• Michael DiBartolomeo

How to Invest 200k

When people start wondering how to invest 200K, that is a good sign. It means that they have been saving money for a while and want to grow their personal wealth for the long term. If someone can invest that much money and leave it alone for a few decades, they are going to compound plenty of interest and let it do its job.


How much money can a person end up with if they invest $200,000 right now?


Though this depends on how the money is invested and the average return, it is possible to see a lot of money. For example, if a person invests that amount and it sees a 6 percent return on 20 years, that is $641,427 in growth.


The real problem here is to figure out how to invest so much personal money. It's best to work with a personal financial advisor to help with this. That way, the $200,000 is spread out over various investments. Ultimately, a person diversifies their investment to increase exposure within different financial areas to see the personal growth potential.


While a personal investment allocation should vary based on the age, investment goals, and what the person wants to achieve, here are a few guidelines and allocations to focus on:


Places to invest $200,000

The Stock Market


Most personal financial advisors recommend that a person invests between 40 and 50 percent of their $200,000 in stocks and bonds. The risk level varies here, but the personal advisor can help choose low-risk or mid-risk options if that is the personal goal of the investor. Typically, the person wants to achieve long-term growth with this option.


The stock market is where many people already save for retirement. Typically, they use tax-advantaged retirement plans, such as a 401K or IRA. However, it's also possible to invest in bonds, stocks, index funds, and other securities with the help of a broker.


While brokerages don't offer upfront tax advantages, there is the chance to invest in a variety of ETFs, stocks, and more. Plus, when a person opens a personal brokerage account, there is usually more liquid than with other tax-advantaged retirement plans.


Many retirement accounts charge a penalty if the money must be withdrawn before the retirement age. However, by investing in the stock market, it is possible to sell securities and access that money without a penalty whenever it is needed. Just remember that capital gains tax is due each year on the personal tax return with this option and remember the rule of 70.


Getting Started

It's always a good idea to work with a personal financial advisor. They can help find the right brokerage firm and figure out where to go with some of that money.


Who Should Invest in the Stock Market

Investing in ETFs, bonds, and stocks can be suitable for any investor. However, it's best for those who want to leave the money alone (not access it) and let it grow with time.


Pros:

  • Fair and excellent returns can be seen over time

  • Can diversify over many sectors within the economy

  • Great for the portfolio

Cons:

  • Some risk involved

  • Lose some/all of the personal investment


Invest in Real Estate


In most cases, a personal financial advisor is going to recommend that someone invest between 10 and 15 percent of their money into real estate. The risk level also varies with this option, but the right personal advisor can help people choose appropriate options. Typically, the goal here is to see some passive income with growth.


It is easy to invest in real estate, and there are various platforms available. Though a person may want rental properties, there are also REITs. Real Estate Investment Trusts are platforms to help the person get in on the upside of real estate investing, but there's no work as a landlord. With that, there are all of the benefits of the rental property without the hassle. On top of all that, the real estate market is always booming, which can open up cash flow and help invest $200,000 in different areas of the market.


* Investing in Real Estate Investment Trusts (REITs) involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.


Getting Started

Using a platform can make it easy to invest in the real estate genre without taking on all the risks. There's no mortgage to pay, and that person isn't searching for quality tenants. In fact, it's easy to invest in a starter portfolio, and not a lot of money is necessary. The investments are also spread through many residential and commercial properties that are chosen by the platform's managers.


If that doesn't seem exciting enough, it is possible to purchase a property and rent them. However, the person is putting in a lot of money at the start. Though investing 200K like this can be a good thing, it also means that the person has to wait longer to see a good return on the investment.


Returns can vary with time, as well. Therefore, one year may be amazing, while the next has more maintenance and repairs come off the top. The right investment strategy is necessary here. Don't invest in real estate without knowing what could go wrong with the property.


Who Should Invest with Real Estate

Almost anyone can use real estate to their advantage.


Pros:

  • Easy to do

  • Potential for great returns on investments

  • Diversified portfolio

  • Can do it hands-on or hands-off

Cons:

  • No liquid investments; takes months to access the cash at times

  • No guarantees for returns


Investing in Gold


Typically, investing in gold is similar to stocks. It's best to invest anywhere from 10 to 15 percent of that 200K into gold. There's a medium level of risk, which means it's similar to most of the other investments listed. Ultimately, the person's goal for such an investment should be diversification of their portfolio.


Many experts agree that investing in gold or other precious metals is essential. These options can often protect somewhat from inflation. Most investors choose gold in an economic downturn, so the price rises, and the person's initial investment increases in value.


Getting Started

It's easy to find various online platforms to help invest into gold. While some vendors focus solely on physical gold, such as in coin or bar form this may not be advisable. Physical or tangible gold can be problematic in buying and selling, and can also be lost or stolen. Rather gold as an asset class in the form of mutual funds or ETF’s may be a better only.


Who Should Invest in Gold?

Investing in gold is a great choice for people who are worried about the turmoil in today's markets. Investors should look to buy valuable commodities that can withstand cash problems and currency fails. Ultimately, gold has stood the test of time and is still around, so it's a worthy investment option.


*The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.


Pros:

  • Diversifies people's personal portfolio options

  • Gold tends to rise in price over the long-term

Cons:

  • Can be volatile for short-term needs

  • May not provide the profit hoped for

  • Physical gold is easily stolen or lost


Investing in a solo 401k

Solo 401K


When choosing to open a Solo 401K, the allocation amount varies. Most personal finance advisors claim that it can generate a lot of money with time. Ultimately, long-term growth is the goal here. However, the risk level also varies, though there's an average low for the world.


If a person already owns a business and doesn't want to sell it, it's easy to stash a large chunk of that income into a Solo 401K for retirement purposes. This can also work for self-employment income. With this account type, investors can save more for their retirement than is possible with a regular 401K. Contributions made are also part of the tax-advantaged option, so there are no costs and taxes paid if no money is removed from the fund. However, if money is taken out of the fund, this can lead to taxation.


With a Solo 401K, small business owners and those who are self-employees can defer 100 percent of their compensation for a maximum of $19,500, depending on the year. If the person is over 50 years old, this bumps up to $26,000.


Meanwhile, it's also possible to contribute 25 percent of a person's compensation for being their own employer. This has a maximum cap of $58,000 for contributions for most people. However, this doesn't count any catch-up contributions.


Though it's not possible to use it as capital for the business, it's a great way to see full appreciation by the time a person reaches retirement age. A personal financial advisor can help with this. Just note that it isn't possible to access the fund amount without seeing penalties. The advice from most personal finance advisors is to use this for money that is not needed for a very long time.


Getting Started

No one needs much free time to get going on a Solo 401K. It's easy to open one with an online brokerage firm. However, some people find that a little worrisome. Therefore, it's also possible to go to a regular broker to take care of this situation. Most personal financial advisors can also give advice on how to see the most profits with less capital. Ultimately, most people choose to work with Char