Different Ways To Invest In Stocks
You might be thinking that you want to take your $50 and invest it in a company like Amazon, Facebook or Tesla. But if maximizing your returns is your goal , that may not be in your best interest.
Few investors, including professionals, are able to pick individual stocks and beat the market. They might get lucky once or twice, but study after study has shown that few succeed in the long run.
Of course, its hard not to try and pick the next big stock market winner. After all, this is what gets a lot of people interested in investing. Im in this camp myself.
If thats the case for you, I suggest limiting the amount you invest in individual stocks to no more than 10% of your total investments. You can check out our guide to investing in stocks to learn more about individual stock investing, including where it fits within your overall financial plan.
The approach that research shows has enabled individual inventors to outperform market averages and even most investment professionals is low-cost index fund investing.
An index fund is a mutual fund that holds a collection of stocks. For example, an S& P 500 index fund holds stock in all the companies that make up the S& P 500 .
There are a number of advantages to investing in index funds, especially for those wondering how to invest $50 in the stock market:
Related reading:How to invest for retirement In your 20s, 30s and 40s.
Best Ways To Invest $50000 Right Now
If youve got $50,000, there are a lot of investment opportunities available to you. You can get into a number of individual stocks or diversify your portfolio with ETFs. Whats more, you can easily max out your IRA account which should take around 12% of your available funds or you can get into real estate investment trusts .
However, which route you take and how much youll put into each investment depends largely on your age and how much risk youre willing to take.
- If youre nearing retirement, a more conservative investment route with stable companies and low risk is often the way to go.
- If youre in your 20s and 30s, you can add in some risky investments, such as penny stocks or new companies with disruptive technology and services.
1. Dividend and blue-chip stocks are good choices
Why its a good option now: Having $50,000 allows you to invest in multiple individual stocks. You can choose from dividend stocks, where you can earn up to 4% or more, or you can go with growth stocks if youre willing to take some risk for a potentially higher return in the future. And if you want to speculate consider penny stocks. These are often known to fail, but if you invest in the right one, your rewards can far outweigh any other return on the stock market in a short period.
What to watch out for: Individual companies may go bankrupt or get into legal problems. Avoid investing a huge chunk of your money into one stock.
2. Automate your investment with a robo-advisor
What Is Your Risk Tolerance And Investment Timeline
That $50,000 is no small sum youre going to want to make it work for you as best as it can. To do that, youll want to figure out your time horizon and how much risk you can afford to take on.
If youre hoping to cash out in the next couple of years, youll likely want to avoid too much risk in the event of a near-term downturn. If, however, you have decades until your goal, that gives you the flexibility to put your funds in riskier investments for now, as youll have more time to ride out any market ups and downs.
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What Are Your Immediate Financial Needs
Once you know how youll start investing whether DIY or with some help you can get down to the facts and factors that will help you build your financial plan. Before you sink that $50,000 into new investments, make sure other areas of your finances are taken care of first. Youll want to prioritize paying down debts or any outstanding bills you might have.
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Not sure where to start? My friend Pete has a great video on how to get started podcasting!
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Invest With A Robo Advisor
If youd like exposure to the stock market but you arent comfortable investing yourself, a robo advisor is a good alternative to a traditional adviser.
- Lower fees. Required fees and investment minimums are much lower than with a traditional financial adviser.
- Goals-based investing. Robo-advisors make algorithmic recommendations based on your goals, risk tolerance and investing timeline.
- Requires minimal time or effort. Robo-advisors keep your portfolio in tip-top shape by performing routine tax-loss harvesting and automatic rebalancing for you.
- Limited flexibility. You typically cant choose your own investments. Your account is invested in a pre-made portfolio based on your risk tolerance, along with other factors, and is rebalanced to stay within your risk level.
- Not entirely personalized. Robo-advisors give advice based on the questions they ask you. But they cant ask follow-up questions if your situation is unique.
- Managed by a computer. While you can still communicate with customer service , if you prefer face-to-face discussions about investing, this may not be the best option.
How $50000 Can Grow
With $50,000 you can start building serious wealth with enough time and wise decisions. Heres a look at how it might grow in three common investment classes.
|$50,000 saved or invested|
For this table we assumed a 1% annual return on a savings account, CD or money market fund an average 6% return for bonds or bond funds and 10% on stocks, the markets long-term annual return. Bond returns vary widely based on bond types, and the stock market has down years while individual stocks can go to zero. So consider these benchmarks only and consider risk as well as return.
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Open A Taxable Brokerage Account
Risk level: Varies, according to which investments you choose
A taxable brokerage account works just like an IRA, except you dont get all the extra tax savings. On the flipside, you can take out that money anytime you want. Just like with an IRA you can choose to invest your $50,000 in money market accounts, stocks, bonds, index funds, mutual funds, ETFs, etc.
In other words, a taxable brokerage account gives you another place to invest in the market besides your retirement accounts. If your emergency fund is already set up, youve maxed out your retirement contributions, and you still have extra money left over, a taxable brokerage account can help grow your investment.
|Taxable Brokerage Account Pros|
|Can withdraw the money at any time||Can be riskier for short-term savings goals|
|Can earn a higher return than a savings account over long term|
Where To Invest As Little As $50
The one downside to getting started with as little as $50 is that youre limited to certain investment providers.
Many investment firms still have minimum deposits that start at $1,000.
Also, you need a brokerage that allows you to invest in fractional shares. Many of todays most popular stocks go for hundreds or thousands of dollars per share, so going with a brokerage that allows you to purchase fractional shares gives you significantly more options.
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How To Invest 100000
Should you find yourself with even bigger sum of money, there are additional things you will need to consider.
While the principles for investing £50,000 and £100,000 are broadly similar, says Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown, arguably the greater sum offers the opportunity for more flexibility over your investment horizons.
You could, for example, choose to invest a larger sum in emerging markets, says Streeter. These are seen as higher risk as they are at an earlier stage of development, however they offer significant long-term growth potential, as they are continuing to evolve and compete with their western counterparts. You can read more about investment trends 2021 here.
You still need to ensure, that you:
- Have an investment horizon of a decade or more
- Wont need immediate access to your money
- Have an overall portfolio that is well diversified
- Are comfortable with the level of risk
The importance of diversification
Dont put all your eggs in one basket in terms of geographies and sectors, warns Streeter. One way of looking at it is viewing individual stocks as side dishes to your well diversified main plate of investments.
With a large windfall it offers the chance to diversify even more, particularly by investing in more funds and potentially expanding your portfolio from passive funds which aim to track the performance of an index, to active funds which are chosen and run by a professional fund manager.
Invest In Real Estate
With $50k to invest, there are several ways you could invest in real estate. You could go through a company like Wealthsimple to purchase real estate investment trusts through an exchange traded fund . Alternatively, you could connect with commercial property developers through a peer-to-peer lending platformlike Lending Loop, or put a downpayment on a house and rent it out yourself.
Learn more about property investing in our detailed guide.
- Passive income. Real estate is an attractive investment because it produces a steady flow of income.
- Plenty of options. With $50k, you can choose to invest in REITs, commercial properties or your own rental property.
- Safe options. If you want to invest in real estate in the safest way possible, you can purchase REITs, which are made up of hundreds of different properties and trade like stocks.
- May need accreditation. Some crowdfunding sites wont let you directly invest in real estate without qualifying as an accredited investor.
- Possible risk of default. If you choose to invest in a single property, you could lose your money if it defaults.
- Illiquid investment. Real estate cant be easily sold or converted to cash, so its not the best option if youll need your money soon.
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Invest Your Spare Change
If you only want to invest small amounts and would love to do so automatically with the spare change you wont miss, theres an app for that.
The most popular mobile apps for investing your spare change are Acorns and Stash. They round up purchases you make with your credit or debit cards to the nearest dollar and then automatically invest that amount for you. For example, if you bought groceries for $40.50, the app would round up the purchase to $41, investing the additional $0.50.
Where the money gets invested depends on your portfolio preference. When you onboard with the app, youll get to choose what your portfolio looks like, and you can rebalance at any time. If youd like to have 55% large-cap stocks and only 5% small-cap stocks, you can select a preset portfolio type that matches your preferences. Your money will automatically distribute accordingly.
This makes for a great diversification of assets, automating what could otherwise be a stressful and tedious process. However, the one thing you need to keep in mind with Acorns is its $1 monthly fee. This could be a large percentage of your portfolio if youre not depositing much every month.
Everything You Need To Grow Your Money
This article is provided for informational purposes only. It does not cover every aspect of the topic it addresses. The content is not intended to be investment advice, tax, legal or any other kind of professional advice. Before taking any action based on this information you should consult a professional. This will ensure that your individual circumstances have been considered properly and that action is taken on the latest available information. We do not endorse any third parties referenced within the article. When you invest, your money is at risk and it is possible that you may lose some or all of your investment. Past performance is not a guarantee of future results. Historical returns, hypothetical returns, expected returns and images included in this content are for illustrative purposes only.
We provide investment services and other financial products through several affiliates.
Wealthsimple Trade is offered by Canadian ShareOwner Investments Inc. , a registered investment dealer in each province and territory of Canada, a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund , the benefits of which are limited to activities undertaken by ShareOwner.
Wealthsimple Invest and Work are offered by Wealthsimple Inc., a registered portfolio manager in each province and territory of Canada. Assets in your Invest and Work accounts are held with ShareOwner.
Best Savings Accounts For 50000
The first thing you need to determine is how long your investment timeframe is. Or in other words, when will you need to access your £50k. A good rule of thumb is that if you need to access your money within the next 5 years then you should just put your money into a savings account. That is because investing in assets other than cash carries the risk of you losing money. Therefore the shorter your investment timeframe the greater the likelihood you could be forced to crystalise a loss. Investments move up and down over time so you need to be comfortable with this.
However, cash is a valid investment asset in its own right. If you do decide to put the money in a savings account then you need to make sure to get the best savings rate. If you plan to put £50,000 or more into a savings account then I suggest you read the 7 must-know rules of saving large sums. It contains advice on how to get the best interest rates on your money and how to protect your savings from the eventuality that your bank or building society goes bust.
If you do opt for putting the money into a savings account then you need to stay on top of things as the interest rate will likely fall over time, especially if the account had an introductory offer.
To get round this I use a rate tracker email alert tool. You simply enter your email address and the details of the savings accounts you choose or currently have and the system will:
Invest In Your Own Business
Do you have an entrepreneurial mindset? Are you interested in building your own brand? Consider simply investing a little money in your own business. Whether its walking dogs or your own freelance company, a small investment is a great start. You could put $100 toward fliers and supplies or a website and domain to advertise your business on.
A small investment in something you enjoy and would like to turn into a business can go a long way. Even if its just a little at first, the money will build on itself like a stock investment and compound. As you earn revenue, deposit a portion of that profit back into the business to continue growing it and gaining customers or clients.
No matter how you choose to invest or the amount of your investment, carefully plan a strategy that best suits your lifestyle and long-term goals. Invest early if you can. Remember, cash is always at risk of devaluing due to inflation.
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What To Do If You Have No Retirement Savings
Once youve figured out what your approximate money needs in retirement will be, its time to figure out how to get there. Youll want to boost your savings and make your money work for you so you have enough when you reach the age at which you hope to retire.
Even if you have no retirement savings at age 50, it isnt too late to get started. Heres how:
You should be using a retirement account of some sort to invest your money. Whether its a 401, a 403, a traditional or Roth IRA or some other plan, having an investment vehicle to put away money is key. If youre really kicking up your savings at age 50, chances are youre decently close to retirement. Because of this, some experts recommend choosing lower risk investment options like bonds. You wont see the huge returns that riskier choices like stocks can bring, but its less likely youll see big losses, even if the market turns volatile.
Invest $50000 In Yourself
You can also use your savings to take an educational course that can improve your career and your earning prospects. With this strategy, you could easily turn $50,000 into much larger earnings.
- Take professional courses: Learn skills with classes and workshops.
- Hire a coach: Unlock potential and get more out of yourself.
- Invest in health: Grow your capacity with a clear mind and strong body.
- Start a side-hustle: Learn by doing.
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