How to invest $50K

Investing $50,000 can feel both exhilarating and intimidating, especially for those new to the world of finance. Whether this amount represents years of savings, an inheritance, or another form of windfall, the desire to use it wisely is a common thread among investors. The maze of investment options can seem daunting, with every turn presenting a new decision to be made. Factors such as your time frame, risk tolerance, desired returns, and overall financial goals all play critical roles in shaping the path you choose. 

In this guide, we aim to simplify these complexities, presenting clear, actionable strategies to help you leverage your $50,000 effectively.

In this article, we’ll cover:

1. Paying off high-interest debt
2. Set aside money for savings
3. Contributing to a 401(k) 
4. Maxing out a Roth IRA
5. Investing with a brokerage account
6. Investing with a robo-advisor
7. Invest in your kid’s future
8. Invest in yourself

1. Start strong by paying off any debt

Best for: people with high-interest debt or who haven’t set up an emergency fund

While venturing into the realm of investing, addressing high-interest debt is paramount. It’s challenging to find investments yielding a 30% annual return, yet that might be the interest rate you’re combating on credit card debt. Prioritizing these debts not only alleviates financial strain but essentially yields an immediate, risk-free return on your money. 

Likewise, establishing an emergency fund ensures a safety net is in place, protecting you and your investment strategies from unforeseen financial demands.

Stash 100 tip: Don’t pay more than the minimum required for low-interest, fixed-rate loans. If your fixed rate loan is low enough, invest the extra dollars for a higher return.

If you have no interest debt and already have a comfortable emergency fund that could float you for three to six months, congratulations, this is a huge accomplishment. Consider some of the investment options below.

2. Set aside savings for short-term goals

Best for: Those planning to use the money within one to  three years

Short-term goals could range from funding a dream vacation to making a significant purchase without compromising your long-term investment strategy. Options such as high-yield savings accounts and money market accounts offer liquidity and slightly higher interest rates, making them ideal for short-term savings. Certificates of Deposit (CDs) and short-term bonds or bond funds also serve well for goals anticipated within a few years, offering secure, fixed-income opportunities.

Ideal vehicles for short-term savings include:

• High-yield savings accounts: A high yield savings account provides higher interest rates compared to traditional savings accounts, making them an ideal choice for storing funds that may need to be accessed on short notice.
• Money market accounts: A money market account offers the dual benefits of higher interest rates compared to savings accounts, along with the convenience of writing checks.
• Short-term CDs: Certificates of Deposit (CDs) are ideal for short-term goals, offering the opportunity to lock in your money for a period ranging from a few months to a few years. They provide secure, fixed-interest earnings, typically at rates higher than those of savings accounts.
• Short-term bonds or bond funds: Investing in bonds or bond mutual funds with short maturities is a relatively safe strategy for growing money to meet short-term needs with minimal risk.

3. Contribute to a 401(k) 

Best for: Those saving for retirement 

If your employer offers a matching contribution to a 401(k) plan, it’s akin to receiving free money (though this is really part of your benefits package from the company, so take advantage of your benefits). 

A 401(k) is a retirement savings plan sponsored by an employer, designed to help employees save for their future retirement. In 2024, the current yearly contribution limit is $23,000 a year or $30,500 if you’re 50 or older. The contributions are usually made pre-tax from your paycheck, and some employers may also offer a match on your contributions. Contributions to such plans not only bolster your retirement fund but can also reduce taxable income. 

Pros	Cons
Contributions are pre-tax, meaning they can lower your taxable income	Limited investment options chosen by employer
If employer matching is offered, this extra money grows your retirement savings further	Early withdrawal penalties and taxes may apply if accessed before retirement age
Automatic contributions taken out pre-tax can help build discipline and consistency	Required minimum distributions (RMDs) at age 72

4. Consider maxing out your Roth IRA

Best for: Those saving for retirement

Another retirement account option is an individual retirement account like a Roth IRA (individual retirement account). Investing in a Roth IRA means you’re setting up a tax-efficient retirement fund, a crucial consideration for any investor. 

This type of retirement account differs from a traditional 401(k) in that contributions are after-tax—money from your paycheck after income taxes have been deducted. This means that through a Roth IRA, your invested money would have tax-free growth and withdrawals in retirement. If your employer doesn’t offer a 401(k) plan or if you’re self-employed, consider opening up and contributing to a Roth IRA.

The current yearly contribution limit for 2024 is $7,000 a year or $8,000 if you’re 50 or older. Utilizing a portion of your $50k to max out your Roth IRA contribution can significantly impact your retirement readiness, all while keeping additional funds open for other investments.

Pros	Cons
Tax-free growth and withdrawals in retirement.	Contributions are not tax-deductible like traditional IRAs.
Flexibility compared to traditional IRAs, allowing for early withdrawals without penalties.	Income limits may restrict eligibility for high-income earners.
No mandatory distributions after a certain age, giving more control over when to withdraw funds.	Early withdrawals are limited and may incur taxes and penalties.

Take control of your tomorrow with an IRA.

Set aside money for retirement and save on taxes with atraditional or Roth IRA.

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5. Investing with a brokerage account

Best for: Those who want to manage their investment portfolio

A brokerage account is a type of investment account that allows you to buy and sell various types of investments, such as stocks, bonds, ETFs, mutual funds, REITs, and even cryptocurrencies. It serves as a platform for investors to access the financial markets and buy and sell investments based on their own research or with the help of a broker or financial advisor. This type of investment account can be a great option for those control want more control over investment decisions. 

Here are some of the investment options you have within this type of account:

• Stocks: Stocks are shares of ownership in a company, providing potential for growth and dividends.
• Bonds: Bonds are loans to companies or governments, offering fixed interest payments and return of principal at maturity.
• Exchange traded funds: ETFs (exchange-traded funds) allow you to invest in a basket of securities, providing diversification with one investment. 
• Mutual funds: A mutual fund is a pooled investment containing many stocks and other assets within a single fund.
• Commodities: Commodities are physical materials such as gold, silver, oil, or agricultural products that can be invested in through futures contracts or ETFs. 
• Real Estate Investment Trusts (REITs): REITs are investment vehicles that allow you to invest in real estate without owning the physical property.
• Cryptocurrencies: Cryptocurrencies are digital or virtual currencies that use blockchain technology and have gained popularity as a form of investment.

However, it is important to note that investing in the stock market through a self managed brokerage account carries inherent risks and requires an understanding of market dynamics, as well as active management to make informed decisions. Additionally, it’s important to note that investments in a brokerage account are subject to capital gains taxes, whereas retirement accounts offer tax deferral or tax-free growth. With fees and taxes that can impact overall profits, it’s important for investors to carefully consider these factors before considering any trades.  

Overall, a brokerage account offers flexibility, diversity, and potential for high returns, making it a popular avenue for investing any of your $50,000, whether as a lump sum investment or through investing a set amount of money weekly, bi-weekly, or monthly.

Pros	Cons
Greater control and flexibility over investment choices	Higher risk due to potential market fluctuations
Potential for higher returns compared to traditional savings accounts	Brokerage fees can eat into investment profits
Diversification through various types of investments	Requires more active management and monitoring of investments

Before investing, it’s crucial to research and understand the different types of securities available and their associated risks. Creating a diversified portfolio can help minimize investment risk and potentially provide more consistent returns over time.  A self-managed investment portfolio may not be suitable for those looking for a more passive investment approach.  

Stash 100 tip: Avoid concentration risk. Buying individual stocks can be fun, but you shouldn’t invest more than 2% of your portfolio in any one stock.

6. Let a robo-advisor invest for you

Best for: New investors wanting support or hands-off investors

For those daunted by the prospect of investing $50k without clear guidance, a robo-advisor offers a compelling solution. They offer a hands-off approach to investing, making them ideal for beginners or those who prefer not to manage their own investments.

With a robo-advisor, your money will be invested in a diversified portfolio of ETFs or mutual funds, customized to your individual risk tolerance and investment goals. This can be beneficial for beginners who may not have a lot of experience in investing, as well as those who are intimidated by managing such a large amount of money on their own. Additionally, robo-advisors can save time and effort for busy individuals who do not have the resources or expertise to actively manage their investments. 

However, it’s important to carefully research and compare different robo-advisors, as they may differ in fees, investment options, and level of customization. It is also recommended to periodically review your portfolio and make adjustments if needed to ensure that your investments align with your evolving financial goals.

Pros	Cons
Low fees compared to traditional financial advisors.	Lack of human advice and personalized guidance may not suit all investors.
Offer automated, hands-off investment management, making it ideal for beginners or busy individuals.	Limited control over investment decisions.
Utilize algorithms and diversification strategies to optimize portfolios based on your risk appetite and goals.	May not adjust to market changes as quickly as a traditional financial advisor might.

7. Invest in a kid’s future

Best for: Anyone with a child in their life that they want to see succeed

As long as you’ve laid the plans for your own personal investment goals and future planning, investing for a child you care about could be an excellent way to use a portion of your $50k. And the best part is, you don’t have to be a parent to do it. As an aunt, uncle, grandparent, distant relative, or close friend of the child’s parents, you can open an account on their behalf. 

Here are some of the options available for helping to set up a kid’s financial future:

• 529 College savings plans: 529 College savings plans are tax-advantaged accounts specifically for education expenses.
• Custodial accounts (UTMA/UGMA): Custodial accounts are managed by an adult on behalf of a minor, offering flexibility in how funds are used.
• Education savings accounts (ESAs): Education savings accounts are another tax-advantaged option for education savings.

Each of these accounts comes with its own set of rules and benefits, so it’s important to understand which one aligns best with the needs of the child. And most importantly, if you are not one of the parents, it is critical that you communicate this generous offer with them and gather their consent first for the arrangement and the intended use of the funds.

Communicating your desire to help can help prevent later conflict, a potential overlap of existing efforts, and even potential impacts on the child’s financial aid eligibility for college and the tax implications for both the child and the family.

8. Invest in your future-self

Best for: every single one of you

While all of the options mentioned above should be considered investments in yourself, investing in yourself through education and personal development has numerous benefits. Taking a career development course or attending a conference can expand your knowledge and skills, potentially making you more valuable to employers or clients. Working with a career or business coach can help you identify goals and create actionable plans to achieve them. Education, whether it’s obtaining a new degree or learning a new skill, can open up opportunities for career advancement and potentially higher income.

By pursuing new ways to grow and develop now, you are essentially investing in your future self, setting yourself up for long-term success and fulfillment. Any of the $50,000 can be used to cover the costs of these investments and has the potential to ultimately lead to a higher return on investment in the long run.  So don’t overlook the importance of investing in your own growth and development, as it can be just as valuable as traditional forms of investment.  Remember, you are your greatest asset and the best investment you can make is in yourself. 

Investing $50,000 wisely involves understanding your financial goals, risk tolerance, and the time frame for your investments. Whether you decide to pay off debt, save for short-term goals, contribute to retirement accounts, or explore other investment options, the key is to make informed decisions that align with your financial objectives. Take your time, do your research, and don’t hesitate to seek professional advice if needed. Your financial future is worth the effort.

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FAQs about how to invest $50K

Still have questions about how to invest $50,000? Find answers below. 

Where is the best place to invest $50,000 right now?

It’s important to understand your goals before deciding where to invest $50,000. If you have short-term goals or need access to the money in the near future, it may be best to keep it in a high-yield savings account. However, if you have longer-term goals and can afford to have the money tied up for a while, consider investing in a retirement focused investment account.

What is the best investment for 50K? 

Some options for investing $50,000 include paying off debt, saving for short-term goals, contributing to retirement accounts, using a DIY brokerage account or robo-advisor, investing in a child’s future, and investing in yourself. It’s important to understand your financial goals and risk tolerance before making any investment decisions.