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You’ve got an extra $20k in cash. Now how do you invest it?

Whether you’ve saved $20k or received it through a windfall, knowing how to invest it can be daunting. It’s a lot of money that you don’t want to squander. In this article, I’ll show you some ways that you can invest that $20,000 to give yourself the best chance at a positive ROI.

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What You Need to Consider Before Investing

Before we even get into how you should invest $20k, there are a few things you need to consider: your intentionality, turnaround period, and risk tolerance.


The first thing you need to figure out is your intentions with this money. Investing is a significant first step, but you must have a goal.

A goal provides you with a structure on which you can build an investment plan. You can change up your goals as time goes on, but you need a rough outline. This goal can be as simple as a numerical value by which you want to increase your investment. It could also relate to something more concrete, such as a new home or car.

Different investment techniques yield different results. So by having a clear intention, you can make a more informed decision on what to do with your money.

Turnaround Period

Besides intentionality, another critical factor in how you invest this money is your expectation for the turnaround on your investment. What is your timeframe? If you want a quick turnaround on your money, you need to consider a less aggressive investment strategy.

Investing in bonds, for instance, is generally more favorable to those who want quick returns, as their worth doesn’t fluctuate as aggressively. If you aren’t sure what you want to do yet, don’t worry. It should all make more sense once you finish reading this guide. Investing in stocks, on the other hand, can provide you with excellent returns over several years, making them favorable for those willing to play the long game.

Risk Tolerance

Making money has become more accessible as the internet has grown more sophisticated. However, it isn’t entirely risk-free. Far from it, in fact. Are you willing to take these risks? More to the point, can you afford to assume these risks?

Consider both your circumstances and your capacity for risk-taking. There is no reward without risk, but you still need to be realistic. With all of that in mind, let’s unpack how to invest that $20,000 of yours–and potentially make a lot more.

Use a Robo Advisor

The first tactic I recommend is using a robo advisor. Robo advisors are digital platforms that use algorithms to provide you with the best investment opportunities. They do this with almost no human supervision.

Robo advisors are often exceptionally user-friendly, which makes them great for beginners. They consider numerous factors relating to an investor’s unique circumstance, too.

Robo advisors curate an investment plan using factors such as your goals, budget, and how long you intend to invest. The information collected from this initial survey generates continuous investment advice. You can update your information at any point to tailor the advice you receive.


The first robo advisor to hit the scene was Betterment back in 2008. Betterment has low fees, allows you to invest in Roth and Traditional IRA accounts and foreign investments. There’s no account minimum, so you could invest your entire $20k or just a small portion of it.

Since Betterment came onto the market, there’s been an uptick in the number of robo advisors investors can choose from.

Open an account with Betterment or read our full Betterment review.


Another one I like is M1 Finance. Unlike most robo advisors, M1 Finance allows a level of customization rarely seen. If you wanted to add just one stock or ETF to your portfolio, M1Finance allows you to do it. This means you can better customize your portfolio. There’s a minimum account balance of $100.

Open an account with M1 Finance or read our full M1 Finance review.


And if you are a Millennial, consider checking out Wealthfront. This app offers everything you expect from a robo advisor plus features like cash accounts, free financial planning, and lines of credits. The account minimum is $500.

One thing all these robo advisors share is their intuitive function and increased modernization.

The AI associated with robo advisors has only gotten better, with some even considering social responsibility. There’s a variety of factors considered by modern robo advisors, allowing you to customize your opportunities from top to bottom.

Open an account with Wealthfront or read our full Wealthfront review.

How Do Robo Advisors Work?

One of the most effective processes a robo advisor completes is the automatic indexing of potential investment opportunities. Crafting a diversified portfolio has never been easier.

You can see all the opportunities most relevant to your goals in a straightforward breakdown. This report makes it a lot easier to know which investments to pursue and how high the risk may be.

The newer robo advisors come with an array of features, including retirement planning and tax-loss-harvesting. The latter means that even if one of your investments falls through, you don’t have to sit in defeat. You can immediately re-purpose those funds to another venture.

Learn More: Best Robo-Advisors

Open an Online Brokerage

Another great option is to sign up with an online brokerage. The trick is finding a broker worth your time. There are many on the market, all vying for your attention. Don’t feel drawn toward the first one you find just because they make bold claims.

The first thing you should establish is where you want to invest. Are you interested solely in the domestic market, or are you willing to invest abroad? The U.S. has a huge stock market, but the UK and Hong Kong can also boost your investment prospects. Consider wisely.

Next, consider the cost. Broker fees are the biggest drawback for younger investors without a huge budget. Many brokers exist behind a paywall and require a minimum account balance to begin.

Not all are like this, however. There are online brokerages that are low-cost so you can get on the ladder straight away. However, some transactions require a withdrawal fee if you back out, so know the terms before signing up.


E*TRADE is the original online brokerage company and offers $0 fees on trading stocks. The mobile app is robust and the company has brick-and-mortar stores and tons of online resources if you have questions. There is no minimum amount required to start your brokerage account with E*TRADE.

Open an account with E*TRADE  or read our full E*TRADE review .


Webull is rooted in technology, so if you want to use that $20k to trade more than stocks and ETFs, such as cryptocurrency, you can do it here. The app is targeted at more sophisticated investors who want in-depth analysis tools. If you’re more of a newbie, you can use their test portfolio before committing any of your cash. There’s no minimum deposit required.

Open an account with Webull or read our full Webull review  .

You Invest

You Invest is the trading account offered by J.P. Morgan Chase. This online brokerage is great because they help you create an asset allocation that is based on your investment goals, timeline, and risk tolerance. Trading stocks, ETFs, and mutual funds are fee-free (unless you need phone assistance). With just $500 needed to open an account, you can use your $20k here and still have plenty leftover.

Open an account with You Invest or read our full You Invest review.

Resource: Popular online brokers that offer a free stock trading simulator.

Boost Your 401(k)

401(k)s get their name from the relevant section of the U.S. Internal Revenue Code. They are primarily available through employers, for their employees, as a benefit and can be great assets for investors. Contributions go into the accounts through automatic paycheck reductions, which the employer will then contribute to or match entirely.

One of the best aspects of a 401(k) account is that the money is entirely tax-free until you withdraw it. It is a popular (and lucrative) option for retirement planning.

There are two types of 401(k) accounts available. One is the traditional kind, the other is a Roth account. The only difference between them is taxation. The traditional 401(k) account has only its total amount taxed once you withdraw it.

A Roth 401(k) account operates similarly, except the employer contributions are subject to taxes before being deposited. In recent years, 401(k) accounts have become a preferred option for retirement planning over traditional methods.

So, how do you invest your $20,000 in a 401(k)? The maximum amount an employer can contribute to your 401(k) changes each year in line with rising inflation rates. For 2021, it’s $19,500. By investing a portion of your $20k into your 401(k) account, you can receive the maximum benefit without the tax repercussions you would incur from alternative investment options.

A 401(k) is a fantastic way to increase your standing total while also preparing for the future. If appropriately maintained, 401(k) accounts can generate wealth through employer contributions.

This possibility is especially true when you pair it with investment optimization services like Blooom.


Blooom will tap into your 401(k) (it’s secure, don’t worry) and optimize your investments just like a robo advisor. It helps you to manage your 401(k) and works to keep your fees low–the company claims it’s saved clients more than $1.2 billion in collective lifetime fees. And if your employer 401(k) options are limited, this is a great service to check out.

Considerations to Make with 401(k)s

Likely, you won’t be in the same job your entire life. So, what happens to your 401(k) account if you leave your current workplace? Well, there are a variety of possible options.

Individual employers will allow you to move your old 401(k) balance to another account. This route is often preferred as it carries over the deferred tax benefits and allows continued contribution.

Additionally, you can move your current balance over into an IRA. This option is often the most popular for investors. With an IRA, you still receive the tax deferral benefits and can continue to make contributions.

If you don’t have one, I strongly encourage you to open a 401(k) as soon as possible. If you anticipate being with the same employer for some time, this investment strategy works to your long-term benefit.

401(k) accounts are only advisable for investors with long-term goals in mind, though. The tax deferral benefits reach their optimum if you save a significant amount. This form of investing is ideal for those looking to create a healthy retirement fund.

Also, one (probably obvious) thing to note is that you can’t directly deposit your $20,000 into your 401(k). It has to come from your paycheck. So the best thing to do is increase your contributions and use the $20,000 you have to spread out over whatever period of time you’ll be ramping up your contributions to invest.

Invest in Real Estate

You might assume that renovating houses is a quick way to make money. You purchase a property with your accrued funds and sell it for profit. Easy, right? Not necessarily. If you aren’t careful with your funds, you can lose out big time. Flipping houses is an especially dangerous trap for beginners.

However, smart investments in the property market can boost your returns. Many online real estate brokers connect investors with prime opportunities to aid in this pursuit. The only drawback is that you may need a significant investment fund before you can begin. Many real estate investment firms require that you’re accredited–meaning you need to make (typically) at least $250,000 per year or have over $1 million in net worth. Note that not all brokers have this prerequisite.


If you only want to use a small chunk of your $20k to invest in real estate, then Fundrise is a great option. The company allows investments as low as $500 into eREITs (think of a mutual fund for commercial real estate) and eFunds (investments in residential-only real estate assets). And you don’t even have to be an accredited investor to join.

Visit Fundrise or read the full Fundrise Review


RealtyMogul offers a way to invest in commercial real estate without having to do any of the actual work of finding a property and renting it out. Their core offerings are for accredited investors only, but they have newer products targeted at a wider range of investors. With a minimum investment of just $1,000, RealtyMogul makes it easy to get into the commercial real estate game.

Visit RealtyMogul or read the full RealtyMogul Review


Streitwise is another way to invest in commercial real estate without needing to be an accredited investor. With Streitwise, you can invest in REITs with a minimum of $1,000. With Streitwise, you’ll be paid quarterly dividends on the commercial properties in the portfolio.

Visit Streitwise or read our full Streitwise review

Real estate investment can yield high rewards, but that also entails a lot of risks. Rather than aiming big and possibly failing big, try to make smaller informed decisions until you feel confident.

You can also consider investing in REITs–this allows you to invest money in a property without physically owning it. You can secure high profits without taking risks associated with property ownership or flipping.

Put the Money in a High-Yield Savings Account

While this method may not seem like the most exciting thing to do with a large sum of money, it can be highly lucrative.

High-yield savings accounts differ from a standard checking account due to their higher interest rates. The longer you hold your money in them, the higher your returns will be.

It isn’t quite as exciting as a high-risk investment, but it isn’t without its merits. The motivation behind savings is to grow your money slowly over an extended period. Its main appeal is the lack of risk associated. Your savings account will not eat up your funds. It’s only going to help them grow.

Compare savings accounts offered by various banks and go where the money is. You can keep healthy interest returns coming in. Your gains will be substantial if you are smart about investing this lump sum.

Make Use of Peer-to-Peer Lending

Peer-to-peer lending sites, or P2P websites, connect lenders with borrowers. They aren’t a traditional loan service, however. What makes them unique is the accumulation of interest the lender will receive. As a lender, you receive your original total back once the borrower has repaid the loan and the subsequent interest total.

This investment strategy can be risky, as is always the case when lending money, but the returns can be substantial.

Substantial returns come with higher-end interest rates. However, remember that the higher the interest rate, the higher the risk. If a borrower offers a high-interest rate, it’s likely because they need the loan amount. This need can indicate financial instability. Make your choices wisely.

To get started with peer-to-peer lending, you will need to sign up with a P2P site. Sites like Prosper or Lending Club are excellent places to start. Simply open an account, deposit money, and decide on an interest rate you would be open to receiving–that will narrow down your options for investing.


Prosper offers personal loans to people who need it for a variety of reasons. As an investor, you invest in “notes,” or small slivers of the loans made through Propser. You can choose what you want to invest in or use auto invest. You’ll need to use a whopping $25 of your $20,000 to start investing with Prosper.

Lending Club

Lending Club is a similar platform that connects borrowers and lenders for things like auto and medical loans. As a lender, your minimum initial investment can be as low as $1,000. The platform offers higher rates of return than what you’d typically get for a traditional fixed-income investment.

P2P sites usually offer advice for beginners on how best to set up their lending amounts. Prosper’s homepage has a letter system that moves from AA up to HR, denoting the increasing risks of lending. A word of advice: If you’re new to P2P lending, start at the lower interest rates and work your way up.

You don’t want to stake your entire fund on a risky borrower. The higher interest rates can be enticing, but investing is about playing the long game. Consider your future goals before making any rash decisions.

You can predict which risks are worthwhile by paying attention to a site’s default rate, too. This figure refers to the rate at which borrowers fail to meet their repayments. The higher the default rate of a P2P site, the higher the number of failed repayments.

This number isn’t always the end of the world. Some sites do offer contingency payments to account for failed loan repayments. Still, you must do your due diligence before investing in any P2P site.

Related: How to Become an Angel Investor with Little Money

Bottom Line

Regardless of your decision on how to invest 20k, you’re in a good position. Just be wary of the easy mistakes you can make by pursuing profit without due risk assessment.

While it is possible to make substantial amounts quickly through investments, it isn’t likely. Focus on your long-term goals. Invest wisely and you’ll reap the benefits for years to come.

Author Bio

Total Articles: 126
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016.

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