How to invest $1 million

Investing 1 million dollars may take a lot of thinking and planning. For many people, this may be a sizable sum of money, so before deciding where and how to invest it, here are some possible factors to consider.

Before making any kind of investment, you might want to look at your current financial situation and ensure that money isn’t needed elsewhere. For example, if you have any credit card debt, outstanding overdrafts, or loans to pay off, you might want to settle that first.

Paying off debt first may be a smarter use of your money, as it reduces your overall debt and prevents any interest payments from adding up. However, you can still consider a savings strategy while paying off your debt.

No investment comes without some degree of risk, and when you’re investing 1 million dollars, that risk can become even greater. So before investing your money, you might want to consider your investment risk tolerance.

For example, investing in stocks comes with greater potential rewards, but also a higher risk of loss, as the markets can often fluctuate, taking your investments with them. On the other hand, bonds can be a less risky investment option for your money but will offer lower potential returns. It is also important to consider that these kinds of investment options do not offer guaranteed returns, which you might also want to incorporate into your risk tolerance.

Short-term and long-term investments can be approached with different investment strategies, so you might want to consider what you hope to gain from investing 1 million dollars before establishing a plan.

If you’re after a short-term win, bonds could be a good option. These are less volatile and tend to produce more moderate returns, however, they are not guaranteed. If you’d rather pursue a long-term investment, products such as stocks and real estate have historically shown greater returns over time, but you may see your money fluctuate in value during the process. Again, it is important to note that you can still face potential losses, as returns are not guaranteed.

Diversifying your portfolio is a good method to help minimize your risk of potential losses. This is essentially spreading your investments across multiple asset classes, meaning if one struggles, your money can still do well in other areas to help balance it out.

For this reason, you might not want to invest 1 million dollars all in one place, but rather spread it out amongst different assets. You might want to consider consulting a financial advisor to determine the best strategy for your personal case.

You might also want to consider the cost of managing your investment portfolio. While some investments require management fees, such as actively managed funds, these costs can reduce your returns over time.

Other investments, such as index funds and exchange-traded funds (ETFs), offer lower fees, depending on the management type you choose. Options can include an online investment advisor, in-person advisor, or robo-advisor; therefore, you may also want to set a budget for this and do some research to determine what option works best for you.

Certain investments provide tax advantages, which can help you keep more of what you might earn. Products like municipal bonds are exempt from federal taxes, which can relieve you from certain tax implications. However, these products can still be subject to state and local tax laws, so you may want to double-check based on your state requirements to avoid potential fees.

While there is no ‘best’ way to invest 1 million dollars, there are several options you can consider. The best option for you will depend on your personal circumstances as well as your financial and investment goals. If you’re wondering where to invest 1 million dollars for good returns, here are some possible options to explore.

Many seasoned investors will look at the stock market as an apparent investment option for their money. This option can potentially deliver higher long-term returns but also comes with a greater risk. Investing in the stock market might require you to watch the market more carefully, and you will also have to consider possible losses, as returns are not guaranteed. You might want to consider getting professional advice before making any big financial decisions related to stock market investments.

Exchange-traded funds, also known as ETFs, are investment funds that hold a basket of assets, such as stocks or bonds, but still trade on a stock exchange like the stock market. ETFs are a way to diversify your assets and often have lower fees than mutual funds. However, it is still important to note that although ETFs spread your money across more assets, you still run the risk of potential losses, so you may want to do some background research first.

If you’re looking for an alternative kind of investment, private or peer-to-peer lending could be an option. Private lending involves providing a loan to a person or business with personal capital, whereas peer-to-peer lending connects borrowers with investors (such as you) online. 

Bonds offer lower risk, making them a commonly used choice amongst more conservative investors or those who want to play it a little safer. However, there is still risk involved. Each bond comes with its own risk, as you’re effectively loaning money to a company or government, so the company’s performance will also impact your investment. It is advised to conduct thorough research before putting your money in a certain bond, or consider hiring a portfolio manager to help manage this type of investment for you.

Investing in another business, starting your own business, or buying a franchise comes with high risks but can be another option to achieve lucrative returns. As with every kind of investment, you may want to do your research on the company and the market before deciding on investing 1 million dollars.

You might ask yourself, is the business performing well? Does it have the potential to grow? Is this business idea something the market needs?

If you are looking for how to invest 1 million dollars for passive income, real estate could be an option to consider. Rental properties in particular can provide a steady stream of passive income and may even appreciate in value over time, letting you sell them off later for a healthy profit. Of course, owning a rental property comes with added responsibilities, meaning you might need to pay someone to look after it for you or be willing to make the occasional trip to make repairs and keep the home in good order.

However, if you do not want to manage your own property but still want to invest in real estate despite the possible risks it may offer, you can also consider real estate investment trusts, or REITs. REITs allow investors to gain exposure to real estate investments without having to own or manage the properties themselves. This is also a common investment choice for positive returns; however, it is again important to note that you still run the possible risk of loss as returns are not guaranteed.

If you are looking for a lower-risk option, you might want to consider high-yield savings accounts, which offer higher interest rates than traditional savings accounts. One example being Money Market Accounts (MMAs), which are a lower-risk investment option, and often offer the highest interest rates amongst high-yield savings products. Certificates of Deposit, CDs, are another option where you loan a bank some money for a set time period, and in return they pay you a fixed rate of interest.

The Raisin marketplace gives you access to MMAs, CDs, and other high-yield savings products all in one dashboard. While Raisin does have a deposit limit of $250,000 per account, you can consider splitting up your $1 million into multiple accounts, or even a CD laddering strategy to take advantage of the high interest rates. Explore your options today and compare competitive interest rates to start making the most of your money!

Investing money in cryptocurrency is a relatively new option, which also comes with higher associated risks. While the market can deliver substantial returns, it can also experience huge price fluctuations thanks to its highly volatile nature. While cryptocurrencies have the possibility of offering passive income, you may also run the risk of losing a substantial amount, so it is best to do your research and be aware of how much loss you may face.

Investing 1 million dollars isn't the only way to put your money to work. While investing can be a good way to maximize your returns, here are some other alternatives that have a lower risk of changing interest rates and unpredictable markets.

Charities rely on generous donations to fund their work and enable them to keep making an invaluable difference to the people they help. Charitable donations are also tax-exempt in many cases, so both parties benefit.

Leaving money to a loved one can make a big difference to the next generation. Getting your affairs in order early allows you to plan exactly what you want to happen, and leaves you with a clear picture of your finances for the remainder of your life, therefore you might want to consider getting a head start with your estate planning.

If someone in your family is hoping to go to college, you could help fund their future. Even adding a small amount to a college savings account, or a 529 plan, could grow into a substantial number over time, so the sooner you start saving, the better. 

A retirement fund is a smart place to have 1 million dollars invested. Opening a 401(k) or Roth IRA now will help you maintain a good standard of living later, and will earn interest over time. The more you put in, the more you’ll be able to enjoy once you stop working, so it could be savvy to think about retirement.

A high-interest savings account can be a less risky way to help your investment grow. By exploring accounts with competitive interest rates, you can build up your own pot of savings without the same risk as other investment plans. Compare the high rates on the Raisin marketplace and get started today!

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.