The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
A Beginner’s Guide: How to Invest $50K to $100K
Whether you’ve saved $50,000 or landed $100,000 through an inheritance or property sale, you’re already making a smart choice by learning a little about how to invest it. Our local Raymond James Financial Advisors can help guide you through your investment options and help you develop a long-term strategy. But first, here’s a basic breakdown of ways to invest $50,000 to $100,000 for those who are new to the game.
Life is an ongoing journey of growth. We want to grow in our careers, grow personally, grow our knowledge and watch our children grow! With growth comes great change and huge opportunities — and that includes the possibility of growing your money through investing. If you’re a smart spender, saver and budgeter, then investing may be your next step to take. Let’s say you’ve accomplished your goal of saving $50,000 (well done!) or came across $100K (lucky you!), and you’re ready to make that money work for you. Then keep reading … the following beginner’s investment guide will give you a glimpse into the world of investing.
You May Want to Build a Savings and Pay off Debt First
Fifty grand is a number that will nudge you to start thinking about investing. Investing is typically smart money management because its purpose is to grow wealth, passive income and long-term financial independence. Prior to investing though, assess your financial situation. It’s recommended to have enough savings for unexpected expenses and pay down debt, especially consumer debt. You’ll want a savings account, so you don’t have to turn to credit cards in an emergency. And the longer you hang onto debt, the more you’re going to pay in accumulating interest.
Take Advantage of an Employer-Sponsored Retirement Plan
Building an emergency savings account is still a priority, but taking advantage of an employer-sponsored retirement plan, or 401(k), is usually a smart move to make now. You don’t want to pass on a retirement benefit through your employer that will match your contributions and give you “free money.” Next, you may want to expand your retirement investments into an IRA account, while hitting those high-interest debts hard. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information.
Define Your Investment Style
For newbies, many decide to take a beginner’s approach by avoiding risky or complicated investments; however, if it’s in your personality to be a bit of a risk-taker, speak with an advisor about taking the plunge into stocks. If you want to err on the side of low risk, then bonds may be the way to go. Also, consider if you would you rather invest independently or under the guidance of an advisor? A DIY investor is a term for independent investors who take a self-directed approach and manage their own portfolios. If that sounds stressful, then you probably identify as a passive investor who prefers to work alongside an advisor. In fact, working with an advisor vs. DIY could help you earn 3% more, which over time can result in a sizable amount of money.1
Introducing … The Investment Options
Once you feel confident about investing, it’s time to learn about investment options and work with an advisor on a starter-strategy.
- Stocks: To invest in stocks means purchasing stock (a.k.a. a share) from a company with the goal for it to rise in value. Then the stock can get sold for more than what it was bought for. Investors, known as shareholders, can also earn money through dividends, which are essentially payments. Ideally, investors will benefit from owning a diversified portfolio and preferred stocks, which pay dividends.
- Bonds: Bonds have a reputation for being less risky than stocks. (A balanced portfolio includes both stocks and bonds.) Think of bonds as if you were a financial institution giving a loan to a borrower. You’re loaning funds to an organization in exchange for fixed interest payments over a period of time, called the “life of the bond,” with the goal to receive a steady source of income. The money is returned once the bond reaches maturity.
- Exchange-Traded Funds (ETFs) and Mutual Funds: ETFs and mutual funds are both bundled investments, offering instant diversification in one purchase. The difference: ETFs are traded throughout the day, similar to stock trading, and are sold at a share price; whereas mutual funds are traded at the end of the day. ETFs are sometimes an attractive option for novice investors and smaller budgets because of share prices that are often lower than a mutual fund’s minimum investment requirement.
- Index Fund: An index fund is an ETF or mutual fund that offers a passive way to invest in the market. Instead of paying higher fees for a fund manager who actively chooses which stocks to invest in, an index fund automatically invests across a market (such as the S&P 500) in an attempt to mirror its activity. They’re designed to go up and down with the market to eliminate any worry about changing investments around.
- 529 Plan: The state-sponsored 529 plan will help you save for a child or children’s education. A few things: Money grows tax-free, qualified withdrawals are tax-free, some states allow tax deductions on contributions, there are no limits on contributions, and there are no age limits for distributions.
$100,000: Consider Real Estate & Peer-to-Peer Lending Too
The investments above are still options for those with $100,000; however, an investor with more money to work with may also be in a position to invest in real estate or loan out money to individuals or businesses.
- Real Estate: With the resources, investors can purchase a residential property to rent out or to renovate and sell as a way to generate income. A second more hands-off option is to put money into a Real Estate Investment Trust (REIT). A REIT removes the burden of making the purchase or managing the property; an investor gives money to a real estate investment company that manages it. Crowdfunding is a third option. This means multiple investors pool their money together to fund a large-scale real estate project, thus becoming stakeholders who ideally get monetary returns for the loan or a portion of the profit once the project is successfully completed.
- Peer-to-Peer (P2P) Lending: Interested in making a meaningful investment? P2P lending is loaning individuals or businesses money via an online platform like Funding Circle or Lending Club. In return, the investor will earn interest, get regular deposits and help others.
Now that you’ve read an introduction to investing, your next step could be to work with a local Raymond James Financial Advisor at Desert Financial Wealth Management. Get the advice and service you’d expect from a full-service investment firm, while working with an experienced advisor who will review your financial situation and help you create an investment strategy customized for your budget and goals.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. There is an inverse relationship between interest rate movements and fixed income prices. Generally, when interest rates rise, fixed income prices fall and when interest rates fall, fixed income prices rise.
Every type of investment, including ETF's and mutual funds, involve risk. Risk refers to the possibility that you will lose money (both principal and any earnings) or fail to make money on an investment. Changing market conditions can create fluctuations in the value of an ETF and mutual fund investment. In addition, there are fees and expenses associated with investing in ETF's and mutual funds that do not usually occur when purchasing individual securities directly.
As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.
Be advised that investments in real estate and in REITs have various risks, including possible lack of liquidity and devaluation based on adverse economic and regulatory changes. Additionally, investments in REIT's will fluctuate with the value of the underlying properties, and the price at redemption may be more or less than the original price paid
Securities are not insured by credit union insurance, the NCUA or any other government agency, are not deposits or obligations of the credit union, are not guaranteed by the credit union, and are subject to risks, including the possible loss of principal. Desert Financial Credit Union, Desert Financial Wills and Trusts, Desert Financial Insurance and Desert Financial Wealth Management is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.
Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact your local Raymond James office for information and availability.
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Desert Financial Credit Union, Desert Financial Wills and Trusts, Desert Financial Insurance and Desert Financial Wealth Management is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.