What is the best way to invest $20k?

1 min readLast updated March 28, 2024by Unbiased team

This article takes you through how to make big investment decisions and some of the options you should consider when investing $20,000.

Summary

  • There is no one-size-fits-all investment approach; how you invest $20k will depend on your goals and risk tolerance.  

  • Before making any big investment decisions, you need to build a solid foundation, including clearing debt, creating an emergency fund, and saving towards retirement.  

  • Some of the options you should consider when investing $20,000 include real estate, brokerage accounts, and index funds.  

  • To get personalized investment advice, speak to a financial advisor. They can create a plan and find the best way to help you grow your money.  

How do I make the right investment decision?

When making any investment decision, these are three of the most important things you need to consider: 

  • Your investment goals 

  • Your investment timeframe  

  • Your risk tolerance 

You should have a clear understanding of your investment goals and when you want to achieve them. This will help you choose the right investment option.  

For example, if you have longer-term goals, such as buying a home or planning for retirement, you will opt for longer-term investments, such as stocks or an individual retirement account (IRA).  

Knowing your risk appetite is also crucial. 

All investments pose some level of risk, but some are higher risk than others. While higher risk can lead to higher rewards, it can also lead to more losses.  

Before making any investment decisions, you need to decide what level of risk you’re comfortable with. 

Will you play it safer and receive potentially lower returns? Or will you invest in higher-risk options and take the chance? 

If you’re unsure about where to start, it’s best to get expert advice.  

A financial advisor will take some of the hard work out of investing and create a personalized investment plan based on your unique goals and circumstances.  

Unbiased can match you with an SEC-regulated financial advisor perfectly suited to your unique needs. Get started now.  

What is my investment risk tolerance? 

Investing is all about risk and reward.  

The higher the risk, the greater the reward or losses you could incur.  

Fortunately, there are different investment options for the various levels of risk, with safe investment options available for those who have a lower risk tolerance.  

All investments pose some level of risk, but what investments you choose will be determined by the amount of risk you’re willing to take. 

Here, you need to be honest with yourself and your investment advisor and decide if you want to invest conservatively, moderately, or aggressively. 

How do I get ready to start investing? 

Building a solid foundation is essential before you can start making any big investment decisions.  

Think about the fundamentals, ask yourself: 

  • Have I cleared all of my outstanding debt? 

  • Do I have an emergency fund I’m comfortable with? 

  • Have I maxed out my retirement savings? 

If you answer no to any of these, you have some work to do.  

Here are the three steps you can take to set yourself up for investment success:  

  • Clear outstanding debt: Outstanding debt will always eat into any investment returns. If you come into a large sum of money, it’s best first to use this to clear any debt you’ve built up, such as credit card debt or home loans. This will help you avoid always chasing your tail and allow you to enjoy any potential returns..  

  • Create an emergency fund: While it might not be the most exciting option, building an emergency fund is a necessity that could prove lifesaving. If you lose your job or have unexpected expenses such as a medical bill, an emergency fund helps you manage. Most experts recommend having three to six months' worth of living expenses in your fund. How much this fund amounts to depends on your unique circumstances. 

  • Maximize your retirement contributions: Saving for retirement should always be at the front of your mind when it comes to making big financial decisions. If you come into some money, such as $20k, you should consider maxing out your retirement accounts first. If you haven’t opened a retirement account, now is the perfect time to do so. Retirement accounts compound over time, meaning the earlier and the more you put in, the greater returns you may receive.  

How to invest $20k 

There is no one-size-fits-all investment approach; how you invest $20k will depend on your goals and risk tolerance.  

$20,00 is a large sum of money, so before making any decisions, you should speak to an expert. 

 A financial advisor can create a personalized investment plan that takes your current circumstances and future goals into account and help you on your journey to a brighter financial future.   

Here are just four different options that might be included in your $20,000 investment plan:  

1. Real estate 

While $20k won’t buy you a property, this doesn’t mean investing in real estate is off-limits.  

If you’re wondering how to invest $20k in real estate, it’s worth considering real estate investment trusts (REITs).  

REITs are companies that own and operate income-generating properties. These properties can vary from office and apartment buildings to retail malls and even commercial forests.  

Here, you invest your money in a REIT and in return, they provide you with a steady income stream. 

Under government legislation, REITs must distribute at least 90% of their taxable income to shareholders annually in the form of dividends. 

As a stable and often considered safe investment option, real estate is definitely one to consider.  

2. Brokerage account 

A brokerage account is a type of financial account that gives you access to various investment options, including stocks, bonds, exchange-traded funds (ETFs), and mutual funds, depending on the broker. 

It’s quick and simple to set up a brokerage account online through a brokerage firm and pay money into it.  

You can also choose a full-service broker if you want help managing your investments or opt for a DIY approach.  

3. Index fund 

An index fund is a collection of stocks, bonds or securities.  

Index funds passively track the performance of a particular stock market index, such as the S&P 500 or the FTSE 100 and are priced at the end of each trading day.  

If you have a lower risk tolerance, an index fund might be for you. They offer more comprehensive exposure to the market without exposing you to costly investment fees.  

4. College savings account 

Investments don’t always have to be stocks, shares, or bonds; you can also invest in products that have specific end goals in mind. 

With $20,000 on the table, you could make some headway to achieving some of your longer-term goals.  

If you have children, saving for their education is a wise decision.  

A 529 plan is a tax-advantaged investment account designed to encourage saving for future education expenses, such as college tuition, room and board, and other related fees. 

Additionally, new legislation also allows unused money from your 529 plan to be rolled into your Roth IRA account. 

This means any money not used for educational purposes is still being saved for the future.  

Get expert investment advice 

If you want to meet your investment goals and see your desired returns, it pays to get expert financial advice.  

Financial advisors understand the investment landscape and can develop a personalized plan to help you reach your goals.  

Unbiased can match you with an SEC-regulated financial advisor. Simply tell us a bit more about what you’re looking for, and we’ll do the rest. 

With no obligation and a free first consultation, what have you got to lose? 

Get started now.   

Writers

Unbiased team

Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.