Investing

8 Best Ways to Invest $1 Million

If you have $1 million to invest, the options can be endless. Below, we’ve sorted through the most financially-savvy moves you can make.

Editor's Note

You can trust the integrity of our balanced, independent financial advice. We may, however, receive compensation from the issuers of some products mentioned in this article. Opinions are the author's alone. This content has not been provided by, reviewed, approved or endorsed by any advertiser, unless otherwise noted below.

It may seem like you’ll never have $1 million to invest, but if you invest consistently over decades, you might build up that much wealth more quickly than you’d think. And if you manage to get a windfall with that many zeros behind it, it’s best to figure out ahead of time how you’ll invest it to keep it growing.

So let’s say someone decides to give you, randomly, $1 million tomorrow. What will you do with it? Well, hopefully, you’d consult with a professional who can give you advice on the best way to allocate your funds. But once you’ve decided to do that, your best bet is to choose low-cost, high-reward investment options. And, of course, you’ll want to diversify your investment portfolio. So to do that, here are the best options you can invest in if you have a million dollars.

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What to Do Before You Begin Investing

Before you start investing, there are a few things that you should do.

Think About Your Investing Goals

Before you start investing, you need to know why you’re investing. Your goals will play a big role in determining how you invest.

For example, if you’re young and investing for retirement, you can afford to own volatile stocks. You’ll probably want to build a portfolio that’s heavy on stocks and light on less risky investments like bonds. This can give your portfolio the highest potential returns.

If you’re investing for a more short-term goal, you’ll likely want to build a more conservative portfolio so that you don’t lose your savings right before you need it.

Your goals can also determine the account you use to invest. If you’re saving for retirement, you’ll want to use a 401(k) or IRA. If you want to help a child pay for college, you might use a 529.

Think About Your Investing Style

Are you the type of person who enjoys managing their money or do you want to take a hands-off approach to investing?

If you’re an active investor, look for a brokerage that offers low or no commissions on trades and that has tools you can use to research stocks and other securities.

If you’re looking for more passive, buy-and-hold investments, consider working with a company that has low-cost mutual funds, such as index funds.

Think About What’s Important to You

Some people want to put their money where their mouth is when it comes to investing. Before you start investing, you might want to consider ESG investing, which focuses on Environmental, Social, and Governance factors in companies.

For example, you might want to focus on investing in companies that do work to benefit the environment, or that take steps to make sure they treat their workers fairly and pay them well.

ESG investing has grown popular in recent years and some argue that it can improve performance compared to investing without a focus on these factors. However, ESG investing is often more difficult or expensive because you have to do the work to assess companies’ commitment to ESG concepts or pay a mutual fund manager to do that for you.

How to Invest $1 Million: Overview

Investment TypeBest For
Robo advisorsLow fees
Individual stocksControlling your investments
Real estatePhysical investments you can see
BondsBalancing your risk
Peer-to-peer lendingHigh-risk/high-reward

1. Pay Off Every Single Debt

First, if you have any major debts, you’ll want to pay those off. There’s some debate about whether or not you should pay off your house, so put some thought into this one. But, at a minimum, you should knock out any and all high-interest debt. Most of the investments below will not come anywhere near beating the 15%+ interest you’re paying for credit cards and personal loans. So get rid of those first so you have a great financial base to launch your investments from.

2. Be Sure You Have a Fully-Funded Emergency Fund

Again, before we start talking about investments, let’s be sure you’ve got your financial base in place. A fully-funded emergency fund of six months or more worth of expenses is your next step. For this, you’ll want to put the money somewhere that is liquid and insured, so look for an FDIC-insured savings account with a high yield. Some of the best options today are online-only and include Chime Bank, CIT Bank, Ally Bank, and Capital One 360. These online options pass their low overhead on to customers in the form of higher APY, which right now might even be out-earning inflation.

Also Read: Best Online Savings Accounts with High Interest

3. Max Out Your Retirement Savings First

With a million dollars to invest, you can definitely max out your retirement savings vehicles first, and using these tax-advantaged accounts should be your priority each year that you possibly can. If you already have money going into a company 401(k), consider a service like blooom to make sure you’re getting the most out of it. And if you don’t already have an IRA, open one to use with some of the following investing options. Then max out those accounts before you direct money to your taxable accounts.

Read More: Blooom Review - Finally, a Robo-Advisor for Your 401(k)

4. Try Robo Advisors or Investing on Your Own for Solid Long-Term Investments

Any time you’re looking to make a big investment, big fees will have an amplified effect. So you’ll definitely want to look for the lowest-fee options that have a good yield when you’re looking to invest this much money. One option for that is to invest with a robo advisor. Using algorithms instead of individuals, these services make historically solid investing decisions but cost far less than traditional investment advisors. Some of our favorite options, like Betterment and Wealthfront, have very low fees and give you access to a variety of investment options. M1 is another option that’s free to use with investing options for a selection of ETFs.

Learn More: Best Robo Advisors

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SEE IMPORTANT INFORMATION HERE.

Related: Best Alternative Investments

5. Invest In Your Values

If you’re interested in using that million dollars to spread some good in the world, you can do that while earning money through services like Stash. Investing in socially responsible companies is easier than ever now. You can invest in these types of stocks (or any other stock) with as little as $5 from the palm of your hand with Stash, an app that simplifies and democratizes investing so everyone from first-time investors to pros can reach their financial goals regardless of income or experience level.

With detailed stock market data and educational materials, personalized portfolio tracking, easy-to-read reports and personalized notifications on your personal moments of success, this app not only lets you invest without any brokerage fees but also equips you with the tools to make more informed decisions about when it’s time to sell up or down. Learn more in our Stash Review.

6. Consider Adding In Some Real Estate

Even with a million dollars to invest, you may not be able to outright buy property in some areas of the country. And if you do own property on your own, you’re stuck with the headache of managing it. If you want to avoid that but still want to add real estate to your portfolio, check out options like Origin Investments, Fundrise, and RealtyMogul.

Review: Real Estate Crowdfunding with Fundrise

All are great options, with different pros and cons. For example, Realty Mogul can help you invest in specific properties while Origin Investments focuses on helping you invest in portfolios of multiple properties.

Review: Is RealtyMogul the Easiest Way to Invest in Commercial Real Estate?

Another option for budding real estate investors is CrowdStreet. CrowdStreet is an online platform that gives investors access to commercial real estate opportunities that they otherwise wouldn’t be able to invest in. You can buy a stake in projects such as major apartment complexes, shopping malls, and industrial parks.

If you’d rather not invest directly in a single property, CrowdStreet also offers real estate funds that let you diversify your investment. You can also sign up for the site’s advisory service, which lets you work with a professional to build a real estate portfolio that can help you achieve your investing goals.

7. Look at Lending for Big Returns

Another way to be choosy and to get a potentially hefty return on your investment is with a peer-to-peer lending platform. Options like Lending Club and Prosper are great for lending your money to individuals who need to consolidate debt, fix up their home, or whatever. When you invest in these platforms, you can create a portfolio of loans that you partially help fund, so that you can spread your risk across multiple loans quite easily. These platforms have historically been great for investors and could net you some serious returns.

Read more: LendingClub Review - Invest on the Largest P2P Lending Platform

8. Consider Balancing with CDs and Securities

Of course, even millionaires have to worry about keeping a balanced portfolio and ensuring that not all of their capital is in riskier investments. That’s where options like CDs and securities come in. These have traditionally been a way to out-earn inflation so you aren’t losing money with it sitting around. But they’re also much safer than any other type of investment. So be sure you talk to your financial advisor about the best way to utilize tools like these to bring balance to your portfolio.

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9. Invest in Cryptocurrency

Bitcoin, Ethereum, Litecoin, and thousands of other cryptocurrencies are attracting investors from every corner of the world.

Investing in cryptocurrencies is easier than ever thanks to platforms such as Coinbase.

With Coinbase, for example, downloading the app is the only step in getting started. From there, you gain access to 5k+ cryptocurrencies along with data to help you make the best investments.

Diversification is critical to your long-term investing success, and cryptocurrencies deserve a closer look. Just make sure you don’t go all in, as cryptocurrency is a risky investment. Start with five percent of your portfolio and grow from there as you become more comfortable.

How Did We Come up With This List?

When designing this list, we looked for investment strategies that are available to most people that will help them build a diverse portfolio and earn solid returns. We also considered the cost of the investment strategy, as costs play a direct role in your returns. Every penny you pay in fees can have a compounding effect on your future returns.

We also tried to come up with a list of investment strategies that meet different risk tolerances and investing goals. People who are less risk-tolerant may not want to invest in real estate because real estate investing often involves high risk and leverage. Instead, they might want to focus on safer investments like mutual funds or even CDs.

Why You Should Trust Us

When you’re looking for financial help online, it’s hard to know whether you can trust the information you find. Anyone can publish on the internet and they may have an ulterior motive

At Dough Roller, we always try to provide the best, most accurate information possible. Our team of writers includes people who have showcased their expertise and been featured in major publications, so you can trust that they know a lot about the subjects they’re writing about.

Diversify Your Investments

One thing that’s essential no matter how you choose to invest is to make sure you diversify your investment portfolio.

Diversifying your investments, in essence, means not putting all of your eggs in one basket. If you decide to invest in stocks, don’t put all your money into a single company. If you’re purchasing real estate, try to buy more than one property.

Think about what would happen if the company you invested in goes bankrupt or the property you buy burns down. You’d lose all of your money. If you diversify your portfolio, even the worst-case scenario for one of your investments wouldn’t completely doom your portfolio.

Mutual funds, especially low-cost index funds, that hold shares in hundreds or thousands of companies, Real Estate Investment Trusts that own multiple properties and robo advisors that build balanced portfolios are all great ways to easily diversify your investment portfolio.

Strongly Consider Working with a Professional

If you have $1 million to invest, you have to be incredibly smart with how you manage that money. As we’ve written about before, $1 million isn’t a lot these days--in fact, the argument can be made that you need $2 million to retire.

So, it’s important that you not only preserve the $1 million the best you can but also help it grow. Investing is one thing you have to do--but only if you are comfortable managing that large of a portfolio. If you’re not (and even if you are) I would STRONGLY consider looking at working with a professional.

I get that you’d want to manage $1 million on your own (heck, even getting to this point is an accomplishment) but don’t be silly and mismanage it.

Track Your Investments

As you begin pulling together your various investments, it’s important to figure out how you’re going to keep track of it. Sure, you could pay someone to do it all for you. But that would just eat into your returns and your ability to grow your money. If you’d prefer to keep an eye on your investments yourself, check out services like Personal Capital, which help you pull together all the various threads of your financial life, from your budget to your investments on different platforms.

Learn More: Personal Capital Review: A Free Wealth Management Tool

Personal Capital can help you track your investment performance, spot potential problems, and keep an eye on your overall portfolio balance. It can also run your day-to-day budget, so it’s a very flexible platform that’s worth using once you’re ready to start keeping track of all this money.

The most important thing to remember is once you hit that million-dollar goal mark you’ve been saving for, the work isn’t over. You could easily lose it with celebratory spending. Have a plan in place for how you want to make this money work for you. With the right investment vehicle, you’ll be cruising down the road towards financial freedom.

FAQs

How much interest will I earn on $1 million dollars?

To use a basic example, say you had an account with $1 million that paid 4% annually--in such a case, you’d earn $40,000 per year. What’s great about compounding interest, though, is by leaving your money in the account, interest would accumulate on the new balance. So after the second year, assuming no other changes, you’d have $41,600.

How should I invest $1m to make $2 million dollars?

To effectively double $1 million, you’ll need to use the rule of 72, which is a formula that has you divide 72 by your expected annual rate of return. So, for example, if you’ve invested $1 million and anticipate a 5% rate of return, you can expect to double your million into two within about 14.4 years [72 / 5 = 14.4]. Now, to get a 5% rate of return, you should invest somewhat aggressively, such as in real estate, peer-to-peer lending, or using a robo advisor.

How can I invest $1m wisely?

To invest $1m wisely, you should look for investments that will net you an average of 4-6% on average, annually. For this, you should look at investments like buying a business, investing in index funds, and investing in large-scale commercial real estate projects. Regardless of what you choose, though, you should diversify your portfolio - especially investing this much.

What’s the best way to invest $1m short term?

The best short-term investment for $1m is a low-cost index fund that broadly diversifies your investments in stocks across a variety of industries. Alternatively, you can invest your $1m in a robo advisor which will pick low-cost investments across different areas for you.

Can I retire with $1 million dollars?

You can retire with $1 million dollars if you manage your withdrawals appropriately. The Rule of 4 says that you should withdraw no more than 4% of your total portfolio each year. Assuming you’re earning at least 4% in returns, you can effectively live off of interest earned without touching your principal balance. With a $1 million portfolio, this is $40,000 per year.

How can I earn passive income with $1 million?

The best way to earn a passive income with $1 million is to put it into something like real estate, where you own the property and can collect rent each month. With $1 million, you could invest half of that in a few properties that generate monthly income, pay a management company to manage it for you (so it’s completely passive), and invest the other half in a broadly diversified index fund. This way, you’re not opening yourself up to too much risk.

Read More: Best Investments for Passive Income

Bottom Line

As you can see, there are many ways you can invest $1 million. The first thing to recognize is that you’ve amassed this much money, which is more than many people can say for themselves. Next, though, you need to determine a strategy and focus on executing that strategy (and stick to the plan!) so you can make that $1 million last and grow even more.

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