Smart Places To Invest $150K Today

If you're looking to invest $150,000, there are a variety of options available to you.

Firstly, you should consider your investing goals, your timeframe, and your risk tolerance. Are you looking for safer investing ideas, or are you comfortable taking on more risk for higher growth potential?

Some of the most popular options for investing $150,000 include:

- Income-generating real estate

- Stocks, ETFs, and dividend-paying stocks

- Robo-advisors

- Tax-advantaged accounts like a Traditional or Roth IRA

- Small businesses

- Digital assets like cryptocurrency

- Index funds

- Mutual funds

- High-yield savings accounts

- Commercial real estate

- Art

Income-generating real estate

There are several types of income-generating properties, including:

• Commercial properties: These include offices, warehouses, shopping centres, and hotels.
• Industrial properties: With the rise of online shopping, warehouse facilities are in high demand for sorting and distribution.
• Multi-residential properties: These consist of five or more fully self-contained legal units.
• Mixed-use properties: The demand for these properties has increased as more people leave traditional jobs to start their own businesses.

When investing in income-generating real estate, it is important to conduct thorough research and due diligence. Consider factors such as location, property tax costs, schools, crime rates, job opportunities, amenities, and vacancies. Additionally, evaluate the current value and future performance potential of the property and the surrounding market.

• Real Estate Investment Trusts (REITs): REITs are companies that own a portfolio of income-generating real estate properties, such as commercial real estate or apartment buildings. By investing in publicly traded REITs, you can purchase shares through a broker, and they are listed on major stock exchanges. REITs offer good returns and liquidity, but they may have high fees and taxes.
• Crowdfunding: This option allows multiple investors to pool their money and invest in real estate together. Platforms like Fundrise, RealtyMogul, Yieldstreet, EquityMultiple, and CrowdStreet offer crowdfunding opportunities. While crowdfunding provides access to a diverse range of opportunities, it also comes with a lack of control over the underlying investment and illiquidity.
• Single-Family Rentals: You can purchase a single-family home and rent it out to a single tenant or family. This process is similar to purchasing a primary residence, including getting pre-approval for a mortgage loan and calculating potential returns. Single-family rentals may attract long-term tenants, and insurance tends to be more affordable compared to larger properties. However, you are dependent on finding tenants, and financing terms are typically more costly.
• Owner-Occupied Rentals: This strategy, also known as "house hacking," involves renting out extra space in your primary residence to generate income. It can attract higher-quality tenants and result in lower taxes and financing costs. However, it may lead to tenant reluctance to live next door to the owner and a loss of privacy.
• Multifamily Rentals: Multifamily rentals consist of five or more units and require a commercial loan. They offer more cash flow opportunities and the possibility of passive income, but they come with a larger initial cost and more property to manage.
• Short-Term Rentals: These are furnished living spaces leased for less than 12 months. They offer flexibility to tenants and can provide deductions and tax breaks. However, they may result in less payment consistency, and you may need to pay utilities.
• Turnkey Properties: These are fully renovated properties that you can rent out immediately, potentially resulting in lower vacancy rates and higher rent. However, they may be more expensive to purchase, and you have less control over the interior design and layout.
• Wholesaling: This strategy involves finding undervalued properties, putting them under contract, and then selling the contract to an investor for a fee. Wholesaling can be less costly and time-consuming, but it doesn't guarantee income, and you may struggle to find investors.

Remember to consider your financial situation, goals, time frame, and risk tolerance before investing. Diversifying your investments across multiple properties or strategies can help minimise risk and maximise returns.

Invest in stocks and ETFs

If you're looking to invest $150k, stocks and ETFs are a great option. Here's what you need to know about investing in these instruments:

Stocks

Investing in stocks can offer high returns, and you won't be taxed on capital gains until you sell. Stocks can pay dividends, which can increase over time as top companies raise their payouts. Additionally, commissions on stock trading have been eliminated by major online brokers, making it free to enter and exit investments.

However, stocks can be volatile, with significant fluctuations in value over short periods. This volatility can be risky for investors with a significant portion of their wealth tied to just a few stocks. It's important to remember that individual stocks closely track the performance of the underlying company, so investing in a losing company will result in losses for the investor.

ETFs

ETFs, or Exchange-Traded Funds, are collections of assets, often stocks, bonds, or a mix of both. They provide investors with a diversified portfolio, reducing risk and increasing returns. ETFs tend to be less volatile than individual stocks, making them a safer investment option. They also have low expense ratios, making them a cost-effective choice.

ETFs can be traded anytime the market is open, providing high liquidity. Major online brokers also offer commission-free trading for ETFs. This makes ETFs a great choice for new investors who want a simple, effective way to invest.

However, ETFs may underperform the best stocks in the fund, and they do charge expense ratios for owning the fund. It's important to understand that not all ETFs are the same, and investors need to know what they're investing in and the potential returns.

Both stocks and ETFs have their advantages and disadvantages. Stocks can offer higher returns but come with greater risk and volatility. ETFs provide diversification, lower fees, and less volatility but may underperform the top-performing stocks. Ultimately, the choice between stocks and ETFs depends on your investment goals, risk tolerance, and the time you want to devote to investing.

Invest in small businesses

Investing in small businesses is a great way to support the growth of entrepreneurs and diversify your investment portfolio. There are a few ways to go about this.

Equity Investment

With an equity investment, you buy a portion of the business and become a partial owner. You may have a voice in how the business is run and its future direction. If the business performs well, you can make money by receiving a share of its profits or by selling your stake at a higher price.

Debt Investment

If you make a debt investment, you lend a specific amount of money, and the business typically agrees to repay the money with interest.

Angel Investor Groups

Angel investors are a top source of capital for small businesses. In 2022, angel investments in the U.S. totalled $22.3 billion. To join an angel investor group, you generally need to be an accredited investor, meaning you must meet specific criteria, such as having a certain annual income or net worth.

Crowdfunding Platforms

If your income or net worth is lower, you may find it easier to invest in small businesses through crowdfunding platforms, which connect small business owners in need of capital with pools of investors. Some popular crowdfunding platforms include Mainvest, Microventures, and WeFunder.

Word of Mouth and Networking

Investing through personal connections is one of the most common forms of small business investing. If you have a friend, family member, or colleague starting a business, you can invest money to help them get started. However, this type of investment requires a significant amount of trust, and it's essential to do your due diligence on the business plan, operations, and outlook.

Things to Consider

When investing in a small business, it's important to understand the risks and potential drawbacks. Many small businesses fail, so there is a chance you could lose money. It's also important to remember that investing in small businesses should only make up a cautious portion of your overall investment portfolio. Diversifying your investments can help offset any losses over time.

High-yield savings account

• Interest rates: High-yield savings accounts typically offer interest rates that are well above the national average. As of April 2024, the national average APY for a traditional savings account was 0.46%, while some high-yield savings accounts offered rates of 5% or more.
• Safety: High-yield savings accounts are generally very safe. As long as your account is at a bank or credit union insured by the FDIC or NCUA, your funds are protected up to $250,000 per depositor, per institution.
• Access to funds: High-yield savings accounts are more liquid than other types of accounts, such as CDs. While there may be limitations on the number of withdrawals you can make each month, you still have some access to your money.
• Fees: Online high-yield savings accounts typically have low or no fees. However, traditional high-yield savings accounts may charge monthly maintenance fees, which can range from $5 to $20.
• Opening a high-yield savings account: To open a high-yield savings account, you will need to provide personal information such as your Social Security number, a valid ID, and contact information. You will also need to meet any minimum deposit requirements, which can range from $0 to $1,000 or more.
• Alternatives: High-yield savings accounts may not be the best option for everyone. Alternatives include money market accounts, certificates of deposit (CDs), cash management accounts, and investment accounts.
• Best high-yield savings accounts: Some of the best high-yield savings accounts include UFB Direct, Credit Karma Money Save, Varo Bank, My Banking Direct, and TAB Bank. These accounts offer competitive interest rates, low or no fees, and other features such as ATM access and online and mobile banking.

Overall, high-yield savings accounts can be a great way to grow your savings quickly and safely. By comparing different accounts and considering your financial goals, you can find the best high-yield savings account for your needs.

Invest in fixed-income annuities

If you're looking to invest $150k, one option is to invest in fixed-income annuities. This type of annuity can provide a guaranteed stream of income during retirement, backed by an insurance company. Fixed-income annuities offer a guaranteed minimum payout and a fixed interest rate, making them a good choice for risk-averse investors.

How They Work

Fixed-income annuities are a type of insurance contract that promises to pay the buyer a specific, guaranteed interest rate on their contributions. You can buy a fixed annuity with either a lump sum of money or a series of smaller payments over time, known as premiums. The insurance company then guarantees that the account will earn a certain rate of interest during the accumulation phase. Once you elect to start receiving income, the insurance company calculates those payments based on factors such as the amount of money in the account, your age, and how long the payments will continue. This begins the payout phase, which may continue for a specified number of years or for the rest of your life.

Pros of Fixed-Income Annuities

• Predictable Investment Returns: The rates on fixed annuities are derived from the yield that the life insurance company generates from its investment portfolio, providing predictable returns for investors.
• Guaranteed Minimum Rates: Fixed annuity contracts typically include a minimum rate guarantee to protect against declining interest rates.
• Tax-Deferred Growth: Fixed annuities are tax-qualified vehicles, meaning earnings grow and compound tax-deferred. Taxes are only paid when money is withdrawn from the account.
• Guaranteed Income Payments: Fixed annuities can be converted into an immediate annuity at any time, generating a guaranteed income payout for a specified period or for life.
• Relative Safety of Principal: The life insurance company is responsible for the security of the invested money and fulfilling any promises made in the contract.

Cons of Fixed-Income Annuities

• No Protection Against Inflation: Fixed annuities do not offer built-in protection against inflation, which can be a significant downside for long-term investments.
• Surrender Charges and Tax Penalties: Fixed annuities often include surrender periods, during which withdrawals incur a fee called a surrender charge. Withdrawing funds before a certain age may also result in a tax penalty.
• Limited Liquidity: Due to surrender fees and other penalties, fixed annuities can be challenging to convert to cash and typically allow only one withdrawal per year of up to 10% of the account value.
• High Fees: Annuities may come with various administrative fees, mortality expense risk charges, and commission fees, making them more expensive than other investment options.

Who Should Consider Fixed-Income Annuities?

Fixed-income annuities are suitable for individuals seeking a low-risk way to supplement their future retirement income. They are particularly beneficial for those who are not yet ready for retirement, as the longer accumulation phase allows more time for tax-deferred growth. However, it's important to carefully consider the associated costs, fees, and potential risks before committing to any investment.

Frequently asked questions