It’s a good indicator when considering how to invest $200,000. After all, having this much money to invest indicates that you are moving quickly toward accumulating long-term wealth. This is especially true if you can invest $200,000 and leave it alone for a decade, giving compound interest ample time and room to work. But how much could you ultimately have if you made sensible investments today with $200,000?
That depends on your financial decisions and the average rate of return. You would have $641,427.09 after 20 years of growth if you could invest $200,000 and leave it to earn a 6% return. Conversely, if you can make a 10% return, you’ll conclude the next 20 years with $1,345,499.99.
How to Invest $200,000 Starting Today
Still, managing hundreds of thousands of dollars to invest is the true challenge. As a financial advisor, I recommend splitting up a $200,000 investment into numerous different pots. By doing so, you can diversify your $200,000 investment and boost your exposure to several financial sectors with growth potential. Here are some fundamental standards and allocations to consider, even if your investment allocation can — and should — vary depending on your age, investing goals, and what you want to accomplish.
1. Invest in the Stock Market
Suggested Allocation: 40% to 50%
Risk Level: Varies
Investing Goal: Long-term growth
Most of us already save for retirement through tax-advantaged retirement plans, such as a 401(k), SEP IRA, or Solo 401(k), which invest in the stock market. However, you can also invest in stocks, bonds, index funds, and other securities through a brokerage account.
Although brokerage accounts don’t offer any upfront tax advantages, they offer the chance to invest in a wide range of securities, and the account you open is more liquid than any tax-advantaged retirement plan. Unlike most retirement accounts, you can sell securities and access your money without penalty whenever you want, although you’ll need to account for capital gains taxes.
How to Get Started: M1 Finance is a popular app that makes investing in stocks, bonds, and ETFs easy. You can set up automatic trades and spread your investment over a large number of fractional shares. It also offers curated “pies” of investments for specific goals. The best part? You can invest without any commissions or platform fees.
Who It’s Best For: Investing in stocks, bonds, ETFs, and other securities can work well for any investor, but especially for those who can leave their money to grow over time.
2. Invest in Real Estate
Suggested Allocation: 10% to 15%
Risk Level: Varies
Investing Goal: Growth and income
Investing in real estate can be a smart move, especially if you have a long-term investment horizon. By purchasing investment properties, you can have your tenants pay off your mortgage over time, which can create a passive stream of income. According to historical data, residential properties have provided an average return of 10.6% per year, making them a potentially lucrative investment option.
If you’re not interested in becoming a landlord, you can also invest in real estate platforms or Real Estate Investment Trusts (REITs). These investment vehicles can provide exposure to real estate markets without the headaches of being a landlord.
One platform that makes it easy to invest in real estate is Fundrise, which allows you to invest in a starter portfolio with as little as $500. Fundrise automatically spreads your investment across various commercial and residential properties, which are carefully selected by platform managers.
While returns on real estate investments can vary over time, Fundrise has delivered returns of 22.99% in 2021 and 1.5% in 2022. For more information on Fundrise,
Overall, Fundrise is a great option for investors who want to gain exposure to the real estate market without the responsibilities of being a landlord.
3. Invest in Cryptocurrency
Suggested Allocation: 5%
Risk Level: High
Investing Goal: Long-term growth
Despite initial skepticism about their mainstream acceptance, cryptocurrencies like Bitcoin are being used for payments at increasing numbers of businesses, and Bitcoin ATMs are popping up all over the world. Some experts in the industry have even predicted that a single Bitcoin will be worth $1,000,000 or more within the next few years.
Investing in Bitcoin and other cryptocurrencies, such as Ethereum or LiteCoin, is relatively easy thanks to cryptocurrency apps. These apps safely store your crypto until you are ready to trade or sell.
How to Get Started: Coinbase is a top platform for buying cryptocurrencies and for earning interest on your crypto deposits through staking. Interest on crypto deposits accrues daily and is paid out monthly, and some types of crypto offer a return of up to 5.75%.
Who It’s Best For: Cryptocurrency is an investment option for anyone who wants to diversify outside of traditional investments. However, be prepared for plenty of ups and downs, as cryptocurrency is incredibly volatile.
4. Purchase a Business
Recommended Investment: Varies
Risk Level: High
Investment Objective: Income
Purchasing a business may not be for everyone, and it is true that this investment strategy requires more involvement than others. Nevertheless, investing in a business provides the opportunity to create something that can generate long-term income for years or even decades to come.
You can develop your business enough so that other people can run it on your behalf. At that point, you could handle the big-picture planning and enjoy a passive income stream for life.
How to Get Started: While you can buy a franchise or a local business in your area, I recommend checking out Flippa to buy an online business. This website allows you to choose fully-developed websites, domain names, and other online businesses. You can then use these sites to create a passive income stream through ads, affiliate marketing, product sales, and more.
Even better, you can start your own online business with as little as $1,000 in some cases. This option requires thorough research to find an online business that you can work with and monetize over time.
Think you can’t do it? I honestly believe anyone can find a way to generate at least some income through web traffic and various online marketing techniques. My guide on how to make money blogging covers all of the different monetization strategies that can be implemented from home and on your own time.
Who It’s Best For: Buying an online business is a sound choice for anyone willing to invest time and effort to get started. After that, online businesses are great for generating passive income or for those who want to create something they can eventually sell for a profit.
5. Invest in Gold
Suggested Allocation: 10% to 15%
Risk Level: Medium
Investing Goal: Diversification
Many experts believe that investing in gold and other precious metals is crucial for diversification, as these options provide a hedge against inflation. During economic downturns, investors often turn to gold, which raises its price and increases the value of your investment.
Getting started with investing in gold is easy with plenty of online platforms that allow you to purchase physical gold. Some vendors even allow you to bundle your gold purchases within an IRA. For example, Orion Metal Exchange lets you invest in gold within an IRA. Other vendors like Oxford Gold Group, Lear Capital, and Goldco also allow customers to buy physical gold.
Investing in gold can make sense for anyone who is worried about market turmoil. Investors who want to purchase valuable commodities that have stood the test of time should also consider gold.
However, with the recent concerns about banks becoming insolvent, investing in gold carries more risk to many. A recent report from CBS News shares how to invest in gold in today’s climate.
6. Invest in a Solo 401(k)
Suggested % Allocation: Varies
Risk Level: Varies
Investing Goal: Long-term growth
If you are self-employed or own a business, a Solo 401(k) can help you save a significant amount of your income for retirement. This account type allows investors to save more for retirement than with a traditional 401(k), and contributions are made on a tax-advantaged basis. This can help lower your tax bill in the year you contribute.
With a Solo 401(k), small business owners and self-employed individuals can defer up to 100% of their compensation, up to a maximum of $22,500 in 2023 (or $30,000 if you are 50 or older).
Additionally, you can contribute up to 25% of your compensation as your own employer, with a maximum total contribution cap of $66,000 in 2023 for most people (not including catch-up contributions).
How to Get Started: You can open a Solo 401(k) with top online brokerage firms such as Fidelity and Charles Schwab.
Who It’s Best For: A Solo 401(k) is a good investment option for anyone who qualifies based on self-employment income.
Determining Your Investment Style
When deciding how to invest your $200,000, it’s essential to consider your goals. Do you want to invest long-term, or are you looking for a quick return? Additionally, think about when you will need access to your initial investment. Will you let it ride for 10 or 20 years, or do you need access to your money soon?
Investing in a Solo 401(k) or brokerage account could be a wise choice if you want to invest long-term. However, real estate, cryptocurrency, or even buying your business could be viable options.
If you need access to your money within the next few years, consider opening a high-yield savings account instead. Although you won’t get a great return on your investment, you can easily access your cash without the risk of losing it. Check out this list of the best high-yield savings accounts to find the right one.
The Bottom Line on Investing $200k
Having $200,000 to invest puts you on the path to financial success, but you still need to get there. Investing your $200,000 strategically can help you grow your nest egg over the next few years or decades. Leaving your money in a bank account is not ideal, as it’s likely to fail to keep up with inflation and grow. To find an investment strategy tailored to your needs, consider your age, life goals, and risk tolerance. If you decide to invest only part of your money, you might explore the best ways to invest $100,000 for ideas.