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If you are a person who has $500 000 in your savings accounts and earns little interest (or sometimes, none at all), well, you are not technically on the “bad side” of the earning spectrum. But did you know that you can do so much more with just earning little interest? If you are one of these privileged people who has these amounts of money, it may be a bit overwhelming, as you might feel pressured to manage the finances and make it roll around. This article will help you figure yourself out!
However, know that having these amounts of money is a good opportunity for you to diversify your personal finance portfolio. Given this, we would highly suggest that you split up your 500 k dollars into investment options –which we will be talking about in this article.
500,000 bucks is a huge amount of cash that should be placed into diversified investments. While this article gives you a wide array of options to invest that money properly, we also believe that you should be working this out with a personal finance advisor.
The first and safest option for diversification is to have a set of guaranteed income investments. If you would like to invest everything (let’s say the whole 500- k chunk of the pie), then getting sure income returns for your money can be very interesting to think about.
You’ll first need to have a high-interest savings account. Also, it is best to have an emergency fund as well. This means you’ll have to allocate a portion of this to savings accounts or a retirement account. The amount of your savings should have a monetary value of at least six months of your household’s expenses. This will eventually serve as your financial buffer for six months should unforeseen, and unfortunate circumstances arise.
All you have to do for this is to get information from online resources and determine which companies you think can grow big in the future market. Once you have identified your company or companies, purchase their stocks in the market. Be sure to buy individual stocks for each. This will be a great way of investing your $500k.
Doing this can be done in partnership with a financial advisor or a stockbroker, but you can usually get better gains and equities with your stock using online platforms.
Consider yourself getting involved in the stock market. If you are not certain which stocks to pick, then subscribing to Robo-investments can give you the jumpstart you will ever need to get started.
Usually, investing with Robo advisors will make you go through a process that identifies your risk tolerance, assess your funds, annual income, dividend income, and other contributors. Afterward, the Robo-investors will engage in the stocks by investing that best credit for you. They can allocate your budget for individual stocks. Many people usually would prefer this method. For the sake of stock, you might want to try this out, too.
Algorithms programmed in Robo-investors will give you the advantage to lessen your liabilities with taxes and will make sure that you will get the highest yields with the least fees possible.
Lastly, Robo-investments are convenient as you are investing without having to get your hands on it. All you have to do is to trust that your money is being managed properly by the platform.
Certificates of deposit (also known as CDs) are not reported to yield positive things like a justifiable interest rate—CDs workaround by putting your funds into a deposit for the short term and guaranteed return rates.
When the great recession hit the market and the Americans in the US, CDs’ returns dropped to one percent. However, interest rates have risen and gave better deals. This made CDs a more attractive investment for those looking at a guaranteed return of investment for their 500 000 bucks.
Engaging with Exchange Traded Funds (or ETFs) is also a strategic method to diversify your stocks and investments in the market. One way to invest is that you will only get to make a single trade across a wide array of different stocks.
ETFs are very much similar to mutual funds wherein you purchase a relatively huge number of stocks that comprise one huge fund all at once. ETFs will mean that it is a single stock share that you buy from the stock market. In other words, you are purchasing portions of the fund from the exchange instead of going through a bigger fund group like what you do with mutual funds.
Peer lending is essentially lending and investing money on people (or business ideas) whom you think can give you a high return in the long run. Therefore, peer lending excludes you from the stock market, as you invest using your personal finance inventories and cash flow.
Peer lending usually gives you a higher return than other traditional investments, but the risk investments for this might be high. Everyone knows that some borrowers might give a delayed payment or might pay you nothing at all!
This is why it is important to question who or what business you will be putting your risk in. Remember to ideate your share price, and you may want to also balance it off by investing in people with a set, stabilized financial income, and a good financial portfolio. Otherwise, without that data or information, you might run into a problem that could put your financial items at risk as time will age.
Look into their business portfolio, the product they give advertiser disclosure on, and make sure that payouts and payment terms are all explicit. Link this information with a financial site if needed to make sure you give them the best credit possible, which will, in turn, give high-interest gain for your part of the pie.
Previous and historical experiences would stigmatize annuities as a way of investing your $500k, or even for retirement. This is because a lot of salespeople have used the complexities of this product to their self-interests. However, there are scenarios where annuities can be that strategic option for a person who has 500 000 to invest. For those huge amounts of funds, that may be the right decision.
While a wide array of choices are available when it comes to annuities, it is important to take note that you will provide a lump sum of funds to insurance companies, which, in return, will give you a high guaranteed yield of that money. The moment you start to draw funds from that annuity is the moment you will get a fixed income as you move forward. Just be sure to consult with the right financial advisor for these ventures.
It could be a challenge for an investor to invest a half-million in physical gold, especially when one is already familiar with trading stock and bonds on platforms found online. So, when it comes to gold, you would be transacting with everyone outside traditional brokers, and sometimes you will need insurance and storage funds on the investment.
Suppose your main concern is about inflation, for instance, or other emergency index funds. In that case, putting some risk into the gold investment industry may be one of the ways to invest your half to a million dollars in fixed-income investments.
Always know that using this method would need some reflection on your risk tolerance and how you would want to jump off from that nest egg of yours. Either way, this approach will still be a good investment, especially if you do not want to get involved in the stock industry. But again, as we all know, you would still want to diversify your seeds as an investor.
If I were a person to get a hold of $500 000, I would place a portion of the pie to real estate. Data this 2020 show that the market shows a healthy demand in real estate investment trusts and the real estate industry as a whole. With the right information on risk tolerance, you will know that investing in such an industry can give you a high yield in the long term.
The FRS’s main goal (also known as the Federal Reserve System) is that they would want to promote the aims of stable prices and maximum employment.
Everyone knows that if someone suddenly gets access to a huge amount of money, there is a tendency that new friends would be attracted to them in a way that they never had before. Sometimes even those whom you have already broken ties with could suddenly return to you to rekindle and amend some relationship. This is a very sad yet very realistic example of how money can bring humans down to their worst.
Given this premise, you can manage your investments easier when you keep them lowkey, especially if this is newly-found wealth. Otherwise, you will most likely fall into two scenarios:
Scenario A: You will either meet the requests of your acquaintances, friends of a family — until most your wealth is gone; or
Scenario B: You will keep tons of people on the margins (usually your lost ties and distant family) and alienate them because they think your wealth should be shared with them.
Don’t worry, you can avoid these stresses if you keep everything on the lowkey–at least until you have stabilized or have managed everything out.
Debt will always hinder you from your financial goals. Some debts even go to the very bad end of the spectrum, and you must get rid of them by paying them off immediately. Otherwise, your investment efforts will go to waste. Now, if you want higher returns:
- Pay your loans from your family and your friends. This is not just because we would want us to be responsible not just with their finances but also because of their manifestations on family and friend relationships. As you invest, now is your chance to pay them off–so you can also secure and protect your social relationships in and outside the home.
- Pay all your debts on your credit cards. This includes that home equity line of credit for your US home. These equity lines are huge credit cards that are secured by your home. No further discussion is needed.
- Pay all your debts on your student loans. These are also huge, unsecured debt, and you have to consider paying these immediately–even if they have low-interest rates.
- Pay all your existing car loans. Pay your pending US car loans if your pending loans are not three years of age yet. (or if you aren’t within 2 remaining years of paying the loan off). This will give you a great leeway of margins for your emergency fund in the long run–should you need it.
- Pay your mortgage. Signing up for a mortgage as an investment makes sense since this is a very long term asset and may take you huge amounts of amortizations per year. It is more strategic to pay off your mortgage immediately. However, if it is an “interest only,” “sub-prime,” “balloon,” or an “ARM” type of mortgage, pay them off, then don’t patronize it. When it comes to mortgages, make sure to be certain and fully-informed.
Do not let money own you; prove to yourself that you have full control of your money, not the other route around. One way you can prove this to yourself is to give back to some extent, and at the earliest possible time.
You do not need to be religious to give back to charities. All you have to do is be kind and generous, especially when you have more than enough. Greed will make us want so much money that it could turn us into selfish people who only want to receive and receive.
But if you would want to practice managing your investments, try doing it the other turn around–give.
Prepare for your large windfall. Try to predict the worst possible scenarios life might hit you with, then plan to secure resilient money savings ahead. Planning will give you time to handle your newly-acquired fortune more properly. It will give you ample time to make better decisions about it–such as your retirement, how content you would want to become, your life status on health, the right company you want to be with, or how you would want to live your life.
To assess and plan your financial expenses, ask yourself, do you want to have your retirement solution right now? Given that, do you have other income sources that can help make your retirement possible, or will your USD500 000 be sufficient enough for you? Is this something we would want to have high returns for?
You can also ponder if you would want to stay in your company or if you would want to shift to other careers? Are you satisfied with the current money you are getting for your pay? Subsequently, would you want to have some fixed income or something more fluid?
Extend those questions into where you would want to live in the US, what kind of home would you want to have, would you want to start your own company and risk your money there? What index funds would you want to invest in, and what rates of return would you like to have? What dreams do you want to be made fulfilled but couldn’t because of limited money and just a fixed income?
Just like what has been mentioned earlier, going through a windfall might be a game-changer when it comes to aspects of trying to live a life for yourself. What else contributes to that game-changing experience is how you invest that money when such windfalls arrive. Therefore, the key is to make sure that you have full control over your strategy.
The moment you have secured the safety of your principal money, the better emphasized your fixed-income assets will be. Some of the things you might want to consider are:
- To secure an ample amount of emergency funds. And to secure an ample amount, we are talking about around 24 months worth of financial content and living expenses, so when your windfalls will come, you will be financially resilient–sometimes even up to retirement.
- To engage in peer lending. Emphasizing your principal investment can diversify your portfolio in various ways. Be an investor in peer lending so that you could secure your money (but with relatively high risks. Create the best personal loans and schemes for your friends. Just make sure to question and be intuitive, and the only risk is the right company.
To manage your stock and financial resources properly, it is important to know that if you put these at high risk investing in the market, a ton of the hard work you have gone through might be jeopardized. This is why you would want to become not just fully aware of the things you are investing in but also on and act on it–by adding measured and well-calculated risk strategies.
A typical financial advisor would say that with 500 000 USD, you are considered a huge investor, and you should think and act like one, especially on income, index funds, and returns from the market. You should be able to diversify your portfolio and to make your money rolling–amidst inflation. That is what the stock market is for, at least in the life long run-up to retirement. Do not, however, overdo it, and learn to be content.
Ensure that you still have your stock allocation on close monitoring and do not exceed 50% of your total capital. This will provide you the growth and diversity you need, minus the high risks.
To further create calculated and measured risks, consider subscribing to ETFs or even mutual funds. Robo advisors are also available online, just if you need help on reviews on your a part of your credit cards or your investment vehicles in the market. They can also calculate returns and items on the stock–given available financial data.
Self-care does not just apply to your mental and physical well-being, but it also manifests in your relationship with your finances. This is the time to spend on a few things you have wanted to have for the longest time.
Do not go all-grand and get carried away in this part of the process, though. Just spend on a little, and to those that are urgently necessary (just like your 401 k). In light of higher returns, focus on investing, and be content.
We hope you have had an informative read as we have talked about steps to make sure your large items for investment are manageable and accounted for. Always remember, with the right passion, data, and attitude for things, getting to the financial goal you’ve always dreamt about will always be one step closer to reality. Read more about Investoralist personal finance articles and be knowledgeable on the current economic situation about finances!