As you look for ways to make your hard-earned money work for you, investing $20K is a simple yet effective way to get started. Whether you have saved up from salary, inheritance, or other sources of income, investing this amount of money can help set yourself up with a solid financial foundation.
There are many different ways to invest your money, and the key is to find the option that's most suitable for your particular needs and goals. From traditional investments to long-term strategies, here are seven ways you can make your money work for you with a $20K investment.
How to Invest $20K: 7 Ways to Diversify Your Portfolio:
When it comes to investing, diversification is key. With $20K to invest, you’ll want to ensure that your money is spread out over various investment types to reduce risk and maximize potential returns.
Here’s how to invest 20k:
REIT or Fractional Real Estate Investing
Most Americans' #1 investment choice is real estate, as it provides a steady income and requires minimal effort to maintain.
How to invest in real estate without being a landlord? Enterprising investors can purchase shares of a REIT or invest in fractional real estate deals through crowdfunding platforms.
Whats a real estate trust reit? REITs are companies that own and operate income-producing real estate. They are funds that own multiple properties and allow investors to own stakes without managing them.
Fractional real estate investing also allows you to invest in real estate, but you purchase a portion instead of buying the entire property. Fractional investing pros and cons may include the ability to diversify your portfolio across multiple properties while reducing risk, but you will have less control over the property.
Invest in a High-Yield Savings Account
A high-yield savings account is another great option for investing $20K. You can earn a higher interest rate with a high-yield savings account than with a regular savings account. It typically pays 20 to 25 times the national average of a standard savings account so that you can see a noticeable return on your invested funds.
Other benefits of a high-yield savings account include FDIC insurance, which protects your money in case of a bank failure. It is also ideal for an emergency fund since you can withdraw the money at any time without paying the penalty.
Invest in Index Funds
As you think about how to invest 20K, don’t forget about index funds. Index funds are a type of mutual fund or exchange-traded fund (ETF) that tracks an index, such as the S&P 500. Investing in index funds is a great way to diversify your investments, as you simultaneously invest in many different stocks.
Index funds are also low-cost investments. The taxes and management fees are typically lower than other funds. They are also easy to manage since they don’t change their asset allocation easily. This makes them an excellent choice for those who are just starting to invest and don’t have the time or inclination to manage their portfolio actively.
Index funds also make an excellent cash flow investment, giving constant returns. Learning what are cash flow investments are will help you make the most out of your investment.
Start a Business
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[31 million](https://www.thinkimpact.com/entrepreneur-statistics/#:~:text=What is this%3F,-Report Ad&text=In other words%2C 31 million,own business at some time.) people in the United States are entrepreneurs. Starting a business is an excellent way to invest $20K. By investing in yourself, you can build something that you are passionate about and have ownership of.
A few potential business ideas include starting a home improvement company, an online store, or a blog. No matter which type of business you choose, plenty of resources are available to help get you started. A business loan can also be helpful if you need additional capital to get your venture off the ground. But we recommend staying within the budget of $20K to avoid over-investing in one venture.
Pay Off Your Debt
Not all investments involve buying something. Paying off your debt is also a great way to invest in your future. Paying off high-interest debt, such as credit cards and personal loans, can significantly reduce your monthly payments. This will free up more monthly disposable income, which you can use to invest in other areas of your life.
Another great benefit of paying off your debt is that it can boost your credit score. This will make it easier to get approved for loans and credit cards with lower interest rates. It can also help you secure a mortgage or car loan at a more favorable rate.
Create or Bulk Up Your Emergency Fund
Stats indicate that 56% of Americans can't cover an emergency expense of $1000 with savings. Create an emergency fund to ensure you’re prepared for unexpected financial setbacks.
An emergency fund is a type of savings account that you can use in case of an emergency or job loss. It should have enough money to cover three to six months of living expenses.
Invest in Yourself
Finally, consider investing in yourself. Investing in yourself means spending money on activities and experiences that will help you grow. Use the money to pay for an online course, attend a professional seminar, or invest in other educational materials.
You can also use this money to hire a career or life coach. This type of professional can help you reach your goals and make more informed decisions about your career and future. Investing in yourself is a great way to increase your earning power and gain the skills you need to build a brighter future.
Key Takeaways
Investing your $20K wisely can be a great way to improve your financial future. Your goal should be to find investments that best fit your risk tolerance and financial goals.
Here’s how to invest 20k:
- Investing in REIT or Index Funds is your best option if you want to invest in real estate without managing the property.
- High-yield savings account investments allow you to earn a higher interest rate while keeping your funds safe.
- Investing in index funds allows you to diversify your investments with low cost and easy management.
- Starting your own business can be a great option to use your $20K; just make sure to stay within the budget.
- Paying off debt is a great way to reduce your monthly payments and improve your credit score.
- An emergency fund should be created in case of unexpected financial setbacks.
- Investing in yourself — through education, professional coaching, or seminars — will help you increase your earning power.
Ready to make the most of your $20K? Invest smart with Getaway and start building a brighter future today.
