When and where to invest 50 thousand dollars? See how simple it is, read on.
When you are thinking about investing, the stock market can be a popular way to invest your money. This makes sense when you consider that more than half of American households (52%) are invested in the stock market to some extent.
But when you accumulate $50,000 for your next investment, the stock market isn’t your only option. Depending on your risk tolerance and investment preferences, some types of investments may be more suitable for you than others.
Here are some of the best uses for your money when you need to invest $50,000.
Where to invest 50 thousand?
Technically, an investment is something that will bring you money back. We’ll include some of these on the list, but let’s start with other investments that are also important to your long-term wealth.
- Create an emergency fund
Unless you have a fully funded emergency fund, this should be your top investment priority. According to a well-published 2018 Federal Reserve survey, four out of ten people could not cover even one. small emergency of $400 in cash – and that was long before the pandemic started. If the last has taught us anything, it’s that your entire financial life can change overnight. When that happens, your emergency fund is literally your financial lifeline.
A good place to keep your emergency fund is in a high-yield savings account. A savings account provides easy access to that money. It’s also recommended that you keep some of this in cash – say, $500 or $1,000 – in case the power grid (and therefore the ATMs) goes down in an emergency.
The only downside to this approach is that savings accounts currently don’t pay much interest. On the other hand, if you keep any part of your emergency fund at home, no interest will be paid and you risk losing it or being stolen. However, for financial stability, it is non-negotiable to have an emergency fund of one form or another. We encourage you to check CIT for your online savings needs. When and where to invest 50 thousand dollars? Let’s see below
| Benefits | cons |
| everyone must have | Don’t pay a good amount of interest |
| It is a guarantee of safety | May cause it to be lost or stolen if money is kept |
| It is a solid foundation for other investments. | |
| It can be a good way to guarantee a peaceful future. |
- pay off debts
By 2018, the average American had sky-high debts, according to an Experian survey. If you have debt—especially credit card debt or other high-interest debt—it makes sense to pay it off before you deposit any money into the stock investment, but this will allow you to keep more money in your wallet for the future.
As such, it’s a relatively safe investment: if you use a debt settlement calculator, you’ll know exactly how much you’re earning to pay off your debts today.
For many people, debt settlement offers more mental health benefits than financial ones. There is something very liberating about knowing that your future income is not legally owed to anyone. If you have financial problems in the future, skating will be easier because you will have fewer bills.
| Benefits of Paying Off Debts | Cons of Paying Off Debts |
| Allows monthly cash flow | can run out of money |
| Clear your name with creditors | It is not recoverable money |
| Increases your credit score | |
| Provides greater peace of mind |
- Pay off your retirement contributions
Americans don’t save enough for retirement. In 2019, a Northwestern Mutual survey found that 22% of Americans saved less than $5,000 for retirement, while 15% had no retirement savings. However, if you don’t plan on getting into the limelight right from the start, chances are you will someday be forced into retirement – compulsorily or voluntarily – and you’ll need the money to support yourself. When and where to invest 50 thousand dollars? Let’s see below
Before, you could make up the following contribution amounts to different types of joint retirement accounts:
- Roth IRA and Traditional IRA:$6,000 ($7,000 if you are 50 or older)
- SEP IRA:25% of your business compensation or $57,000 (whichever is less)
- Solo 401(k):100% of your business compensation or $19,500 (whichever is less)
How risky or safe this is depends on the types of investments you choose for your account. For example, you can invest in CDs for an ultra-safe (but low-income) investment, or you can go all-in on the race track for a super risky (but potentially profitable) reward in the stock market.
There are many ways to open your retirement account. If you have a work account like the 401(k), you’ll likely use your paychecks to fund it, but you can deposit your $50,000 into an IRA or a self-employed retirement account if you’re a business owner or merchant.
| Benefits of Investing in Retirement | cons |
| Creates security for retirement | Access to money will only be granted at age 59 and a half. |
| It is a good opportunity to take advantage of capitalization of interest | |
| Reduces tax collection | |
- Open a taxable savings account
A taxable brokerage account works like an IRA, except you don’t get any additional tax savings. On the other hand, you can withdraw this money at any time. Just like an IRA, you can invest your $50,000 in money market accounts, stocks, bonds, index funds, mutual funds, ETFs, etc. When and where to invest 50 thousand dollars? Let’s see below
In other words, a taxable brokerage account offers another way to market in addition to your retirement accounts. If your emergency fund is already in place, you’ve depleted your pension contributions, and you still have extra cash left over, a taxable brokerage account can help you grow your investment.
| Taxable Savings Account Benefits | cons |
| Has the opportunity for extra investment in the market | Does not have tax advantages |
| Money can be withdrawn at any time. | |
| Has a higher return than a regular savings account |
- Investment in real estate
Americans have always loved real estate. Maybe it’s because it’s something tangible to touch and feel, as opposed to owning a stock in a company through stocks or bonds. Or maybe it’s because it’s one of the quickest ways to get wealth. In any case, a Gallup poll found that 35% of Americans think housing is the best long-term investment compared to other long-term options like savings accounts and stocks.
Real estate is also a very broad asset class. $50,000 may not be able to buy an entire property unless you live in a place with a very low cost of living, but you can use it as a down payment on your own rent. This is one of the riskiest and most time-consuming ways to invest in real estate.
You can also invest in real estate indirectly through REITs (real estate mutual funds), which operate similarly to index funds. With REITs, you still have the potential for big rewards, but you don’t have to worry about fixing (or paying a property manager) a broken bathroom in the middle of the night.
| Benefits of Investing in Real Estate | cons |
| High potential for returns | Potential for losses |
| Investment is simple | DIYers take time |
| Excellent way to diversify investments | It’s complicated in some situations |
your investment
After doing the basics, like replenishing your emergency fund and paying off debt, it’s not so easy to invest a sizable $50,000. For example, if you want to save money in a retirement account or open a taxable brokerage account, you need to know what kind of investments to put there and how and when to adjust them over time.
This is the tricky part for many people. Deciding in advance how you will or will not handle this is a great way to plan your strategy.
- solo investor
If you want to familiarize yourself with investment strategies and do all the administration yourself, opening a brokerage account may be the best route for investors of all skill levels. That’s because you save a lot of money on administration fees, which can be a big hurdle to your earnings. But on the other hand, you can also lose a lot if you make reckless or uninformed decisions.
- investor robot
They are a good choice for people who cannot or do not want to work with a live human being and who are also not interested in a totally manual approach. Robot-investors generally work in a similar way.
They guide you through a questionnaire to discover your financial goals, then select and manage your investments using algorithms. This is generally much cheaper than hiring an investment professional to do it for you, and it also eliminates complicated (and expensive) emotions from the equation. When and where to invest 50 thousand dollars? Let’s see below
- financial consultancy
Financial advisors can play many different roles in your financial life. If you really don’t care how your investments are managed, hiring a financial advisor might be your best bet. They are available to you throughout the entire process to manage your investments and answer your questions – this is obviously the most expensive option.
If you’re in the enviable position of figuring out what to do with $50,000, your options are a few. The truth is, it doesn’t have to be that black and white. You don’t need to choose one option over the other. You can pick parts from this list: use a little to replenish your emergency fund here, buy some index funds there in your IRA, and so on.
Ultimately, you need to decide which of these options is best to use with your extra cash, based on your short-term and long-term goals.
