Marcus Marion, CMA™ Let’s imagine you just came into a windfall of $200,000. How would you go about investing it? Perhaps you’ve been diligently saving for some time. We have now reached the $200,000 mark. How can you make this money work for you? What are the best investment strategies to grow your wealth?
While it might be tempting to splurge and spend the money, remember that learning to invest is one of the most important financial decisions you can make.
Having $200,000 at your disposal puts you in a position to achieve independence. What are the smart money investments worth considering? The investment portfolio should be well diversified to withstand losses while also harnessing the benefits of thriving sectors.
Before you get carried away with the excitement of investing your $200k, there are a few things to keep in mind:
Risk Appetite or Risk Tolerance
Short-term or long-term investments involve risk, so you should consider how you will react if an asset loses value or whether you are willing to accept ups and downs. You cannot eliminate risk when investing while keeping the door open to potentially higher returns.
So first, determine your risk tolerance. Then, invest your money in funds that can help you achieve the returns you desire.
Determine Your Investment Goals
It’s essential to set goals for your investments. Are you saving for retirement or a house?
So, you’ll need to carefully think through your choice of account so it matches each goal. For instance, if you’re saving for retirement or short-term savings, there are bank accounts tailored to this purpose.
An Emergency Fund Can be a Life Saver
The thing about emergency funds is that they’re totally off-limits. Everyone can set money aside, but not everyone knows how to restrain themselves from making small withdrawals from their savings account. You absolutely can’t do this with your emergency fund unless, of course, you have an emergency.
Regularly Evaluate Your Portfolio
No one will care about your hard-earned cash like you. Therefore, you want to take full responsibility for monitoring how your portfolio is performing. But that shouldn’t be all. You also need to go a step further and watch the market regularly for trends and events that might favorably affect or harm the investments in your portfolio.
Several new investment trackers and services have emerged in recent years, offering you a variety of options for monitoring your investments.
How to Invest your $200k
There is no guaranteed way to make $1 million out of $200,000, and there is no assurance when it will happen. Nonetheless, you can make wise financial decisions to improve the chances of your investments reaching your long-term objective.
Below are nine practical $200k Investment Ideas to get your money up:
1. Invest in Stocks
Investing in stocks is undoubtedly one of the finest strategies to accumulate wealth over the long run. This is a long-term investment strategy. Stock investment allows you to profit from the growth of the world’s most well-known corporations. They can be riskier than other investments, but allocating some of your money to stocks will strengthen your overall portfolio.
Advantages
- High-yield investment
- Capability to diversify across economic sectors
- An opportunity to invest in ETFs and index funds
- An excellent portfolio investment
Disadvantages
- You can lose everything investing in individual stocks
- Calculating the risk of these investments can be tricky
2. Bonds
Those in favor of short-term investment should also look into bonds. These are viable options for any investor who is more invested in a fixed return rate for their short-term investments. In other words, bonds don’t have a volatile return rate like some other options out there.
For instance, when you compare them to stocks, you’ll notice bonds have lower risks. On the flip side, you should also expect smaller long-term returns than stocks. Nevertheless, they bring obvious advantages that stocks lack. Some excellent examples are higher liquidity, variable term structures, lower volatility, and legal protection, among others. But before you dump all your money on bonds, you must know they can suffer from repayment, liquidity risk, interest rates, and reinvestment risks.
3. Enter Into Real Estate
Few options can rival the lucrativeness of real estate when it comes to best-in-class investments. Not only is the real estate industry a smart bet, but it’s also tangible. You’ll get the structures and properties your money yields. However, it’s most lucrative for those playing the long-term game with moderate risk. But, though purchasing real estate properties strategically diversifies your investment portfolio, you’ll find becoming a property owner comes with some costs.
Luckily, the real estate market offers diverse means of investment. You may go for commercial private properties that yield money through rentals. These offer long-term streams of increasing returns.
But guess what?
Real estate investment trusts (REITs) enable investors to purchase multiple properties without managing them individually. REITs, which function as investment funds, can be bought and sold on the stock market. As a result, you are not required to manage properties or hire someone to do so. Instead, you pay fees to the trust’s administrator.
Advantages
- A simple investment option
- Portfolio diversification ability
- Income can come either actively or passively.
Disadvantages
- Real estate comes with no liquidity
- Little to no return guarantees
4. Become an Entrepreneur Online
If you have $200,000, one of the best things you can do in the current digital economy is to launch an online venture. Mind you, it doesn’t have to be the whole sum of $200K. You can dedicate a fraction of this amount toward your new online business. Several successful entrepreneurs started with much less. Some initial expenses you’ll need to cover include hosting and domain costs, marketing, and hiring.
But making isn’t only dependent on your starting capital. You’ll also have to invest several hours to transform a small business into a successful company. Optimistically speaking, your initial investment of time and money can literally yield millions of dollars in the long-term if you play your cards right – thus making this option one of the highest ROIs for a $200K investment.
Advantages
- You stand a chance of becoming a millionaire
- It may require a smaller initial investment
- High ROIs
- Offers a passive income stream
Disadvantages
- Choosing a profitable industry can be tricky
- The online space is so saturated
5. Index Funds
Usually, the capacity of index funds to provide diversity is the most significant advantage they offer. Additionally, the costs for these funds are typically cheap because they are not under active management. For those seeking an easy approach to enter the investment market at a favorable dollar-cost average, index funds are a popular choice. Many investors like index funds because they make it easy to build a diverse portfolio with just one investment.
Pos
- Low cost and ease
- Better diversity
- Requires minimal financial expertise
Cons
- No safety nets against potential losses.
- Inability to regulate index composition.
- Performing worse than the market average.
6. Gold
Gold prices frequently rise during times of crisis and higher-than-usual inflation, making them another viable wealth-building investment. One of gold’s best qualities is that it preserves wealth; it has monetary value and can be easily purchased and sold. Risk reduction is essential for long-term investing success, and gold lacks any positive correlation with bonds, stocks, or real estate.
Pros
- The ability to diversify your portfolio
- An excellent inflation hedge
Cons
- Fluctuations in short-term gold prices can be pretty risky.
7. Peer-to-Peer (P2P) Lending
Online marketplaces that match private lenders with those in need of credit have become widespread in recent decades.
When compared to more conventional savings methods, P2P lending generally offers higher returns. Investing a part of your two hundred thousand dollars in this domain could result in a regular inflow of interest. But, as with any business, it’s crucial to know what the risks are.
8. Explore Collectibles
The realm of collectibles, which includes objects such as art, antiques, and one-of-a-kind coins, is a place where passion and investment go hand-in-hand.
These kinds of things usually go up in value over time, especially ones that are historically relevant or naturally hard to find.
9. Alternative investment assets
Alternative assets are the perfect fit for investors who want to diversify their holdings and make more money. Several appealing areas include cryptocurrency, art, private equity, and venture capital.
You can start by learning how to make your own cryptocurrency. But first, you have to know when is the best time to sell cryptocurrency and explain the answer to questions like “Why is cryptocurrency valuable?”
Ready to Take the $200K Plunge?
Investing two hundred thousand dollars isn’t a cakewalk since there’s no one-size-fits-all answer. As a matter of fact, many investors will likely build their portfolios by picking and choosing parts of different strategies. So, if you find an excess of $200,000 in your wallet, you should invest this capital for long-term growth without hesitation. However, rather than “betting the ranch” on one method with such a large sum of money, diversify your investments.
Another essential thing is to be a well-informed investor. Smart portfolio allocation through crowdfunding, a robo-advisor, or selecting your stocks all require adequate due diligence and a thorough understanding of the investments you are making.
