It is generally a good thing if you get to the point where you are wondering how to invest $200k. Thinking about investing so much money means you are on the path to creating long-term wealth, which is especially true if you can invest that amount for a long time, say about 10 or 20 years. The compound interest from such an investment is usually huge.
But how exactly can you invest $200,000? We provide a few top investment strategies used by professionals.
According to financial experts, the best investment strategy is a diversified one. For this reason, every strategy listed in this article will have a recommended allocation and a matching investment goal.
Why Your Investment Style Matters
There are many good investment options where you can invest $200,000. To choose the right strategy, you must think about your investment goals.
Are you trying to invest for the future and looking for a strategy that you don’t need to concern yourself with for a long time? Or, are you searching for short term investments that let you turn a massive profit quickly? You must ask yourself these questions before you settle on an investment option.
Additionally, you have to consider how soon you will need to gain access to your initial investment or if you plan to reinvest your capital later on. You also have to consider if you plan to let your entire investment stay long-term for about 10 to 20 years.
If a long-term investment option interests you, then you might be interested in signing up for a brokerage account or simply putting your money in a 401(k) retirement account. You could also put your money in cryptocurrency, a business, or real estate.
If you are interested in having your money made available to you in a couple of years, you might want to consider going another route. Consider depositing your money in a high yield savings account. While you are unlikely to get a comparable return, a high yield savings account is a safe investment as it enables you to gain easy access to your money without worrying about losing it.
Invest by Buying a Business
Although this is generally a sound investment strategy, it is important to note that it isn’t for everyone. Compared to other investment strategies on this list, purchasing a business is a lot more hands-on. That said, purchasing a business offers you the opportunity to create something with the potential to bring long-term income for decades.
You can even grow a business to the point where others will run it for you. At that point, you can simply oversee the business while enjoying a passive stream of income for the rest of your life.
When buying a business, you could choose to purchase a local business or buy a franchise in your area. If you are interested in purchasing already established businesses, you can do so through various platforms. You could also buy an online business through a service known as Flippa.
Flippa enables you to choose already developed websites, online businesses, and domain names. You can use these sites to create passive income through affiliate marketing, adverts, product sales, and more.
Alternatively, you could choose to create your own online business using about $1,000 in some cases, but this option requires a lot of research to locate an online business that can be profitable when you monetize it. Purchasing an online business is great for anyone who prefers a hands-on opportunity and isn’t shy of putting in the work.
Online businesses as a whole are great for those searching for passive income or those looking to create something they can profit from in the long term.
Recommended allocation: It depends on the business
Investing goal: Income
Pros
- Buying a business provides you with an unlimited income potential
- It allows you to use your creative talents to build and generate passive income
- It is possible to conduct this investment strategy with just a little bit of capital
Cons
- There is quite a learning curve when it comes to purchasing a business
- There is no guarantee that the business you purchase will succeed
Investing in Cryptocurrency
There was a time when most people and experts believed that cryptocurrency would never become mainstream, but that is no longer the case. At the moment, you can use different cryptocurrencies, such as Bitcoin and Ethereum, to make payments at many places and vendors. There are even cryptocurrency ATMs popping up all over the world. Many experts believe that Bitcoin’s wide adoption could cause it to become worth at least $200,000 in the next few years.
The great thing about cryptocurrencies is that just about anyone can invest in them. You invest by signing up for a cryptocurrency platform or app. These applications can store your crypto coins safely until you are ready to sell. Starting on this investment strategy is quite easy. You simply need to download a platform. It is a good idea to ensure that you choose one that lets you also earn interest on your crypto deposits.
Recommended allocation: 5%
Investment goal: long-term growth
Pros
- Depending on the cryptocurrency platform and app you choose, you can buy, trade, and sell crypto.
- Some platforms let you earn interest on your cryptocurrency.
- You can buy as many cryptocurrencies as you can afford.
Cons
- Cryptocurrencies can be quite volatile and that means you can lose all your investment if your coins depreciate.
- There is quite a learning curve when it comes to this investment strategy.
- Cryptocurrency is still relatively new in the investment sector so there are still a few unknowns.
Investing in Real Estate
Property investment makes sense for many people, especially if they aren’t interested in accessing their cash immediately. If you purchase rental property, the rental income generated from tenants can help you pay off your mortgage. Once you pay off the mortgage, the monthly rent from the tenants can become a passive income stream.
Additionally, you can invest in a REIT or real estate investment trust or real estate platform. These platforms enable you to get into real estate investing without playing the role of landlord.
There are many platforms for real estate investment that you can use without searching for new tenants or getting a mortgage. Some investment platforms enable you to invest as little as $500 to create an investment portfolio. Your investments are then spread across numerous residential and commercial properties, expertly selected by the managers.
Recommended allocation: 10 to 15%
Investment goal: income and growth
Pros
- This strategy is perfect for those that want a hands-off approach to real estate investments.
- Some platforms let you start with as little as $500.
- Depending on the platform and the spread, you can expect to earn about 9.47% on your returns.
Cons
- Returns in this investment strategy are not guaranteed.
- Funds placed in this investment strategy are not liquid and can take a couple of months to access.
Investing in the Stock Exchange
The stock market is perhaps one of the go-tos when people consider investing their money. Most people tend to put a large portion of their retirement fund in the stock market using tax-positive retirement savings plans such as a Solo 401(k), 401(k), and a SEP IRA. For those who want a different stock strategy, you can also get bonds, individual stocks, index funds, and other types of securities through a brokerage account.
Although brokerage accounts do not provide upfront tax advantages, using them can allow you to invest in as many ETFs, stocks, and others as you want.
Additionally, the brokerage account ensures your investments are more liquid than they would be in any tax-advantaged retirement plan.
Most retirement savings accounts have penalties for withdrawals before you reach retirement age. You can sell stocks, ETFs, and other securities to access your money without having to pay a penalty, making them a safe investment. All you need is to account for the capital gains tax when you withdraw your funds.
Recommended allocation: 40 to 50%
Investment goal: long-term growth
Pros
- You can choose to invest in ETFs or index funds.
- This strategy lets you diversify your investment across various economic sectors.
- It provides the possibility for fair or great returns over the long term.
Cons
- It is possible to lose a bit or all of your money in this investment strategy.
- Investing in individual stocks can be quite risky.
Conclusion
Considering investment options means that you are on your way to financial freedom. However, that is only half the journey. You need to be able to invest your $200,000 strategically in a manner that builds up your nest egg for years or decades to come. Consider this investment advice before you make your next move.
