The right way to invest 50,000 dollars today
If you have 50,000 dollars to invest then you have many more options open to you than most beginners. We’re going to discuss the best place to invest 50,000 dollars as well as strategies you should consider when investing this amount of money.
- Invest your $50,000 sooner rather than later
- How should you invest 50,000 dollars?
- What to consider before you invest your $50,000
- Passive vs. Active investing
- How to invest 50,000 dollars
- The best places to invest 50,000 dollars in a diversified portfolio
- Why P2P lending may be the best way to invest 50,000 dollars short term
- Where to invest in fully-backed loans for 7% APR
Invest your $50,000 sooner rather than later
Investing $50,000 can seem daunting at first, but it’s crucial that you do it. If you just leave it in a savings account and don’t touch it, it will slowly lose value over time. Inflation rates for the US dollar hover around 2% and with savings account interest rates around 0.05%, your $50,000 will not be worth as much in the future.
How much will that $50,000 be worth in 10 years? Based on the 2% inflation rate above, $50,000 will lose about $9,000 in value in 10 years, and $16,000 in value in 20 years. This is why you must make the money ‘work for you’ and not let it idle.
Fortunately, today there are countless ways to invest your $50,000 dollars — some that you might not have thought of too.
How should you invest 50,000 dollars?
While it’s great that you’re thinking about investing, it’s important to consider one thing before investing that 50,000 dollars and that is if you have any debt.
If the answer is yes, then perhaps investing first might not be a good idea — crunch the numbers. Credit card compounding interest rates, for instance, will hurt you in the long run and possibly negate the earnings in your investment strategy. If you have multiple credit cards, consider taking out a consolidation loan to pay them off all at once.
What to consider before you invest your $50,000
#1 What is your investment goal?
There are plenty of $50,000 investment opportunities out there. But when investing any amount of money, it’s important to make a realistic investment goal. Think about what you need the money for: College? Buying a home? Retirement? Setting a goal before investing allows you to choose a specific investment vehicle that best fits your needs.
For example, if you want more money to purchase a house in 3 years from now, investing your $50,000 in CD’s or bonds might not be the best idea, as they are long term holds. The best way to invest $50,000 short term would be a peer-to-peer lending platform. Platforms like MyConstant allow investors to lend their money for terms from 30 to 180 days at rates up to 7% APR.
Or — if you have a higher appetite for risk — play the stock market.
#2 What is your time frame?
Whatever your personal investment goal may be, it’s important to consider the time frame from the beginning, as this will impact the type of investments you should consider to help achieve your goals. It also makes sense to revisit your goals with a financial planner to account for any changes to your personal circumstances.
#3 What is your investment style?
People have varying appetites for risk and reward. And when it comes to the best place to invest your $50,000, there are so many approaches you can take. You should try to figure out your investment strategy type that works best for you.
If you’re a conservative investor you’d want to consider fixed income investments: Money market funds, loan funds, bonds etc. Conservative funds are generally as good as income investments, with many paying interest distributions or reinvesting your capital.
If you think of yourself as more of a moderate investor, you’d want to consider managed funds with large-cap, blue chip securities (big companies with excellent reputations) or a value investment style. Large-cap, blue chip stocks can attract income investors since they are mature businesses with committed dividend payouts and steady dividends.
Lastly, if you’re an aggressive investor with a high appetite for risk, you’re probably drawn to playing the stock market or ‘aggressive growth funds’. These are mutual funds that seek capital gains by investing in shares of a company — typically a young company that shows promising growth. Remember though, while high risk can equal high reward, there’s also a possibility of a great amount of money lost.
Passive vs. Active investing
When you’re investing your $50,000, ask yourself: How involved do I want to be during the investment period?
Most people who want to invest, do it passively, putting their money somewhere and withdrawing later when it has grown in value. Whereas active investors take a more ‘hands on approach.’
The goal of active investing is to beat the average stock market returns and to take advantage of short term price fluctuations. This takes a level of expertise to move into or out of a particular stock.
If you’re a active investor who wants to make the high returns of active investing, you may want to hire a portfolio manager. A portfolio manager will usually have a team of analysts who look at a multitude of factors and data regarding an investment (usually stocks) and then make a decision.
Active investing requires a level of confidence in the person managing the portfolio. Successful investment management requires being right, more times than being wrong.
If you’re a passive investor, you’re going in for the long haul. You’ll try to limit the amount of buying and selling in your portfolio and stick to the ‘buy-and-hold’ mentality. That means, resisting the temptation to react to every ebb and flow of the stock market.
A good example of a passive investment is buying an index fund that follows one index (S&P 500 or the Dow Jones Industrial Average, Nasdaq Composite).
When you own small pieces of thousands of stocks, you earn your returns simply by participating in the upward movement of corporate profits and the stock market. It’s important to ignore any short-term setbacks and keep the eye on the prize.
How to invest 50,000 dollars
Figuring out where to invest 50,000 dollars can be a tricky question since there are so many potential paths you can take. Investing 50,000 dollars is different from investing $1,000 or even $10,000 because the larger sum gives you flexibility.
At this amount of money, you open the door to bigger investments and the potential for a more diversified portfolio. Remember, the more types of investments you have, the lower the overall risk since your capital is spread out across multiple avenues.
A good example would be using the safe nature of bonds to hedge the potential volatility of stocks or crypto. We’ll cover a few popular choices below so you can see which ones are the best fit for your investment style.
The best places to invest 50,000 dollars in a diversified portfolio
There are a lot of places where you can invest a large sum like 50,000 dollars, but you should be wary of putting all your money in one place. A better strategy is to diversify your investments to lessen risk.
Stocks are a pretty popular investment because the return potential is high. That being said, there’s a relatively high level of risk involved and you have to do your homework to pick the right companies.
Putting some of your money into stocks can raise your ROI significantly but we wouldn’t recommend investing a large portion of your capital into single stocks. Better choices include ETFs and market-tracking funds that can help mitigate your gains over a large range of stocks.
Bonds are often used in conjunction with stocks to hedge for volatility. By serving as the anchor of a portfolio, they can keep risk at a manageable level. If you’re looking for high returns and fast turnaround when investing 50,000 dollars then never rely solely on bonds. They’re more of a parachute than a helicopter.
Many investors have been reluctant to get into crypto since the Bitcoin burst of 2018, but since then, a Bitcoin investment has yielded great overall returns. In any case, you still shouldn’t put all your eggs in one basket — especially if you’re using less predictable forms of cryptocurrency.
While real estate investments like rental properties can make for a great passive investment, they require a lot of capital and can take years to pay off. Most landlords are happy to make their money back in 10 years.
Still, with 50,000 dollars to invest you have more than enough for the down payment on a mortgage (usually around $10,000 for a $200,000 home). You’d even have a little leftover for any maintenance you might need.
Starting a business
While there’s nothing inherently wrong with the entrepreneurial mindset, just know that it carries a high risk that you’ll lose your capital. After all, according to accounting software company FreshBooks, 1 in every 5 businesses will fail in their first year.
However, according to the U.S. Small Business Administration, most microbusinesses cost around $3,000 to start, and home-based franchises cost $2,000 to $5,000. With $50,000 in your pocket, you can easily afford to play around with some of these ideas without destroying your finances.
Why P2P lending may be the best way to invest 50,000 dollars short term
Peer-to-peer lending (P2P lending) is one of the best places you can invest $50,000 – a form of investment where you lend money directly to a borrower then receive interest on the loan.
Since 2008, P2P has quietly grown worldwide to one of the top forms of alternative investment. Investors can expect average returns of 5% on the low end and up to 10%+ on the high. The best part is that unlike bonds and stocks, P2P loans are not tied to the market, and rates are often locked in for the term.
While there are many platforms to choose from today, many P2P lending companies force you to invest in unsecured loans. That means if a borrower doesn’t pay back, then you’re simply out of money. If you have that to invest it might be better.
But there are a growing number of platforms today that solve that problem…
Where to invest in fully-backed loans for 7% APR
When you’re thinking where to invest your $50,000, you want to put most of it somewhere where you can be sure of returns. At MyConstant, we give back some of the steadiest returns in the entire P2P industry.
A fixed-term investment on MyConstant will grow your capital by as much as 7% on a short, six-month term. And you won’t have to worry about borrowers defaulting on their loans since they must put up 150% of the capital beforehand in crypto.
Don’t like being locked in? Our Deposit investment account lets you make feeless anytime withdrawals with 50x better interest than a savings account you might get at your bank.
Interested? Come check us out and see how we can help you do more with your money. Sign-ups are free.
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