So you’ve stockpiled roughly a standard US worker’s salary, and now you’re wondering how to invest $50K. Congratulations!
The bad news is that you’re nowhere close to retirement yet. But the good news is that this is a fun investment zone!
So today you will learn:
- The real goal of investing that much money
- 3 best ways to invest $50,000
- Traps and shiny objects to avoid
And in case you missed it, this is part of a larger “How to invest” series where we talk about investing at every stage of wealth from $1K to $10M!
So what’s so special about this $50K stage?
The $50,000 level is special. It’s a bridge between being a normal person and being financially independent.
By most people’s standards it’s a lot of money, and you want to treat it right. You should already be familiar with the stock market, and have enough money that investing it will bring sizable returns.
However… you’re still a beginner if you want to achieve mega-wealth status. That means that you want to learn how to invest $50K for the sake of growth but we still want some first-hand education.
So the 3 methods below will be your bridge between investing like a beginner and investing like a millionaire.
How to invest $50K – 3 best methods
Learn how to invest $50K… tax-efficiently (over 30% return)
If you managed to save up a normal person’s annual salary, I’m guessing you’re making a lot of money right now. And that means… you’re paying a lot in taxes. Oh no! Curse you, Uncle Sam!
So now’s the time to start putting money away into tax-sheltered accounts. They’re not complicated. Start by opening one up, funding it, and learning how they work.
Hey, if you can dodge 30% taxation, you just gave yourself a 30% boost in investment return! It’s worth learning about that now rather than when you’ve invested a million dollars, right?
You can basically shelter it all now by investing this year’s 401K and filling up next year’s right on January 1st. (At time of writing, there’s a $19.5K limit/year for those of us under 50, and $25K limit for those above.)
If it was my money, I’d just invest it in the stock market via index ETFs because they are safe, have fantastic long-term returns, typically beat fancy managers, and can be bought and sold whenever you feel like it. Sometimes you’ll need to pull money from your retirement account. It happens.
Special note to my Canadian friends:
Everything works pretty much the same but put off tax-sheltered investments for a while. In Canada, you can roll your unused contributions into the future, which makes them good to save for when your income is really really huge.
Dip your toes into real estate investing (11% return)
I know that being a landlord isn’t for everyone, but I do think that everyone should have at least some experience in real estate investing before they are mega-wealthy so you know how to handle your piles of money later in life.
The lazy person’s path:
Invest in real estate through crowdfunding like Fundrise. It’s not really better than stocks, but it’s different, which is good. You need a minimum of $1000 to get a full Core Account with Fundrise, or $5,000 with EquityMultiple. (I currently have no recommendation for which is best.)
Kick it up a notch:
If you don’t mind being hands-on with your real estate investments, you can buy a low-cost rental for $70-100K. I know you’re here to learn how to invest $50K, but I’ll still lump this in. You can get a great rental that should consistently get you 11% returns, with $50K and the help of a line of credit.
It’s not just about the returns. It’s also about learning.
At this rate, you’ll be a millionaire soon, and you need to find out if you even like real estate and understand the ins and outs before you have to mobilize your $1,000,000 (on houses??).
A tip from experience: Don’t buy too cheap.
As a bit of a spoiler, I recommend buying a very expensive, mortgaged home when you’re at the $100K investing level. It’s more aggressive and will net you more money if you want to skip the “little leagues.”
Design and sell something at scale (500% return)
To be honest, I’m not a big proponent of the side-hustle lifestyle. I’d rather work part-time at my workplace. There are lots of reasons for this, but mostly it’s hard to beat the hourly rate of a person with 10+ years of experience in their field.
Having said that, I know some side-hustles are good, and setting up a business can be worth it. Especially for people:
- If you hate your job
- If you have the desire to start something big
- If you’re just into it
Then maybe having a different job could be your jam. But most side hustles suck.
- Yeah, you could make money flipping toasters on eBay.
- And yeah, maybe you can bootstrap something cheap on Etsy for very little money.
- But I hope you agree with me, that those sound like wastes of time.
- If you go all-in this is actually the best (and most aggressive) method of how to invest $50K. Get something real made at scale.
I don’t like to screw around here on the FIRE escape. Farting around for 3 weeks to make something I could outsource for a thousand bucks is just not in my blood. And $50,000 is the magic point where you could have a prototype, hire out a fair amount of work, and even pay for a marketing campaign.
Entrepreneurs often go cheap and time-consuming. But if you treat it like an investment it can make an insane amount of money! Just look at this:
Nerd alert example:
If you’re techno-minded like me, you could design a PCBA, order 1000 custom parts at $10 each, and through the magic of software and markups, easily sell something like this for over $50 a pop! BOOM, millionaire!
This will be SUPER time-consuming. But worth it if you do it right. 🙂
What didn’t make the cut?
Peer-to-peer lending. It’s like investing with FundRise, but it’s way less awesome.
And a few cheaper investments if you haven’t done them already:
- Invest in yourself
- Rent out your basement
- Employer Stock Matching
- Learn to invest tax-efficiently
- Pay off high-interest debt
- Refinance your house
(And since you’re here, read up on socially responsible investing too!)
TL;DR – how to invest $50K
- This is the stage where you should be investing for returns AND to learn about larger-scale investing
- Start learning about tax-sheltered accounts and keep investing in the market
- Find ways to invest in real estate. You’ll need to know if this is for you once you reach multi-millionaire level
- Design, produce, and sell something at scale
Now you are starting to learn the ins and outs of big-time investing while earning some awesome money in the interim. So I’m curious, what do you think is the best way to invest as you progress to multi-millionaire status?