If you have, or have recently come into, $20k to invest, good for you! It’s not easy or common to save (or inherit) that kind of money in a short period of time.

You don’t want the money to sit around and get stale. If you’re not investing the money, you’re actually losing money due to inflation.

Here are 8 ways you can invest that money, including suggested allocations and other tips.

1. Invest with a robo-advisor

Recommended allocation: Up to 100 percent

Investing your $20k with a robo-advisor is a great option, as you’ll immediately be invested in the stock market in a broadly diversified way. If you’re unsure of exactly what a robo-advisor is, be sure to read our detailed article on what they are if they’re right for you.

In a nutshell, a robo-advisor is like a financial advisor, but instead of a person picking out expensive investments for you, a company like Betterment creates a series of algorithms to choose, diversify, and adjust your investments over time, all based on your financial resources, tolerance for risk, and investment timeline.

You can choose a regular, taxable investment account or set up an IRA. My advice would first be to set up and max out either a Roth or Traditional IRA, then use the rest for a taxable investment account.

Currently you can contribute up to $5,500 per year to an IRA, unless you’re older and meet catch-up qualifications.

Betterment

If you want to invest your money with a robo-advisor, I suggest checking out Betterment. They have an easy-to-use platform and a very low fee structure. Plus they have no minimum starting balance, meaning if you’re not willing to invest the full $20,000, you can start with a much lower amount and scale up from there.

M1 Finance

Another one I really like is M1 Finance. Most robo-advisors won’t let you select individual stocks to add to your portfolio, but with M1 you can.
That means you can rely on their expertise to create the bulk of your portfolio, but you can also add in your own preferred stocks on top of that. Plus, they charge no commissions and have no minimum starting balance.

Wealthfront

Wealthfront automatically invests your money into low-cost index funds, which reduces your risk while bringing maximum earnings. You’ll pay only an 0.25% annual advisory fee for the service, and Wealthfront uses a strategy called Tax-Loss Harvesting to lower your tax burden. Once you’re set up, you’ll also get the benefit of Wealthfront’s insights, which shows you how much you can expect to make in the years to come.

2. Invest with a broker

While many folks prefer hands-off investing with robo-advisors, there are plenty who like to invest on their own. Brokers can help you do that. Before online brokerages come onto the scene, folks used to pay hefty fees to a broker who would make trades on their behalf. That’s quickly becoming a thing of the past.

For a fraction of the cost of traditional brokers, online brokers like E*TRADE and TD Ameritrade can help you educate yourself about the stock market and invest your money quickly and easily.

You Invest by J. P. Morgan

You Invest by J.P. Morgan has two options for investing. You can use their self-guided option for free, with no investment minimums. There’s also You Invest Portfolios, which gives you access to experts who will help build and manage your investments. You’ll pay a small annual fee of 0.35% for that option. The easy-to-use app means you can monitor performance on an ongoing basis.

Disclosure – INVESTMENT PRODUCTS: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

E*TRADE

E*TRADE, one option for an online brokerage, now offers trades for free. That’s right, what used to cost $6.95 now costs nothing — you can make online US-listed stocks, options, and, ETFs for a $0 commission (see full pricing here). But it’s not just the low-cost trading that won us over. E*TRADE offers many educational resources that actually explain complicated investing well.

Webull

When you sign up for Webull, you get more than a platform for managing your investments. The Webull dashboard gives you a real-time overview of how the market is performing.

You can also add stocks to a watchlist and keep an eye on them. Once you’ve built your portfolio, you can monitor it through the website or the mobile app. But what I like best about Webull is that it’s completely free.

3. Do a 401(k) swap

Recommended allocation: Up to 100 percent

If you’re employed and have $20,000 to invest, one option is to effectively “swap” the money into your 401(k).

Since that money typically comes from your paycheck or bonus, you can increase the contribution amount significantly (usually up to 75 percent of your salary) until you have contributed $20,000—using the cash you have on hand to replace the lost income.

How a 401(k) swap works

Say you make $40,000 per year and you’re putting 5 percent into your 401(k) right now. Not including any employer match, that’s about $2,000 per year. Now let’s say you come into $20,000 that you want to invest.

You could stash that $20,000 in a liquid, high-yield savings account and then increase your 401(k) contribution, so it wouldn’t feel like you were living off of any less. (Though I’d still challenge you to do so!)

So instead of a five percent contribution, change it to 50 percent—yes 50 percent. After a year, you’ll not only have invested $20,000 in a 401(k), but there’s another huge benefit:

You’ve just reduced your taxable income by 50 percent. A 401(k) is pre-tax money, so anything that you get in your paycheck after your 401(k) contributions is considered your taxable income.

This means that, in the government’s eyes, you’ve only made $20,000 in one year, not $40,000. You’ll pay fewer taxes in most cases, so it’s a win-win.

If don’t have a 401k and you want to start saving for your future, I’m gonna recommend blooom, a robo-advisor that specializes in managing your 401k. Choose a risk tolerance, and blooom will make recommendations for you based on your age, income, and other factors.

Get started with Blooom and get $15 off your first year of Blooom with code BLMSMART. Or check out our Blooom Review for more information.

4. Invest in real estate

Sure, you could take the chance of buying a rental property and becoming a landlord. But even if it works out, it’s a complete time-suck. Plus, you’re missing out on the potential rewards from investing in large-scale commercial projects.

Until recently, you had to be an accredited investor to invest in these types of projects (or have a ton of money to put in). But now there’s a real estate crowdfunding investment site called Fundrise that creates loans for people or groups who are buying commercial real estate.

Think BIG projects, like apartment buildings and office buildings. They then bundle these loans together and make it an investment, called an eREIT. They then sell shares of the eREIT to you as an investor, directly through their site.

In other words, they make it incredibly simple for you to invest in big real estate projects. What’s even better is that you can start investing with as little as $500. Now those of you that have read my thoughts on investing over the years know I hate correlating past performance to future returns, but it’s worth noting that Fundrise has historical annual returns between 8.7 and 12.4 percent. 

That’s hard to ignore.

So with $20,000 to invest, adding at least some diversification in real estate is a wise investment decision. And Fundrise can help you accomplish that quickly and securely. 

Plus, with such a low barrier to entry, Fundrise makes it easy for you to start investing in real estate without sinking all of your money into property or expensive REITs. I think this is a great way to dip your toe in the real estate waters. Check out our full review.

5. Put the money in a savings account

Recommended allocation: Up to 50 percent
The reason Money Under 30 recommends only putting up to 50 percent of your money in a high-yield savings account is because the return on investment won’t be great. If you absolutely know you’ll need the money in a very short period of time, you should feel comfortable going over that 50 percent mark, but I would think about it first.

Some high-yield savings accounts will give you one percent annual percentage yield (or higher), which is awesome… for a savings account. You’re better off, however, putting your money in the stock market, taking on a little more risk for a higher potential reward.

The other thing to consider is that you can invest your money with a robo-advisor in a super-conservative way. For example, we’re saving for a new home right now and I chose to take my money out of my high-yield savings account and put it into a Betterment account with only 10 percent stocks and 90 percent bonds.

This is by no means going to give me the 6 percent-plus return I’m expecting from my stocks, but I’m hoping it’ll do better than a typical savings account, while also keeping my money liquid, meaning I can take it out of the account whenever I need.

6. Try out peer-to-peer lending

Recommended allocation: Less than 10 percent

Peer-to-peer lending is a way of loaning money to someone else who needs it. This could be for anything: a business idea, student loans, or just paying down credit card debt.

The benefit to peer-to-peer lending (or P2P lending) is that your returns can be much higher than if you were to invest in stocks or bonds. The risk, however, is much greater, as many people won’t pay the loan back on time or won’t pay it back at all.

If you’re going to look into peer-to-peer lending as an option for investing part of your $20,000, be sure to do as much research as you can.

Here you can read the review of two of our favorite peer to peer lenders, Lending Club and Prosper. Before diving into P2P lending, make sure to do your research, because the risk is considerable. Also, check out this article comparing LendingClub and Prosper to find out which is right for you. If you do want to get started, click here to invest with Lending Club and here to invest with Prosper.

7. Start your own business

Recommended allocation: Up to 100 percent (be aware of the extremely high level of risk)

I want to emphasize that starting a business is extremely risky. If you put 100 percent of your $20,000 into starting a business, there’s a strong chance it’ll fail and you’ll lose everything.

Now that I’ve gotten that disclosure out of the way, starting a business can be incredibly lucrative (and fun). You just really have to know what you’re doing.

This all starts with a solid business plan. If you don’t have a comprehensive business plan, don’t even bother thinking of starting a business.

You also have to dedicate a lot of time and energy to that business. Expect to work far more hours than you would as a regular employee.

The payoff can be great. If you find something that there’s a market for, and you know how to operate a business the right way, you could end up doing exactly what you love and making great money from it.

8. Pay for an education

Recommended allocation: Up to 100 percent

My dad once told me that the only thing someone can never take away from you is your education. It has stuck with me to this day because it’s true.

You can lose all of your money in the stock market. Your business can fail. But if you have a strong education and a degree, that’ll never go away.

If you don’t have a college degree, consider getting one in something you really enjoy, but is also marketable. If you already have a college degree, consider an even higher one, say a master’s or a PhD.

If that’s still not for you, there’s always the option of paying for some of your child’s education. If you have children and haven’t started a college savings account for them, now might be the time.

A 529 Savings account is an excellent choice for college savings, and there are a ton of benefits to having one. In fact, I just opened one up for my son who was born earlier this year.

While $20,000 isn’t going to cover the full cost of a degree in most cases, it’ll at least get you started.

Summary

Remember that diversification is key, especially with this kind of money. I’d suggest you don’t put all your eggs in one basket unless you really know what you’re doing.

The exception to this is investing with a robo-advisor. I would feel completely comfortable investing $20k with a robo-advisor, knowing that my money is going to be well-diversified. Just make sure you mix up the type of accounts you have (i.e. retirement vs. regular investment accounts).

Don’t forget about the value of an education or the thrill of starting your own business. But be sure to know the risks involved.

Whatever you do – do something. Indecision is a losing game in the financial world.

Read more:

  • How To Invest
  • Asset Allocation For Young Investors