties can work through online platforms, reducing operational expenses and reducing interest rates.

P2P can help reduce risk by dividing your funds among several borrowers than giving it all to one person.

Invest in Yourself

Investing in yourself is an excellent investment vehicle. These investments can take several forms, from taking a course to nurture talent to picking up a new hustle for continuous cash flow.

It is unlikely you will spend the whole $50,000 on yourself. But putting your wellness first can help improve your energy and production levels for better results and more revenue!

Consider Alternative Investments

3 old $1 bills on a laptop

“Alternatives” refers to any investments that do not fall within cash, stocks, or bonds categories. While many consider real estate as an alternative investment vehicle, other options include:

  • Cryptocurrency
  • Antiques
  • Stamps
  • Commodities
  • Wines
  • Coins
  • Private equity
  • Art

 

Conclusion

You can make a $50,000 investment in several ways.

However, make sure you deal with the pressing financial issues first. So, put some money in your emergency fund, pay down your current debt, and learn your investor type.

However, make sure you are aware of promising risky investments such as pyramid schemes and penny stocks that may not be worth much.

The bottom line to finding the best way to invest 50k is starting early and safely. This strategy ensures you earn the benefits from your investments sooner.

Does real estate investing pique your interest? Get in touch with the professionals at Homes by Ardor. We buy and sell homes and can assist you in finding the perfect investment property.