How to Invest $20,000 Right Now - 12 Smart Ideas

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Whether it is a stroke of luck or you've saved up for a while, $20k is an amount that requires you to put in some extra thought. That's why you must invest it in much smarter ways than you would with just a few hundred dollars.

You may be making a big mistake if you're not putting that money to good use at the right time. The more cash you have, the better options to avail. However, $20k is a large sum, and investing it can seem risky.

Luckily, there are several clever ways to increase that amount instead of letting it sit in your bank account. Since this is not a simple economic decision, it's necessary to learn how to invest $20k correctly.

Financial markets are forever evolving; that's why our ideas are future-proof. Read on to find 12 different ways you can get the most out of your $20k.

Start trading or investing in stocks right now with Interactive Brokers!
Your capital is at risk.

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Get Out of Debt

The first thing you can do with $20k is get out of debt. If you have high debts, especially on a credit card, it's most important to pay them all back with any available funds. Not only is that an ethical practice, but it also helps improve your credit score by repaying loans on time.

Plus, the longer you take to pay back a loan, the more interest and potential penalties you'll have to pay!

Index ETFs

Not only do ETFs (Exchange-Traded Funds) diversify your portfolio, they also give you access to a diverse range of securities. Plus, trading flexibility is another positive aspect of EFTs, as it allows you to make timely investment decisions and diversify.

Warren Buffet, one of the most successful investors of all time, recommends this method as the best way for investors to grow their money. According to Buffet, beginners can outperform professionals by periodically investing in indices that grow nearly 10 percent every year.

Invest with a Robo-Advisor

If you're in possession of a large sum such as $20k and wish to invest, the first step is to build a reliable and credible investment portfolio. Robo-advisors are services that build and manage an investment portfolio for you.

Aside from being low-cost and having no balance requirements, robo-advisors follow optimized indexed strategies that are most suitable for your investment.

Plus, if you're a beginner in this field and don't know where to put your money, robo-advisors will do what their name entails; they'll give you professional financial advice!

Invest with a Broker

Traditional brokers will charge a hefty fee to make trades on your behalf. On the other hand, online brokers do not only invest your money quickly and efficiently, but they also educate you about the stock market.

There are many sought-after broker platforms you can find online, and if you keep reading, you'll find our top picks and why you should invest with them.

Do a 401(k) Swap

One of the best ways to utilize $20k is to swap it into your 401k. For example, if you're earning $40k annually and putting 5% into your 401k, that will result in $2,000 per year.

When you have $20k on hand, you can stash it in a liquid savings account and then increase your 401k contribution to 50%. That way, your taxable income will reduce by 50%. Plus, you'll have $20k in your 401k!

As a result, you'll have to pay fewer taxes and save even more money. In case you don't have a 401k yet, we'd recommend getting a robo-advisor to manage one for you.

Invest in Real Estate

Undoubtedly, real estate is one of the most beneficial industries to invest in. The best advantage for real estate investors is the tax breaks and deductions that help you save even more money!

Now, 20k may not be enough to buy a property in this day and age, but you can also opt for a real estate investment trust (REIT) if you're not ready to own and manage properties. These companies own, operate, or finance income-producing properties on your behalf. Again, you can buy or sell such REITs on major stock exchanges for higher dividends.

Build a Well-Rounded Portfolio

A well-rounded portfolio consists of different investment types, especially those with a high return. It's proof of the saying that you shouldn't put all your eggs in one basket. Not only does it increase credibility for you as an investor, but it also minimizes any chance of risk.

If you have enough information about the products you want to invest in, you'll know when their value increases. That way, you can make the most out of your investments and create a diverse and well-rounded portfolio.

Put the Money in a Savings Account

Of course, the simplest thing to do when you have $20k is to put it into a high-yield savings account. You'll even find some savings accounts that offer an annual 1% yield, which is surprisingly great for a savings account.

However, we would only recommend this method if you'll need access to your money soon. Otherwise, the stock market is a much better place to invest your money if you want a higher return than simply 1% annually.

Try Out Peer-to-Peer Lending

Lastly, you could also try out peer-to-peer lending with your $20k. Peer-to-peer lending is simply a professional way of lending money to anyone who needs it. However, you must ensure the person you lend it to is reliable and capable of repaying the loan on time.

The upside is that your returns will be much higher than investing in the stock market.

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Copy Trading

Copy trading is a great way for beginners to have the same profits as successful investors. That's because you'll be copying their trading strategies and implementing them into your own investments for better returns.

If you have a large sum like $20k and no experience with trading, copy trading might be the best option for you.

The process is simple; firstly, you must create an account on a reliable trading platform. Then, you can determine your investment amount and simply let the platform copy trade on your behalf.

However, you must be precautious while choosing which trader to copy and finding the right trading platform to avoid getting scammed.

Options Trading

An option is a contract that's linked to a stock or another security, which you can buy at a specific time and price. These contracts can last anywhere between a day and a couple of years. The trading of such contracts is known as options trading.

The working of options trading is somewhat complicated, but the end result is worth it. However, it's worth noting that options trading is riskier than buying individual stocks.

Cryptocurrencies

Cryptocurrency is definitely one of the most popular investment products right now. Admittedly, there is a high risk with investing in cryptocurrency, but there's also a high return. Plus, cryptocurrency promises a fairer, more transparent financial system.

Note that cryptocurrencies must be invested with caution since their risk factor is almost equal to the high profits.

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Handle Asset Allocation Properly

Ultimately, deciding your asset allocation is based on your personal preference. Asset allocation most commonly depends on equity, debt, and cash. However, you must also take into consideration personal aspects such as your age, savings, financial goals, and risk tolerance.

Of course, the advice for asset allocation would vary greatly according to your age. That's why you can make the decision based on your risk assessment and investment time horizon. For a shorter horizon time, we'd recommend a debt funds-heavy portfolio.

On the other hand, you can take your time to invest in equity if you have a longer horizon time.

Diversify your Investment

Diversifying your investment portfolio is a great way to reduce risks. The more product types you invest in, the more chances you have of success. Even if one investment fails, you still have the rest of your money invested elsewhere.

Plus, a diverse investment portfolio increases your credibility as an investor.

Identify your Risk Tolerance Capacity

As we mentioned, your asset allocation depends on your risk tolerance, which is why it's important to identify it. You must take into consideration your age, income, dependents, and more while assessing your risk tolerance.

Taking more of a risk than warranted can be disastrous in the world of investing.

Maintain Adequate Liquidity

We would recommend keeping your expenses for a few months in liquid and other accessible asset classes. It's also not wise to invest in highly volatile products. In case of an emergency, you won't be able to access your money if the product is undergoing a down cycle.

Invest in Yourself

Last but definitely not least, you must always remember to invest in yourself. Of course, you can invest time and other resources in yourself, but it's also important to invest your hard-earned money in yourself.

Whether that be a gym membership or all the right equipment for a new hobby, there are many ways you can invest money into your general wellbeing.

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Define Your Goals

The starting point to any kind of financial success will always be a compelling goal. That's why you must define your investment goals before creating your success method. The most common financial goals are a rich pension, financial independence, living on interest, etc.

To retire with millions in your account, you must invest at least 15% in a tax-advantaged account. However, if financial independence is your priority, you can create a portfolio of index funds or ETFs.

Determine the Amount for Investment

Naturally, the next step is to determine how much money you wish to have at the end of this investment. Truthfully, there's no exact way of knowing the increase rate you can expect from a certain market.

At the same time, there is no restricted amount of money you must invest each month for guaranteed success. You should only invest according to your current financial situation and lifestyle.

However, most experts recommend investing 10-15% of your income, and if you're financially comfortable, 30% would be ideal. But since you already have 20k cash at hand, you already have a headstart.

Open an Investment Account

After you've defined your investment goals and determined the monthly amount, all there's left to do is invest the money. You must be wondering, "Where do I invest all this money?" Well, investment accounts with reliable U.S. brokers serve sufficient for most purposes.

Not only do they charge low commissions, but they also offer a wide variety of options, including stocks, options, EFTs, and more. Here we've compiled a comparison of the most reliable U.S. brokers in 2023, so you can pick the one that serves you best.

Best For Minimum
Investment
Amount
Investment
Assets
IRA
Account
Robo
Advisory

eToro

Copy Trading, Free Stocks Investing

$0

US Stocks, ETFs, Crypto currencies, Forex

No

No

Open an account

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

Interactive Brokers

Robo Advisor, IRA account

$0

Stocks, Options, Bonds, Crypto currencies, Forex

Yes

Yes

Study review

eOptions

Options Trading

$500

Stocks, Options

Yes

Open an account

Your capital is at risk.
Via eOption's secure website.

Coinbase

Crypto currencies

$10

Crypto currencies

No

No

Open an account

Your capital is at risk.

eToro

Open an account
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

eToro is a unique proprietary that's ideal for cryptocurrency traders in the U.S. This platform is known for how easy it is for customers to implement copy trading. On eToro, you'll find traders who follow risk-control rules and want to be copied.

As a retail account holder, you'll be able to mimic the trades and strategies of eToro's most successful clients. eToro gives access to Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and XRP for U.S. customers on its user-friendly website and app.

👍 Pros

15 cryptocurrencies that can be traded 24/7

Great community for cryptocurrency traders

Easy-to-use website and mobile app

👎 Cons

Relatively high minimums are required for most copy trading

Interactive Brokers

Interactive Brokers (IBKR) is known for its broad market access, low costs, and superior trade execution. This is the ideal platform for anyone that wants to trade options, stocks, bonds, futures, forex, and funds on a wide range of markets from a single integrated account.

In fact, IBKR offers 135 different markets to choose from! Its wide range of assets is the reason IBKR is one of the top brokers for professional and active traders. Plus, it accepts clients from over 220 countries and territories.

👍 Pros

Low margin interest rates

Superior order execution

Excellent trading tools

👎 Cons

No backtesting of custom trading algorithms or automated trading

eOptions

Open an account
Your capital is at risk.
Via eOption's secure website.

eOptions is a powerful, commission-free trading platform that lets you trade options and equities on its easy-to-use, customizable charts. In terms of low-cost trading, eOptions is one of the best brokers on our list.

Its options-oriented tools, such as OptionsPlay, allow you to stream real-time data and news and view customizable charts. Plus, the $0.10 options contract fee is another attractive feature that'll entice you to work with eOptions.

👍 Pros

Auto trading from newsletter trade alerts

Great value for frequent options traders

Easy to use browser-based trading platform

👎 Cons

Not much education for beginners

Coinbase

Open an account
Your capital is at risk.

Coinbase is one of the most popular cryptocurrency exchanges, and its 72 million users are proof of that. They offer over 100 tradeable cryptocurrencies, which include Bitcoin, Dogecoin, and Ethereum.

As a beginner, you can use the Coinbase platform to buy and sell orders. After that, you can explore more advanced options such as different order types through Coinbase Pro. Simply put, Coinbase provides enough education for newbies and enough versatility for veterans.

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👍 Pros

Easy to use for cryptocurrency beginners

Lower pricing available with Coinbase Pro

Support for a large number of cryptocurrencies

👎 Cons

No access to trade many altcoins

Summary

If you're wondering what to do with 20k, all of these 12 ideas are smart and beneficial. However, you need to invest this amount based on your current financial situation and lifestyle. You must ensure a strong financial backup before investing this significant amount in the right place.

To summarize our guide, there is a lot more you can do with the $20k than just spending it on a big purchase. Investing your money is the best way to secure a hassle-free future and build up a strong financial background.

FAQ

How can I minimize investment risks?

Other than knowing your investment goals, you should also create a diverse portfolio of investments. When you're placing your money in different places, there are more chances of success.

Other than that, we'd recommend keeping a close eye on your investments and reviewing their progress regularly.

What causes an increase in investment?

Your investment will only crease if the industry has a great growth potential, which depends on the risk-return tradeoff and power of compounding. Risk-return tradeoff refers to a balance between the return and risk in a certain market.

On the other hand, compounding occurs when an investor reinvests their earnings and dividends from a previous investment.

What is the best industry to invest in?

Artificial Intelligence stays at the top of the list when we talk about the best industries to invest in. The potential of this technology to advance rapidly in the future is what makes it such a beneficial industry to place your money in.

Other than that, virtual reality, renewable energy, and cyber security are some other examples of valuable investments.

Why is investing your money so important?

Investing your money allows it to outpace inflation and increase in value. As long as you choose the industries with the most growth potential, you can count on your wealth to build over time without having to do any work.

Team that worked on the article

Oleg Tkachenko
Author and expert at Traders Union

Oleg Tkachenko is an economist-analyst and a risk manager with a practical experience of working in financial institutions for over seven years. Oleg specializes in the analysis of commodities, Forex, stock markets and non-standard investment markets (cryptocurrency, hypes, peer-to-peer lending). He holds a Master’s Degree from the Ukrainian Academy of Banking of the National Bank of Ukraine, Kharkiv Banking Institute. Oleg became an author for Traders Union in 2018; in 2020 he joined the TU’s team of financial experts.

At Traders Union, Oleg is involved in expanded reviews of brokerage companies, and in monitoring the relevancy of the information provided in them. He analyzes trading strategies and indicators, and prepares educational articles on the topic of finance. In addition, Oleg carries out expert research in the Forex and stock markets, and also binary options and cryptocurrency markets. In particular, he checks brokerage companies, studies their performance and growth, tests new services offered by brokers, software and the level of customer support.

Oleg’s motto: Information is a force that opens boundless opportunities, but requires relevancy!

Olga Shendetskaya
Author and editor at Traders Union

Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.

Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.

Olga’s motto: Do well and you’ll be well!

Mirjan Hipolito
Cryptocurrency and stock expert

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.