How to Invest 200k? - SmartAsset

If you have $200,000 to invest, there are many ways to make your money grow. Let’s take a look at how you can invest in the stock market, real estate and other common investments, while keeping a few practical tips in mind.

A financial advisor can help you create a financial plan for your investment needs and goals.

What to Consider Before Investing $200k

Before you put your money into a six figure investment portfolio, financial experts will recommend that you diversify your assets to minimize your risk. When putting together a portfolio, it is important to keep in mind the time horizon in which you intend to access your investments. If you are decades away from retirement, as an example, then you may want to make riskier investments with the aim of getting higher returns. But, if you have a shorter time horizon, then you may want to scale down those riskier investments in favor of safer securities.

In addition to your time horizon, you will also want to be clear with yourself about how much risk you are willing to take on. This will drive your asset allocation. In 2022, for instance, rising inflation and ensuing interest rate hikes would have played directly into your investment strategy, and depending on your risk tolerance, you may have considered keeping a traditional 60/40 portfolio (60% stocks and 40% bonds) or adjusting it for the market.

4 Common Way to Invest 200k

With $200,000 to invest, here are four common choices to make your money grow:

The stock market. Investing in stock is a popular choice. You may want to put your money into big company names like Apple, Google, Microsoft or Tesla. Or invest on the future of smaller companies that have positioned themselves in the market for future gains. In either case, you will need to decide whether you want to put your money directly into a company through a stock plan or buy mutual funds, equity index funds or exchange-traded funds. Whichever path you take, experts caution: avoid putting too much money into one investment or a specific area of the market.

Real estate. Traditionally considered a consistent investment, this asset can offer investors long-term capital gains. You can invest in real estate through REITS, which are companies that own commercial property like office buildings and hotels. You can also buy a rental property directly, but you will need to make sure that your operating expenses fall under your rental income to turn a profit.

Health savings accounts. HSAs can be a practical way to invest money for future medical expenses in exchange for tax breaks. First, when you contribute to an HSA, your taxable income can be reduced and that money grows tax-free. Second, your withdrawals are also tax-free, if you use the money to pay for qualified expenses. And third, you can take your HSA savings and invest them further into mutual funds or index funds.

Fixed-income investments. These include financial vehicles like corporate, government or U.S. savings bonds, as well as certificates of deposits (CDs), high-yield savings accounts and preferred stocks. With all of these investments, you may know how much you are going to earn. Preferred stocks, for instance, pay a fixed dividend rate. They are generally considered to be well-rounded investments that are less vulnerable to market volatility. They may typically earn less than riskier investments, but you can also hold hybrid securities like convertible bonds that have both fixed-income and equity components.

Bottom Line

If you have $200k to invest, there are many types of financial investments that can help your money grow. But before you pat yourself on the back, make sure to diversify your asset allocation. When building your portfolio, keep both your time horizon and your risk tolerance in mind.

Investment Tips

A financial advisor can help you understand how your time horizon and risk tolerance will impact your financial plan. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
As we already emphasized, rebalancing your portfolio is a crucial for the success of your investing goals. Here’s what investors need to know when rebalancing.