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How to Invest 500k: Investment Mediums to Consider for Maximum Returns in 2022

$500,000 is a lot, and investing such an amount paves the way for generational wealth — if done right. However, it’s easy to lose this sum, thanks to the countless investment opportunities at your fingertips.

So, what do we advise? A diversified portfolio consisting of widely proven investment vehicles. 

In this piece, we’ll recommend twelve vehicles in which you can invest your half a million dollars in 2022 for the best results. However, before we proceed, let’s consider the possibilities of keeping this money instead of investing it. 

The Basics of Investing $500,000 – Just Before You Take That Huge Leap

Before you invest 500k, it’s essential to consider the reason why you’re making this decision. Since $500,000 doesn’t come out of the blue, it’s possible that you obtained such a large sum through savings or inherited it from a rich relative.

If you take a cautious look at things, you’ll realize it’s possible to live off $25,000 a year for 20 years, or if you’d like to go farther, $20,000 yearly for 25 years. This plan sounds great for settling your monthly expenses, but there won’t be a dime left after this period elapses. 

On the other hand, did you know that you could invest 500k in something tangible and turn it into 700k, 900k, or even a MILLION dollars? While it might seem like a long shot on paper, it’s possible. By making suitable investments and not putting all your eggs in one basket, you can enjoy positive results in almost no time at all. With the proper investment decisions, you can convert your $500k into legacy wealth, which can benefit your family tree significantly.

In a nutshell, spending this $500k over a year can ensure you’ll live a comfortable life, while investing it wisely helps ensure your kids (and even their kids) enjoy it too. What’s your preference?

Suppose you choose the latter option. Here’s another equally important question: what mediums are available to invest 500k to yield bountiful rewards? We’ll see below.

How to Invest 500k: 12 Viable Alternatives for Investors Looking Towards a Breakthrough in 2022

Defining the ideal investment strategy is a challenging task. Why? Risks are a constant theme in investments. 

Consequently, we advocate a portfolio with low-risk assets (for some security) and high-risk vehicles (for higher profits). Such an approach will likely keep your investment profitable even when some assets fall in value. 

Considering this possibility, the following are investment vehicles that have performed profitably in recent times. 

Real Estate Investing

Real Estate Buildings

Over time, real estate has become a hotspot for investors looking for low-risk investment vehicles with significant returns.

Properties have high demand levels, particularly in the right locations. Even better, the industry now offers numerous diversification options. You can now become a real estate investor without performing the duties attached to a traditional property owner. 

As such, the real estate market is an excellent vehicle to invest part of your $500k, notwithstanding your investment preferences.

The following are four common ways to earn decent ROIs through real estate.

Real Estate Crowdfunding

Crowdfunding brings numerous small-time investors together to foster sizable real estate investments they’d probably never be able to make alone. Although 500k is enough to invest in good rental properties, this technique helps to “test the waters.” Thanks to crowdfunding, you can invest less and earn well.

While crowdfunding was for the select few in the past, the Jumpstart Our Business Startups (JOBS) Act passed in 2012 marked a change in proceedings as advertising and marketing barriers were removed, allowing more investors to get in on the action. Thanks to this increased accessibility, online platforms, such as Holdfolio, now offer investors ease of access alongside decent profits. 

Holdfolio is an online multifamily crowdfunding platform where anybody can sign up with as little as $20,000 and start investing in significant real estate deals and grow their wealth. What’s more, the interest rates are client-friendly, and there’s a package to suit everyone!

Real Estate Investment Trusts (REITs)

Real estate investment trusts oversee real estate investments and other similar structures. With REITs, rather than spending a large chunk of your 500k to secure a real estate property, you can invest half or less.

What’s more, REITs guarantee steady income without any effort on your part. Just find a trustworthy company to trust with your funds.

However, you may consider publicly traded alternatives featured on stock markets like the New York Stock Exchange (NYSE) if you have reservations about REITs.

REITs are growing in popularity as over 145 million Americans made a sizable investment via a 401k, pension funds, and Individual Retirement Accounts (IRAs) in October 2020. Two years on, we expect this value to increase due to the profit margins.

Raw Land

Raw land refers to a piece of undeveloped real estate. While developed real estate might come off as expensive, raw land is a great investment alternative due its relatively low cost.

So, with 500k, you can secure a parcel of land and have a decent amount of money remaining. You have two options when you acquire raw land. First, you can develop the land and sell it off for a profit. Alternatively, you can lease it out to farmers looking to bolster their agricultural produce. 

House Flipping

House flipping is when an investor purchases a home, makes some renovations, and sells it for a higher price. For some investors, this approach has been a medium for fixed income over the years, so it’s no surprise people are turning towards this alternative.

The vehicle comes in several formats. For starters, you could hire a building contractor for the renovations. Besides the hands-off experience, you get to execute decisions without doing anything daunting.

On the other hand, you could flip a home while living there. While this might sound weird to some, investors on a tight budget prefer this method as they can buy a home, live in it, and make renovations at their own pace. By incorporating this strategy, investors don’t have to worry about rental payments. 

The Stock Market

Laptop with Statistics

With great power comes great responsibility. When you have $500,000 at your disposal and don’t want to risk losing money in a flash, it’s possible to cast your mind to trendy and profitable companies like Tesla, Microsoft, Apple, Google, and more. However, these giants shouldn’t be your sole area of focus as financial advisors recommend smaller companies to achieve astronomic profit margins.

Irrespective of what part of the divide you land on, the stock market has several advantages and disadvantages. 

If you’re able to seek out companies with decent growth percentages, you’ll be able to receive a decent ROI. Nevertheless, making the right choices isn’t a constant as you can make a wrong decision that could adversely affect your financial situation.

Despite its “topsy-turvy” nature, one of the best ways to invest $500,000 is through the stock market. We advise creating a brokerage account. 

Although it doesn’t offer you the tax advantages for regular retirement plans, you can trade stocks here without encountering a penalty. Due to this provision, funds stored here are more liquid.

Exchange-Traded Funds (ETFs) and Mutual Funds

Exchange-Traded Funds (ETFs) are highly recommended for stock diversification. Fortunately, diversification doesn’t require anything too detailed, as you can get it done in a single transaction. For context, Exchange Traded Funds can track the market in one go since the stocks attached are diversified.

It’s worth noting that ETFs work like regular mutual funds. A mutual fund, like an ETF, brings several investments together, regardless of their form or size. Although both index funds look the same, investors favor mutual funds due to their rewarding nature. While this preference has seen the prices of mutual funds skyrocket. They’re easily accessible. 

Despite the pros of ETFs and mutual funds, you have to understand that they pose several risks. For instance, you can get a market value less than the purchase price when you redeem the shares on these index funds. As such, you’re better off investing 10 – 20% of the entire $500,000 on these assets.

Annuities

Annuities are a decent way to invest and get something rewarding long-term.

These are insurance contracts you can enter to gain a fixed amount of money over the rest of your life. It gets better! There’s practically no risk involved in buying one!

Investors planning their retirement might want to consider fixed annuities as long-term investment vehicles. Engaging the services of a top-notch financial advisor is critical for effective portfolio management.

High Yield Savings Account

While it might seem convenient to get $500,000 and put it into a savings account, it’s possible to get more profits through high yield savings accounts. High-yield savings accounts accrue 20 – 25 times the average returns on regular savings accounts. 

However, what high yield savings account should you choose? According to several financial experts, the “Savings Builder account” by CIT Bank is an excellent high yield savings account. For context, investors that enter this plan are eligible for an Annual Percentage Yield (APY) up to 40%.

You need to have a $25,000 minimum balance or make a $100 deposit at least once every month to get these returns. Devoid of account opening and maintenance fees, CIT Bank’s Savings Builder account ranks as one of the best high yield savings account alternatives countrywide.

Hedge Funds

A hedge fund is pooled from the contributions of numerous investors. The fund is then invested in certain assets to increase investors’ ROI  and minimize risks. Hedge funds, unlike mutual funds, are more aggressive with their returns.  

The name “hedge fund” came about due to the trading techniques used by fund managers. If they expect a rise in market value, they’ll decide to go long. On the flip side, when there’s a drop on the horizon, they resort to “shorting stocks.”

While a hedge fund’s goal is to eliminate risk, the aggression on this investment strategy increases the stake, resulting in huge risks. With some hedge funds requiring huge buy-ins reaching amounts of $500,000 and above, it’s necessary to research thoroughly before investing in this vehicle. 

Emergency Funds

The COVID-19 pandemic took everyone by surprise. However, while some people were looking towards where their next meals would come from, others lived in comfort and affluence. The difference between these sets of individuals? Planning.

As such, you may consider investing in an emergency fund with a sum of $500k. Life is full of uncertainties, and you’d need to be able to counter adverse conditions with relative ease.

When you’re investing in an emergency fund, you can either diversify your investments or choose a specific medium known for its positive dividends. 

You don’t have to invest $500,000 in one go. You can start out slow. Whichever you do, you’ll appreciate this strategy as it protects you from inflation and other adverse economic conditions.

Treasury Bonds

With $500,000 in hand, you might want to secure some treasury bonds. Over the years, this investment class has become popular due to its exceptional stability. 

Unlike corporate bonds released by private entities, governing authorities issue treasury bonds. These bonds are outstanding for those nearing retirement and looking for a stable income, and it’s decent for young investors seeking to make good ROI values. 

However, due to the varying forms of bonds in the United States, things can become confusing for beginners.  Let’s take a look at the four primary forms.

Treasury Bills

Treasury bills (T-bills) are short-term securities that mature in less than a year. However, note that these bills have varying maturity timelines on each. Besides the 52 week variation (one year), consider those ranging from four to twenty-six weeks.

Treasury Notes

These securities aren’t long-term or short-term. Instead, they’re in the middle and get to their maturity in periods from two to ten years. 

Treasury Bonds

Tagged T-bonds, treasury bonds mature after 10 to 30 years. Your financial advisor might recommend these bonds to you if you’re looking towards a functional and beneficial retirement plan.

Treasury Inflation-Protected Securities

Also classified as TIPS, treasury inflation-protected securities are other treasury bonds. The only difference? Their valuation follows inflation trends. 

Max Out Retirement Accounts

Is maxing out your retirement account a valid way to invest 500k? Yes. You can invest in both mutual and index funds with your retirement account. 

Suppose the company you work for offers a 401(k) retirement account that matches your contributions, and you see that you aren’t contributing enough. In that case, your 500k at hand is instrumental in bolstering your input.

Alternatively, you can decide to put these contributions into a traditional IRA account. Nonetheless, there’s a limit on these accounts. As directed by the Internal Revenue Service (IRA), you can only make a yearly $6,000 contribution (this value increases to $7,000 if you’re above 50).

With these limits, combining different index funds is instrumental in preparing for your retirement journey. By investing 500k in these funds, you stand a greater chance of receiving a decent ROI upon maturity.

Buy a Business

With your personal finance reaching the $500,000 threshold, you’ll probably have numerous business ideas running through your head. You can decide to engage a franchisor or invest in online platforms with a proven track record.

Nevertheless, understand that buying a business doesn’t yield earnings from the get-go. In the beginning, you’ll have to implement a groundbreaking idea to ensure the company has a solid foundation. As you continue, you won’t need to put in those long hours as you can finally hire people and run affairs at the comfort of your home. 

Running that entity successfully for years to come is feasible when you get to this point. If you’d like to leave the reins of power, you can put the business up for sale and receive astronomic profits when the purchase agreement goes through.

Invest in Gold

While other precious metals are available for financing, many people turn to gold as a “hedge” to fight inflation. Gold’s market value tends to skyrocket when there’s an economic downturn. 

So, if you want to invest $500,000 on a recession-proof medium, you might want to secure gold ASAP. You can head towards web-based platforms like Oxford Gold Group, Goldco, and Lear Capital to enable seamless transactions. 

Invest in Cryptocurrencies

Bitcoin

Cryptocurrency has undergone significant growth in the last decade, with several institutions now looking to invest in this decentralized blockchain vehicle.

Some industry experts believe that Bitcoin’s value will rise 400% in the foreseeable future. With primary forms like Bitcoin going for almost $50,000 at the moment, investing a decent amount of your $500,000 could see you on the receiving end of decent profits.

Regardless of Bitcoin’s potential, other crypto currencies are making waves in the market. By diversifying, you ensure that you don’t get the short end of the stick if things go haywire.

However, it’s noteworthy that cryptocurrency is arguably the riskiest venture on this list—approach with extreme caution.  

Your Investment Style or Risk Tolerance

The investment alternatives listed above all have a decent reputation amongst seasoned investors. However, risk tolerance is key to success in all investments. Therefore, you must consider this variable before making decisions.  

Some people are willing to invest more money than they’re afraid of losing, while others would rather not risk anything at all. However, no one can predict what will happen with an economic forecast or political climate change – which means there isn’t “one” perfect strategy for everyone!

As you commence this process, you might want to answer the following questions:

  • What timeline do I have for this investment?
  • What’s my risk tolerance level in times of uncertainty?
  • Will I need my money back in five, ten, or fifteen years?
  • Am I techy enough to engage modern forms of investment?
  • Do I need assistance to make a suitable investment?

You’ll be asking these questions to one person you can trust — YOURSELF. If you have $500,000 lying around and are scared of losing the funds to some financial misstep, it might be time to seek advice from experts in real estate or any other investment form that catches your interest. For those who prefer the DIY (Do It Yourself) route, you have the leeway to do what you think will yield decent returns in the long run.

Major Takeaway

There are numerous ways to invest $500K in 2022. Some are high-risk, others are not so risky. As such, the smart thing to do is to diversify your portfolio. 

Take your time to assess the 12 investment classes we’ve discussed. Answer the above questions to define your risk tolerance level and find the ideal vehicle for your objectives (short or long-term).

Would you like to start with real estate? Holdfolio offers multiple investment types from as low as $20k that could help you reach your financial goals.

There’s the ideal package for everyone at Holdfolio — whether you want to invest with other people in a syndication project or prefer to purchase a property independently. It’s financial freedom for EVERYONE.

Ready to invest in real estate?

We make real estate investing simpler, more transparent, and accessible to individual investors.

TJ Lokboj

TJ Lokboj is an entrepreneur with a passion for adding value to the real estate investing industry through adopting digital transformation. Some of TJs companies have been featured in Yahoo Finance, Morningstar, Benzinga, and many other publications.

TJ is the managing partner of Holdfolio, a real estate investment firm that leverages a premier crowdfunding platform.

He is also a member of the Forbes real estate council and co-founded SyndicationPro, which is the #1 syndication management SaaS solution in the market today.

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Ready to invest in real estate?

We make real estate investing simpler, more transparent, and accessible to individual investors.