Smart Strategies To Invest 20K In Crypto

Investing $20,000 in cryptocurrency is a high-risk, high-reward endeavour. While cryptocurrencies are volatile, with prices fluctuating rapidly, investors have generated returns of thousands of percent from top tokens. Established cryptocurrencies like Bitcoin and Ethereum are well-known and have attracted institutional investment, while new crypto projects offer the chance to get in on the ground floor.

When investing in crypto, it's important to consider the properties of different tokens and the level of risk you're comfortable with. New and emerging tokens are riskier since there's no guarantee of success, but they can generate enormous returns. On the other hand, established coins might have less explosive growth potential but are still considered high-return investments.

Before investing a windfall, it's crucial to ensure you're on solid financial footing. This may include paying off any high-interest debt and establishing an emergency fund. From there, you can explore various investment options, including crypto, stocks, ETFs, and more, keeping in mind your risk tolerance, goals, and investment timeframe.

Max out your retirement accounts

If you have $20,000 to invest, one option is to max out your retirement accounts. Retirement accounts like IRAs (traditional or Roth) and 401(k)s offer a tax-advantaged way to save for your golden years. Here's how to maximize your retirement savings with this windfall:

First, if your employer offers a 401(k) plan, start by contributing enough to take full advantage of any employer match. An employer match is essentially free money, so don't leave it on the table. For 2024, the yearly contribution limit for 401(k)s is $23,000 or $30,500 if you're 50 or older.

Next, consider maxing out your IRA contributions. For 2024, the yearly contribution limit for IRAs is $7,000 or $8,000 if you're 50 or older. If you have multiple IRAs, remember that these limits apply to your combined contributions. So, if you've contributed $4,000 to a Roth IRA, you can put up to $2,500 into your traditional IRA.

When deciding between a traditional IRA and a Roth IRA, there are a few key differences to keep in mind. With a traditional IRA, your contributions are typically made pre-tax, which lowers your taxable income. The money grows tax-free until you withdraw it in retirement. On the other hand, a Roth IRA is funded with after-tax dollars. While you don't get an immediate tax break, the money grows tax-free, and withdrawals in retirement are also tax-free.

Another option for adding crypto to your retirement portfolio is through a crypto IRA. These are self-directed IRAs that allow you to use the funds in the account to purchase cryptocurrencies. Make sure to find a regulated and licensed company for this purpose and be aware of the risks involved.

While crypto IRAs offer an opportunity to invest in the emerging asset class, it's important to remember that cryptocurrency is a very volatile and risky investment. Consult a financial advisor before making any decisions, as retirement accounts are crucial long-term investments.

Robo-advisors

If you're looking for a robo-advisor with a more personal touch, consider Ellevest. Their algorithm takes into account important realities of women's lives, such as pay gaps and career breaks, to provide a true sense of their financial standing. Ellevest also offers discounted access to financial planners and career coaches.

For those with a higher net worth, Charles Schwab's robo-advisor, Schwab Intelligent Portfolios, is a good option. It requires a $5,000 minimum deposit, but you get access to over 300 brick-and-mortar branches across the US for in-person support.

Lastly, if you want a robo-advisor with comprehensive member benefits, SoFi Invest is a great choice. In addition to automated investing, they offer rate discounts on other SoFi products, access to exclusive events, and one-on-one time with financial advisors.

Brokerage accounts

With a brokerage account, you can access a variety of investment products, including individual stocks, mutual funds, exchange-traded funds (ETFs), bonds, futures, and options trading. The right online brokerage account will give you the freedom to take a DIY approach to stock trading while providing resources for beginners.

For example, online brokers like J.P. Morgan Self-Directed Investing and Vanguard offer unlimited commission-free trades on ETFs, stocks, and options.

When choosing a brokerage account, it's important to consider the account minimums, investment options, research tools, and platform ease of use.

• $20,000 is more than enough to meet the minimum requirements for most online brokers.
• Brokerage accounts offer access to a wide range of investment products, including stocks, bonds, ETFs, mutual funds, options, and more.
• Full-service brokers are worth considering if you want help managing your investments or already work with a private banker or wealth manager.
• Discount brokers offer low costs, a broad range of research tools, and easy-to-use platforms for placing trades.
• Some brokers, like J.P. Morgan, now offer fractional trading, allowing you to invest in eligible stocks and ETFs starting with just $5.
• It's important to do your research and compare different brokers to find the one that best suits your needs and investment goals.

By using a brokerage account, you can take control of your investment portfolio and have the freedom to choose from a diverse range of investment options.

Crypto projects

When investing in crypto projects, it's important to carefully consider the properties of different tokens. Established mega-cap tokens like Bitcoin and Ethereum are well-known and have attracted institutional investment, which is a positive sign for their future. These coins may not experience explosive growth, but they are still potentially high-return investments.

New crypto projects offer investors the chance to get in on the ground floor of a token. Investing in new and emerging tokens is highly risky as there is no guarantee that a cryptocurrency will take off or even that the project will be completed. However, coins that do succeed can generate enormous returns that are almost impossible to match in the stock market.

Two of the best emerging cryptocurrencies for 2022 are Tamadoge and Battle Infinity. Both are play-to-earn crypto projects with strong fundraising results ahead of their launches. Tamadoge, in particular, offers a deflationary cryptocurrency. In this blockchain game, players can purchase NFT pets and upgrades from the in-game marketplace. Players earn TAMA, the game's native cryptocurrency, when they win battles with their pets. However, 5% of the TAMA used for every transaction in Tamadoge is removed from circulation and burned. This means that the supply of TAMA decreases over time, and as more players join, the demand may increase, pushing the price of TAMA higher.

Real estate investment trusts (REITs)

REITs were designed to make real estate investing more accessible so that smaller investors could invest in a portfolio of properties with the same ease as buying stocks. By pooling capital from many investors, REITs have funded much of the American real estate market.

REITs are structured as corporations and are not typically taxed at the entity level, which allows investors to avoid double taxation on dividends. They must invest in real assets and derive most of their income from real estate activities, including rents and interest from mortgages. Due to this structure, they typically pay out higher dividends than equities or many fixed-income investments.

There are two main types of REITs: equity and mortgage. Equity REITs own and manage properties and collect payments from tenants, while mortgage REITs invest in mortgages and derive their income from interest payments.

REITs can be a good investment for those seeking to include real estate in their portfolio, offering the potential for steady income through dividends and exposure to real estate without the complexities of directly owning property. They have historically provided competitive long-term returns and can serve as a hedge against inflation.

However, there are some risks to consider. REITs are sensitive to interest rate changes and can be affected by downturns in the industries where they hold properties. They also offer little capital appreciation since they must pay out most of their income to investors. Additionally, REIT dividends are taxed as regular income, which could result in higher tax bills for investors in higher tax brackets.

When investing in REITs, it is recommended to start with publicly traded REITs, as they offer greater liquidity and are subject to SEC regulations. It is also important to do your research, consider the fees involved, and ensure that the REIT aligns with your financial goals and risk tolerance.

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