InvestHow to Invest $500K Safely And Confidently

How to Invest $500K Safely And Confidently

Are you looking to invest $500,000? These are smart ways to invest $500,000 and minimize risk.

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Looking to learn the best way to invest 500k safely? Lucky you. If you need some help on how to invest $50,000 and avoid risk, let’s get to work.

Because if you are reading this article, then it probably means you are either working actively towards amassing wealth to the tune of a $500k (by investing smartly) or you’re fervently hoping to win the lottery someday.

Either way, it’s smart to learn about how to invest wisely and not spend this huge amount even before it hits your account. The reason is that $500,000 will not guarantee financial security unless the money is invested in ways that allow it to compound.

So it’s important to invest your $500k with caution.

19 Ways to Invest 500K Safely

Before that $150,000 burns a hole in your bank account, let’s work on building a diverse investment portfolio. While investing in the stock market is a no-brainer, there are multiple ways to invest money so you don’t have all your eggs in one basket.

Stock Market
Alternative Assets
Real Estate
Crypto
4.7
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4.2
Risk Level: Varies
Risk Level: Medium
Risk Level: Medium
Risk Level: High
Pros:
  • Invest 40% to 50% of your portfolio
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  • Invest 15% to 20% of your portfolio
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  • Invest 10% to 15% of your portfolio
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  • Invest 5% of your portfolio
Stock Market
4.7
Risk Level: Varies
Pros:
  • Invest 40% to 50% of your portfolio
Alternative Assets
5.0
Risk Level: Medium
Pros:
  • Invest 15% to 20% of your portfolio
Real Estate
5.0
Risk Level: Medium
Pros:
  • Invest 10% to 15% of your portfolio
Crypto
4.2
Risk Level: High
Pros:
  • Invest 5% of your portfolio

1. Pay off your debt.

The easiest way to invest your money is by paying off debt. It may sound odd but paying off your debt is the first and biggest investment you can make with $500,000 in your account. The interest on any debt you have grows with time and the sooner you pay it off, the more you will save.

You should know that the secret to success is paying off high-interest debt. Sure saving money and spending less is important but paying down debt is a worthy goal. Before you go off and invest $500,000, make sure your debt with the highest interest rates is paid off, in many cases that is going to be credit cards.

“So before you go dip your chunk of money into stocks, you’ll likely get a better return on your money if you pay off your high-interest CONSUMER debt.”

According to the latest reports, the average credit card interest rate is 17.98% for new offers and 14.58% for existing accounts. While the average stock market return for 10 years is 9.2%, according to Goldman Sachs data for the past 140 years.

Are you picking up what I’m putting down? Or is your credit card debt all paid off? Let’s move on.

2. Alternative investments.

how to invest 500k

You’ll be wise to consider investing some of your $500k invested in alternative assets. Companies like Yieldstreet offer a curated selection of alternative asset opportunities that were previously only available to institutions and the ultra-wealthy.

This opportunity is good for those with $500k to invest and who want to go beyond the stock market. It’s no secret that wealth professionals recommend allocating 15-20% of your portfolio to alternatives. And that’s where Yieldstreet can be a smart option for accredited investors.

Yieldstreet gives you access to investment opportunities in commercial real estate, art, legal finance, and more. With historical yields of up to 18% and over $100 million in interest paid to date, Yieldstreet takes pride in helping investors reach their ambitions. Diversify your portfolio and earn passive income with investments starting at only $2,500.

Got some time? Use their passive income stimulator and explore how you could build passive income with Yieldstreet today.

3. Portfolio management.

invest 500k

If you are working with $500,000 in liquid cash — you are considered a high-net-worth client who would benefit from a personal touch. With that amount of capital, you can start investing with Personal Capital.

Personal Capital has two options. The first is a free net worth tracker and planning tool that collects information from your financial accounts and helps you make improvements to increase returns. That’s a great option for anyone, no matter where you bank or invest.

The second option is using their asset management service which has a minimum account size of $100,000 to start. Once you join, you can get help setting goals for your money — primarily for your retirement savings.

If you invest your money here, a financial prossional will invest your money based on the Modern Portfolio Theory (MPT) which ensures true diversification and they go a step beyond tax-loss harvesting. They will optimize your tax burden and your portfolio will be tax-efficient.

According to the company’s own tests, it outperformed the S&P 500 by more than 1.5% annually with less volatility. Overall, it is a safe bet to open an Account at Personal Capital to help you grow your $500,000 safely.

4. Real estate.

how to invest 500k in real estate

One joint study by the University of California and the German central bank found that over the last 145 years, the real estate market offered the highest returns of any asset class. Even better, it did so with far less volatility than stocks.

As such, one of the easiest ways to grow your money is to invest in real estate. Robert Kiyosaki, author of ‘Rich Dad Poor Dad’ learned to quickly grow his money by making down payments for rental properties and gaining profit by selling the property later at a higher price.

Another way to invest in real estate is by buying a property and renting it with companies like Arrived. With the ever-increasing inflation rate, rents will go up while your mortgage payments stay the same. This increases your cash flow and your rental yield as an investor.

You could also invest your $500K in raw lands with AcreTrader. Investing in land is a profitable venture because of one key reason: land is scarce and its demand will always exceed its supply.

Another option to invest in real estate is a REIT (real estate investment trust) through real estate investing apps like Fundrise. Fundrise is the first investment platform to create a simple, low-cost way for anyone to access real estate’s historically consistent, exceptional returns.

Your $500,000 can go a long way through Fundrise as they consistently make 8.7% – 12.4% in historical returns ($62,000 in profit annually for your $500K).

5. Index funds.

Investing in index funds is like investing in the stock market without taking on too much risk. The risk of investing in index funds is very minimal yet the benefits are massive. The trick is to diversify your stocks by buying the largest companies through your index fund.

According to Bankrate, the best index funds to own this year are as follows:

  1. Fidelity ZERO Large Cap Index (FNILX)
  2. Vanguard S&P 500 ETF (VOO)
  3. SPDR S&P 500 ETF Trust (SPY)
  4. iShares Core S&P 500 ETF (IVV)
  5. Schwab S&P 500 Index Fund (SWPPX)

These index funds track the S&P 500 Index Fund and offer you a way to invest your $500,000 in stocks of the S&P 500 at a low cost, while still enjoying diversification and lower risk.

The main difference between exchange-traded funds (ETF) and index funds is that ETFs can be traded (bought and sold) during the day and index funds can only be traded at the set price point at the end of the trading day.

6. Mutual funds.

Another way to invest your $500,000 in the stock market is through mutual funds. A mutual fund is an investment vehicle that holds a portfolio of stocks, bonds, or other securities.

Since they hold many different securities, it makes it a very attractive investment option for someone who has $500,000 to invest. Investing your money in a mutual fund instead of individual stocks means you get diversification, convenience, and lower costs.

According to Investopedia, the top 5 biggest mutual funds on the stock exchange are:

  1. Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
  2. Fidelity 500 Index Fund (FXAIX)
  3. Vanguard Institutional Index Mutual Fund (VINIX)
  4. Fidelity Government Cash Reserves (FDRXX)
  5. Vanguard Federal Money Market Fund (VMFXX)

Some people may wonder how mutual funds are different than index funds? An index fund only seeks market-average returns (safe), while active mutual funds have fund managers that try to outperform the market. This means that the fees for active mutual funds are higher than index funds and less predictable returns.

7. Max out your retirement accounts.

Any investment advisor would suggest investing in index funds and mutual funds in your retirement accounts and shooting for maxing out these accounts.

If your employer offers a 401(k) that matches employee contributions, and you aren’t currently contributing enough to earn that match, let your extra $500k free up some space in your budget so you can do so.

The other option is to contribute to a Roth or traditional IRA. These retirement accounts do have annual contribution limits — $6,000 in 2022 ($7,000 if age 50 or older).

You can pad these retirement accounts in order to help prepare yourself for retirement down the road.

Your retirement accounts commonly invest in index funds, exchange traded funds (ETFs), mutual funds, and are low-risk investments because your investments are diversified.

One of the most critical parts of investing half a million dollars is maxing out your tax-advantaged accounts. Most high earners that don’t have qualified financial advisors can get some insight into maximizing these tax advantages by using services like Playbook.

Playbook looks at your finances holistically, helping you build a plan to capture tax advantages, customize your investments, and automate your wealth-building.

Your tax advantages expire every year, but Playbook can help. If you miss a year, you’ll never get those dollars back — that takes a huge toll on your net worth. Don’t wait another year, you can learn more from Playbook here.

Building wealth is a compounding game. If you avoid paying 20%+ in taxes, it can supercharge your year-over-year earnings and increase your net worth over your lifetime. Playbook predicts that its average user will add over $1.3 million to their net worth over their lifetime.

8. Start a business.

Starting a business is one of my favorite ways to get rich because of how much money you can make. Invest your $500k in that promising business venture you put on the back burner for lack of money. If it is a high-risk business be sure to conduct research into your prospect, seek expert advice and develop a solid business plan before starting out.

Of course, the amount of money required to start your business depends on your business model and industry. However, a 2009 study conducted by the Ewing Marion Kauffman Foundation puts the average cost of starting a business is around $30,000, leaving you $470,000 for other investments.

Alternatively, starting a business with no money might initially seem like a far-fetched idea, but it’s not impossible. You can even use a personal loan to start a business, in certain situations. The bottom line is that nothing is stopping you from launching a business.

9. High yield savings accounts.

invest 500k in savings

High yield savings accounts offer a safe short term way to invest your 500k. It’s much more profitable than a normal savings account. Your money can sit in there and accrue some interest until you are ready to invest in bigger and more profitable ventures.

Most experts recommend Axos Bank’s High Yield Savings, where you can earn a very impressive .61% annual percentage yield which is an APY that’s 6X the national average. Comes with zero monthly maintenance fees and zero minimum balance requirements. On a $500,000 balance, you’ll earn $3050 annually compared to just $500 (national average).

But there are other options, in the table below we show some of the best high yield savings accounts, some of which offer 5% interest savings accounts.

Market conditions will determine how much interest you make in a high yield savings account. When interest rates rise, the amount of money you’ll be paid will increase. If interest rates drop, your earnings will decrease as well.

10. Invest in yourself.

Investing in yourself is one of the best investments you could ever make and it can take many forms: pursuing a creative project, nurturing a talent taking a course, learning a new skill or pick up a new side hustle to get paid today.

While you won’t likely spend $500,000 by investing in yourself, when you put your wellness first, your energy and production will increase at work which will yield better results and more revenue overall.

11. Donate to charity.

One of the best ways to invest $500,000 is to make an impact in the lives of the less fortunate through charitable giving. Investors who are into impact investing also get tax deductions. Most all charitable organizations qualify for a charitable contribution deduction.

You may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions. Generally, you may deduct up to 50 percent of your adjusted gross income, but 20 percent and 30 percent limitations apply in some cases.

12. Treasury bonds.

Treasury bonds can be an excellent investment for those looking for safety and a fixed rate of interest that’s paid semiannually until the bond’s maturity.

There are 4 different types of treasury bonds (NerdWallet):

  • Treasury bills (or T-bills): Short-term debt securities that mature in less than one year. Though T-bills are sold with a wide range of maturities, the most common terms are for four, eight, 13, 26 and 52 weeks.
  • Treasury notes (or T-notes): Intermediate-term debt securities that mature in two, three, five, seven and 10 years.
  • Treasury bonds (or T-bonds): Long-term debt securities that mature between 10 and 30 years.
  • Treasury Inflation-Protected Securities (or TIPS): Another type of Treasury bond, adjusted over time to keep up with inflation.

Overall, treasury bonds should play a strong role in your portfolio’s asset allocation because it provides steady returns and can help offset the volatility in the stock market. You can purchase Treasury bonds directly from the Treasury Department through its website, TreasuryDirect, or through any brokerage account.

13. Invest in art.

invest 500k in art

Contemporary art has offered an annual return of 14% over the last 25 years, as of December 2020, versus a 9.5% annual return from the S&P 500, according to the Citi Global Art Market chart.

If you want to invest in art, Masterworks is a good place to start. You can buy and sell shares in multimillion-dollar paintings on the Masterworks platform. If you decide to keep your shares until the painting sells, you’ll receive proceeds from the sale.

Read more on investing in art to decide if it’s a smart investment for you.

14. Invest in cryptocurrency.

invest 500k in crypto

When it comes to investing, diversification is key. Cryptocurrency can be considered one of the newest and most exciting asset classes that is available to investors.

Bitcoin, the world’s largest crypto by market cap, has fallen half its value since hitting a record high. Some experts are saying now is the time to invest by using trusted cryptocurrency apps like Coinbase. Coinbase is one of the most established cryptocurrency exchanges in the United States and one of the largest in the world.

Over 73 million people and businesses trust Coinbase to buy, sell, and manage crypto. Most investors prefer using Coinbase since it links up to your budget planners like Mint, Personal Capital and even Fidelity.

For those not interested in buying digital currencies like Bitcoin or Ethereum, there are dozens of ways to score free Bitcoin, we’re serious.

15. Downpayment on a home.

The homeownership rate ticked up more than 2 percentage points in the last year, to 67.4 percent. And there are many renters eager to join the club, especially since mortgage interest rates dropped to all-time lows during the coronavirus pandemic.

For first-time homebuyers, the process of becoming a homeowner can be intimidating. It’s a big purchase that comes with a host of responsibilities and costs. But, real estate assets are also a long-term investment that can help secure your financial future.

What house can I afford? How much would my mortgage be? What would the mortgage be for a $500k house?

The monthly payment on a 500k mortgage is $3,539 for a 30 year-loan. This is calculated at 5.5 percent interest and a 10 percent down payment ($56,000).

Before you invest $500k into a home or any sort of real estate, you’ll want to be sure you can afford it. To be able to borrow a 500k mortgage, you’ll require an income of $153,812 per year.

When you want to buy a house with a mortgage of 500k, it’s a huge deal, so it’s wise to find the best real estate mortgage lender to help you do that. We recommend shopping for offers from at least three different lenders to find the best rate.

To help you choose the best mortgage lender, we have picked the best mortgage lenders that we’ve found that offer an online easy application to help you get a home loan with the best terms.

16. Annuities. 

This is a low-yielding investment that could pay as low as 3% on your capital. An annuity is a way to supplement your income during retirement.

Annuities can be a smart option since it provides regular payments, tax benefits, and a potential death benefit. The other advantage is that your capital is kept safe and your returns are guaranteed.

For example, you can get income for life after 90, starting at just $25/mo with companies like AgeUp. AgeUp is issued by MassMutual, an insurance company that’s been in operation for more than 160 years.

The AgeUp annuity provides guaranteed lifetime income if you reach your 90s, and an optional return of premium that could help cover final or other expenses if you don’t.

What’s best about AgeUp is that you can contribute in low monthly payments. Unlike annuities that require large lump sum deposits upfront… it’s affordable for almost everyone.

17. Invest using a robo advisor.

Last month, I had $500,000 to invest and I chose to invest some of it using robo-advisors. Who says you have to stick all of your money in just one place? You should diversify in order to not put all your eggs in one basket.

When choosing the best robo-advisor I looked for ones that had tax loss harvesting (to help with capital gains taxes), low fees, and overall the best performance. The best robo-advisors I’ve found were:

Ultimately, I invested my money using both Betterment and Acorns which are pioneers in the robo-advising space and the platforms are very user-friendly. In comparison, Betterment uses tax-loss harvesting to help maximize returns and reduce taxable income, which Acorns does not offer.

If you want to invest $500,000 utilizing a hand-off approach, with goal-based planning, and automated investing tools — using Betterment is a no-brainer.

Betterment provides automatic portfolio management and only charges 0.25% annually. This is very reasonable compared to other robo-advisors management fees, especially since there is no other platform that offers as much value to its customers as Betterment.

I opted for dollar-cost average (DCA) in the market using Betterment instead of making one big lump sum investment (would be unsettling if the market tanked).

In addition to a standard taxable account option, long-term savers should check out Betterment’s retirement accounts, including a traditional individual retirement account (IRA) choice, a Roth IRA and a SEP IRA option for small business owners.

Overall, robo-advisors are a smart way to invest any amount of money without much risk. In fact, since 1928, the S&P 500 (a collection of the 500 largest stocks in the U.S.) has averaged roughly 7% in annual returns, even after adjusting for inflation.

18. Peer-to-peer lending.

This is a way to make a direct impact on the lives of people. This is how it works: you sign up on a platform like LendingClub or Prosper and start giving loans to peers registered on the platform. You can buy into a thousand different loans to spread out risks and earn a profit in the form of interest.

19. Invest in an emergency fund.

One wise thing to do once you have your 500k in hand is to set up an emergency fund or fund it if you already have one. It will shield you from life’s unpleasant surprises.

As you may have guessed, there are so many ways to invest your $500,000 with confidence. You might choose one particular method, or you might choose to diversify. Just make sure to invest somehow so you can offset inflation and your wallet will thank you for it!

Things to Keep in Mind Before You Invest $500,000

Before investing $500,000, take a deep breath and go over your financial situation. Do you have any pressing financial issues that you need to deal with? Before investing this money that’s liquid, you should make sure everything else is in order.

This generally means that you already have an emergency of three to six months set aside, you are paying down debt already, and you need to understand what type of investor you are.

Because you only know your risk tolerance, so that alone will help you decide which way you want to invest your money.

Whether you want to use it as a down payment on a rental property, buy commercial real estate, pay off some expenses, invest in a CD, or a taxable brokerage account, it’s all up to your risk tolerance.

If you’re looking to invest a larger amount of money, you can see how to invest $100k safely.

For you: What ways have you found to invest or which best way to invest 500k safely did you like best?

Brian Meiggs
Brian Meiggs
Founder of Smarts, Brian is an entrepreneur and investor who enjoys working out, reading, spending time with his family and friends, playing chess, traveling and creating great content. He’s passionate about helping others make smarter money moves and achieve financial freedom. He uses the free Personal Capital app to manage his cash flow and net worth.
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Carolina D.
Carolina D.

Good resource, especially with bonds and CDs yielding so low, some assets at astronomical valuations and the economy struggling with surging inflation.

Thakur
Thakur

Great article