Investing $500000 is a very exciting and at the same time, stressful decision to undertake. All the more, it becomes a daunting task if you have to invest a relatively huge amount of $500,000 today. If you have $500000 available to invest, Deciding where and how to invest this amount of money is a very crucial question to ponder. It all depends on your knowledge of investment strategies and products. The return of your investment of this amount of $500,000 will dramatically depend on how and where to invest it. To put it simply, the decision you make today will affect how much money you get in return due to that investment decision.
Just to give you a clearer view of your investment return, let us take a look. If $500,000 grows at 6% for 20 years, it will yield approximately $1.6 million. However, if you can find a way to grow it at 10%, it would generate you a nest egg of $3.4 million. Seeing this comparison, you will realize a remarkable difference in the amount of money you will get.
At this point, thinking about how you get the best possible return that will yield the most out of your investment is very challenging. As a rule of thumb, it is safe not to put all your eggs in one basket. It is still wise to spread this amount of money across a variety of investment products.
There is no hard and fast strategy to go about investing. There is no right or wrong formula to invest your $500,000. However, suppose you will not decide now on how to invest 500000 dollars. In that case, it also means there will be some degree of depreciation on its value. Hence, the best time to start is to invest it as soon as possible, which is today.
There are ways on how to invest it. What we are offering here are suggestions. Reading these suggestions is a good way to familiarize yourself with the options available on various investment strategies and products that suit you best, depending on your timeline and investment goals.
Here are the top ways for you to invest your $500,000:
If you think of long-term investment, you may invest 40-50% of your $500,000 into the stock market. Actually, for those who have retirement plans, this is probably where most retirement funds are invested. This refers to the 401 (k) that you get through your work or your self-employed retirement plan. This is synonymous with a SEP-IRA or Solo 401 (k).
Opening a separate brokerage account is possible. That is great because you can do your way of investing in stocks that are not within the scope of your typical retirement plan.
The downside of investing in a brokerage fund is that you cannot reduce your taxable amount. There is no tax advantage in this aspect, unlike in retirement plans, which is tax-advantaged because you can reduce your contributions so that there is also a reduction in the actual income that is taxable.
The advantage of investing in stocks is that you can easily liquidate your stocks at your own free will without being subjected to a penalty compared to most retirement plans. You just need to plan well to avoid capital gains taxes. Also, you have to consider the possibility that your investment can be worthless if you sell it when the prices of your stocks are down.
If you would like to seek assistance on the ways to start, there is an available technology, an app, or an advanced algorithm to help you invest your money. There is one company that offers that, which is Betterment. Betterment is an app that provides you with tools and advice for you to become a better investor.
Betterment is a reliable robot advisor as it makes investing look easy. It readily allows you to track your finances. It also offers diversified investing. Their portfolio includes EIF, which stands for Exchange-Traded Fund. You buy a whole collection of different stocks or bonds, not just investing in one company like Apple. They also charge an annual fee of 0.25%, which is relatively low. It saves you on taxes because you can have an automated and optimized tax strategy for you to get the most returns. However, the downside of this is that the returns are not assured, and also they require a fee for their account management.
Consider allocating 10-15% of your investment money to Real Estate. When we say real estate, we are not only referring to a property such as an office space, room for occupancy, or a building. There is another way of investing in real estate, which is called REIFs. It stands for Real Estate Investment Funds.
Suppose the sound of managing a property is not an attractive idea to you. In that case, there is a platform that can help and offer you advice on investing in real estate.
Investing in Gold
Gold has been a good investment option, as we often heard of because gold prices do not go down and are not affected by inflation. As it is, gold is an excellent way to store value.
Investing in gold in the form of physical gold is highly possible. The physical gold we are talking about here is bullion, a bulk form of gold that can be turned into coins or bars. Buying and selling gold is easy nowadays because several online platforms offer assistance, such as Oxford Gold Group, Lear Capital, and Goldco.
Investors see the role of gold as a diversifier because of its minimal correlation to mainstream assets. Gold is also called a protective asset because of its hedge against inflation and financial risks. Investors often connect the increase of the value of gold if there is transient instability of the world markets. Gold is said to keep its value when the dollar loses its cost.
If you heard about Bitcoin, this is one of the cryptocurrencies that has been making a big craze in the investment world today. Investing in cryptocurrency is an excellent option because it gives you excellent returns. Just imagine that one single Bitcoin that costs now at $50,000 can turn to $200,000 or more in the next few years. According to industry experts. Since the level of risk is high in investing in cryptocurrency, it is safe to allocate only 5% of your $500,000 into this investment option.
Nowadays, there are different cryptocurrencies to look into. In fact, other cryptocurrencies have the potential for even higher growth. There are other cryptocurrencies other than Bitcoin, such as Ethereum or LiteCoin. The actual number of how many cryptocurrencies exist now is ever-changing. They say there are 1,375 virtual coins in the market. Moreover, anyone can be an investor in cryptocurrencies through helpful mobile apps.
On the other hand, some investors like Coinbase because you can choose from a wide array of cryptocurrencies. For your sign-up alone on this platform, they will reward you with a free Bitcoin. Another good thing about Coinbase is that it provides free educational materials that allow you to study this type of investment scheme before jumping in.
After you buy your crypto, you can go to Block, and from there, your crypto deposits can earn interest. Block allows you to earn as much as 8.6% ASY on your crypto, depending on the type of currency you invest in. Also, interests earn on your daily balance.
Cryptocurrencies are virtual currencies or what they call electronic peer-to-peer currencies. These types of currencies do not exist physically, but it does not mean that you can deny the potential returns it can earn. The earnings in cryptocurrency can be explosive. On the contrary, it can also wipe out your entire investment just like that.
The good thing is there is a tendency to earn interest on your crypto deposits. It also has the potential for you to have great long-term returns on your deposits. The challenge is if you like to investigate it, there is a limitation in terms of the short history you can know about it.
Buy a Business
A big amount of $500,000 can allow you to invest in a business, be it a home-based business, purchasing a franchise, or an online business. However, the downside is you cannot generate a passive income with owning a business, especially during your start-up years. Some business owners have this plan of putting up a business and eventually sell it in the future.
Buying a franchise is also another option; however, the franchise fees can be exorbitant. Some franchises will require an initial fee that ranges on the average %50,000 to $200,000 just to jumpstart the business. Also, the physical, mental and psychological demands of making sure that this franchise will succeed can be very toiling and demanding to the businessman. Hence, it is best that when you are willing to buy a franchise, it is something that you are passionate about and that interests you.
The latest trend is investing in online business because the start-up capital is relatively small and does not require a physical storefront. If you are interested in online business, you can learn from Flippa. Flippa is a website that assists you in anything you need to know about online business, from domain names to blogs on monetization. The income from online business can be unlimited, but there is also no guarantee that it will succeed. Most online businesses were not fortunate enough to succeed.
Open a Solo 401 (k)
A Solo 401 (k) is considered one of the best long-term investments; however, it is not for everyone. To be eligible for Solo 401 (k), the number one requirement is to have a self-employed income. You should be the only employee and should not have any employee under you. However, having business partners and spouses is the exception in Solo 401 (k).
Solo 401 (k) gives the many self-employed advantages because it allows its account to defer up to 100% of their compensation, up to $19,500 maximum in 2021. If you reach 50 years of age or more, it allows you up to $26,000. On the employer’s side, they can contribute up to 25% of compensation which translates to a maximum cap of $58,000 for many entitled.
The ease of opening a Solo 401 (k) can be done through online brokerage firms that can give you assistance and ideas. If you are qualified, it is a smart move to invest in Solo 401 (k).
In conclusion, the best way to invest your 500,000 dollars depends on how much time and effort you are willing to dedicate to your particular investment product. If you do not have the means, you can always seek help and assistance from investment platforms specialized in doing it. I believe this is a more innovative way to do it. Hence whatever you decide on, you should trust the process and your investment platform. The wise move is still to invest it now, rather than lose the inflation this year. So good luck and happy investing!