Smart Ways To Invest $25,000

There are many options for investing $25,000, but the best choice will depend on your financial situation, goals, and risk tolerance. Before investing, it's important to ensure you have an emergency fund that covers three to six months' worth of expenses and that any high-interest debt is paid off. Once you've taken these steps, you can consider investing in a high-yield savings account, the stock market, alternative investments such as real estate or art, or a business venture.

If you're unsure about how to invest your money, it's a good idea to consult a financial advisor, who can help you create a financial plan that aligns with your goals and risk tolerance. They can also help you identify new opportunities to make money and protect your investments.

High-yield savings accounts

When choosing a high-yield savings account, it's important to consider the APY, fees, minimum deposit and balance requirements, and customer service options. Some accounts may also offer additional features, such as ATM access or mobile banking apps. It's also important to remember that interest rates on high-yield savings accounts can fluctuate, so be sure to check the current rates before opening an account.

Overall, high-yield savings accounts can be a great option for those looking for a low-risk way to grow their savings. By choosing an account with a competitive APY and favourable terms, you can effectively manage your savings and work towards your financial goals.

Real estate

Down Payment on a Property

With $25,000, you can put a 20% down payment on a $125,000 property. You could then rent out the property and pay the mortgage with the rental income.

Partner with a Group

You could partner with a group to invest in a bigger investment property. Your $25,000 would grant you a share of the rental income.

If you can't find suitable properties or partners, you could consider investing in a REIT. A REIT owns properties or mortgages on the properties and sells shares that you can buy like a stock. The REIT then pays out dividends from the profits they make.

Raw Land Investment

Investing in raw land is a profitable venture due to the limited supply of land. With $25,000, you can invest in raw lands through companies like FarmTogether.

Apartment Investing

You could also consider investing in residential real estate and vacation rentals with companies like Arrived, which only requires a minimum investment of $100.

Other Considerations

Before investing in real estate, it is important to consider your financial situation and risk tolerance. Ensure you have an emergency fund that can cover at least three to six months' worth of expenses. Additionally, be aware that real estate is considered an illiquid asset, meaning it may be difficult to quickly unload the investment if you need cash.

Stocks

Things to Consider:

Before investing in stocks, there are several factors to consider to ensure you are making a well-informed decision:

• Risk Tolerance: Determine your risk tolerance by assessing your financial situation and how much loss you can afford. Stocks are generally riskier than other investments like government-backed bonds, so consider your comfort level with potential losses.
• Time Horizon: Evaluate your time horizon, or how long you plan to hold the investment. If you need the funds in the short term, investing in stocks may not be advisable due to their volatile nature.
• Diversification: Diversifying your portfolio across various stocks, sectors, and investment types can help manage risk. Consider investing in different industries and market capitalizations to spread your risk.
• Fees and Taxes: Be mindful of fees associated with investing, as they can eat into your returns over time. Additionally, consider tax implications and seek out tax-advantaged accounts or strategies to minimize the tax burden on your investments.

Specific Stock Opportunities:

• Upstart Holdings (UPST): Upstart is a cloud-based, AI-driven lending platform that has seen significant growth in revenue and loan originations. Its recent performance and entry into new markets make it an attractive investment prospect.
• PayPal Holdings (PYPL): PayPal's integration with Amazon's Venmo and its strong growth trajectory make it an intriguing option. Its double-digit revenue growth and strong cash flow generation are surefire green flags for investors.
• NextEra Energy (NEE): NextEra Energy is a renewable energy company that has announced a 10% dividend increase, reflecting its confidence in its business and commitment to shareholders. With existing solid assets and a growing pipeline, NextEra offers steady growth potential.
• Ford (F): Ford's electric vehicle (EV) initiatives, including the F-150 Lightning and Mustang Mach-E, position it well in the growing EV market. The company's strong outlook for revenue and free cash flow make it a compelling stock to invest in.
• Shopify (SHOP): Shopify's business boomed during the COVID-19 pandemic, and it continues to offer small businesses e-commerce solutions. Despite recent stock crashes, Shopify's potential for double-digit revenue growth and industry outperformance makes it a stock to watch.
• Accenture (NYSE: ACN): According to Lazard Asset Management's Florentin-Lee, IT is a strategic consideration for all businesses. Accenture, with its long-term relationships and experience in massive transformational projects, is well-positioned to benefit from this trend.
• RELX (NYSE: RELX): RELX garners 40% of its business from academic journals in science, technology, and medicine, which have high renewal rates and strong profit margins. Additionally, RELX operates in the risk business, providing critical accident claim data to insurance companies, making it a niche industry leader.
• Toei Animation (TYO:4816): Toei Animation is a Japanese company that owns popular IP and has successfully monetized its content through gaming partnerships. With high margins and a niche market position, it could be an under-the-radar investment opportunity.

Paying off debt

The first step is to know exactly what you owe. Make a list of all your debts, including credit cards, student loans, auto loans, and any other type of debt. Then, make a budget to understand how much money you can put towards your debt each month. There are plenty of free tools available to help you with budgeting, such as printable planners, spreadsheet templates, or online budget planners like Mint.

Once you have a clear picture of your finances, you can start to tackle your debt. There are a few different approaches you can take:

• The debt snowball method: This involves focusing on your smallest debts first. Make a list of your debts from smallest to largest, and throw every penny you can at the smallest one while making the minimum payments on the others. Once the smallest debt is paid off, roll that entire payment to the next smallest debt, and so on. This method can be motivating as it gives you a sense of quick progress.
• The debt avalanche method: This method focuses on paying off the debt with the highest interest rate first. Make a list of your debts from highest to lowest interest rate, and put all your effort into paying off the one with the highest rate while making minimum payments on the others. Once that debt is cleared, move on to the next highest-interest debt. This approach can save you money and time, but it may be harder to stick to as it doesn't provide the immediate gratification of the snowball method.
• Side hustle: If you have the time and energy, taking on a second job or starting a side hustle can help you throw extra money at your debt. This could be something fun, like turning a hobby into an income stream, or something simple like delivering food for Uber Eats.
• Balance transfer: Balance transfer credit cards can be a powerful tool as they allow you to temporarily halt your interest payments. Look for cards with a 0% introductory APR, and transfer over balances from accounts with higher interest rates. Just be aware that there is usually a balance transfer fee involved.
• Personal loan: Taking out a personal loan may seem counterintuitive, but it can be a good option depending on your circumstances. Personal loans typically have lower interest rates than credit cards, and they give you more flexibility as you receive a lump sum to pay off your lenders.

While paying off $25,000 in debt can seem daunting, it is definitely achievable. The key is to take action sooner rather than later and to ask for help if needed. Credit counselors at non-profit credit counseling agencies can provide valuable assistance and advice.

Alternative investments

• Venture capital and private equity: This involves investing in private companies, often startups or early-stage ventures, that are not listed on a public exchange. Private equity companies often provide more than just capital; they may also offer industry expertise, talent sourcing assistance, and mentorship to founders.
• Private debt: These are investments that are not financed by banks or traded on an open market. Private debt funds, which provide capital to companies that need additional funds to grow their businesses, typically earn through interest payments and the repayment of the initial loan.
• Hedge funds: These are exclusive investment funds that trade relatively liquid assets and employ various strategies to achieve high returns. They are only available to institutional investors and high-net-worth individuals.
• Real assets: This includes land, timberland, farmland, intellectual property, and the most common type, real estate. Real estate investing has similarities to both bonds and equity. On the one hand, property owners receive current cash flow from tenant rent. On the other hand, the goal is to increase the long-term value of the asset (capital appreciation).
• Commodities: Commodities are real assets that are mostly natural resources, such as agricultural products, oil, natural gas, and metals. They are considered a hedge against inflation as their value is influenced more by supply and demand than public equity markets.
• Collectibles: This involves purchasing and maintaining physical items, such as art, antiques, fine wine, or classic cars, with the hope that their value will appreciate over time. This type of investment can be risky due to high acquisition costs, lack of dividends or income, and the potential for asset destruction if not stored or cared for properly.
• Structured products: These are complex investment products that usually involve fixed-income markets and derivatives. Examples include credit default swaps (CDS) and collateralized debt obligations (CDO). Structured products are typically created by investment banks and offered to hedge funds, organizations, or retail investors.

Frequently asked questions