Investment Options and Potential Returns on $500,000

Whether you’re planning for the future or already have a strong financial foundation, it is always wise to put careful thought into the decisions you make for your money. If you have $500,000 to invest, choosing the right investments can set you up for long-term growth and financial security. Using SmartAsset’s investment calculator, we explore your investment options and potential returns on $500,000 should you invest half a million dollars.

You can consider working with a financial advisor to develop a strategy that fits your goals and risk tolerance.

An S&P 500 Index Fund

Average Rate of Return: Over the past 10 years, the S&P 500 has had an average rate of return of around 10%.

Total Portfolio After 10 Years: $1.296 Million (a gain of nearly $800,000)

Active investors, who trade individual assets to beat the market, underperform the market on an overwhelming 9-to-1 ratio. This means that if you go out and buy individual assets, nine times out of 10, you will make less money than if you had simply invested in the market itself and held on for an equivalent period.

The market, usually defined by either the S&P 500 or the Dow Jones Industrial Average, has historically outperformed almost every other asset over the long run.

One example is the price of real estate, which nearly doubled between 2010 and 2022. This makes real estate one of the best assets you can buy. However, the S&P 500 has nearly quadrupled in that same period, jumping from around 1,300 points in 2012 to more than 5,200 at the time of writing.

It may not be the most exciting option, but the numbers don’t lie. A good index fund is one of the best investments you can make.

Private Equity or Hedge Funds

Average Rate of Return: This is more difficult to calculate. By their nature, private equity firms and hedge funds don’t always report their losses and earnings. However, most estimates suggest that you can expect average returns of up to 14%.

Total Portfolio After 10 Years: $1.85 Million (a gain of $1.35 million)

If you have $500,000 to invest, there’s a good chance that you meet the criteria to become an accredited investor.

According to the SEC, this is an investor who meets one of the following criteria:

Annual income exceeds $200,000 when filing single or $300,000 jointly
Over $1 million in household assets
Holds a position that indicates sophisticated market knowledge (for example, if you are an officer with an investment bank).

Many higher-risk assets are restricted to accredited investors because the SEC considers them to be more insulated from those risks. If you’re an accredited investor, you’re more likely to know what you’re getting into or at least have enough money that you can handle losses.

For those investors, private equity firms and hedge funds offer the potential for significant gains. These companies invest in assets outside of the traditional market, such as startups, loan origination and real estate. They can post average returns of around 12% to 14%, making them potentially strong investments for high-net-worth households.

This is equivalent to investing in the stock market, and historically has beaten S&P 500 returns by between five and seven points.

Just remember: These assets are restricted for a reason. The gains are potentially outstanding, but they also come with the potential for real loss. Invest accordingly.

Individual Businesses

Average Rate of Return: It’s difficult to discern hard numbers for this one. Investing in a new business can post high returns or high losses. It depends entirely on the individual business. Because each business differs so wildly from the next, it’s impossible to quote or source an exact figure with any confidence.

Total Portfolio After 10 Years: Depends on the individual investment.

When weighing risk vs. reward, there is one option that is potentially the riskiest but also potentially the most rewarding: individual startups.

Investing in an individual business can take many forms. Many investors do this based on relationships. They have money to invest, so they look for business people who they trust and believe in. Oftentimes, that connection comes from someone’s personal or professional network. Other investors find new businesses through third-party networks, like firms or brokers who help them find startups to buy into.

In either case, investing in a new business generally means buying equity in the company. You give them your money in exchange for an ownership stake, or at least a pledged percentage of future profits.

If the company does well, this can be by far the most rewarding investment on the market today. If it does not, this can lead to some of the most significant losses on the market.

Although not for the faint of heart, investing in entrepreneurs is a great way to take a big swing.

Real Estate

An investor looking for the best return on a 500k investment.

Average Rate of Return: Real estate continues to be a popular and potentially lucrative option for high-dollar investors.

Returns can be examined in two ways:

Direct property investment: According to data from the Federal Reserve Bank of St. Louis, U.S. home prices have risen from $334,400 in 2013 to $492,300 in 2023. over the past 10 years. Of course, gains can vary significantly depending on location, property type and market conditions.
REITs and real estate securities: The Dow Jones U.S. Real Estate Index, which tracks real estate investment trusts (REITs) and related securities, posted a 10-year annualized return of approximately 2.38%, as of 2025.

Total Portfolio After 10 Years: Potential real estate returns fall into two separate categories:

REITs: At a 6.3% annual return, a $500,000 investment in REITs could grow to approximately $914,000 after 10 years.
Direct Property Investment: At a 6.5% appreciation rate, investing $500,000 in property could yield a portfolio worth around $935,000 after 10 years — assuming a straightforward buy-and-hold strategy and excluding rental income, taxes and maintenance costs.

Real estate remains one of the most popular destinations for large sums of capital. It is historically viewed as a stable, long-term growth asset. Events like the 2008 housing crisis challenged the belief that property values always rise. However, the long-term trend for real estate continues to be upward, particularly in high-demand metro areas.

Real estate also has high barriers to entry. Whether you’re purchasing raw land or a condo in Los Angeles, you’ll need substantial liquidity. Even if you take out a mortgage, lenders typically require a sizable down payment, and the more you finance, the more your returns are diminished by interest payments. Simply put, the more cash you can put into the property up front, the more profitable the investment is likely to be.

Despite its illiquidity and the complexity of managing property, real estate offers the potential for capital appreciation, rental income and tax benefits. With housing prices still high in many markets and demand for rental units strong, real estate remains a compelling asset class for investors with the funds to participate.

Will real estate values continue to climb at the same pace? No one can say for sure. But with the right market selection and strategy, real estate can still be a valuable piece of a diversified portfolio.

General Tips for Smart Investments

Before deciding where to put $500,000, it is helpful to step back and look at the broader financial picture. Whether your goal is long-term growth, income generation or capital preservation, a few general principles can guide your approach.

Diversify across asset classes. Avoid concentrating all your funds in one area. Diversifying your portfolio with a mix of stocks, bonds, real estate and cash or cash equivalents can reduce risk and improve potential returns. Consider combining index funds for growth, REITs or rental property for income, and short-term securities or cash for liquidity.
Balance risk and return. Higher potential returns usually come with greater risk. Allocate funds based on your time horizon and comfort with market volatility. For example, investors with longer timelines may put more into equities, while those closer to retirement might prefer more stable, income-generating assets.
Keep taxes in mind. Investment returns can be reduced by capital gains, dividend taxes and other liabilities. Use tax-advantaged accounts where appropriate (IRAs, 401(k)s, HSAs), and explore tax-efficient investments like municipal bonds or index funds with low turnover.
Build an emergency reserve first. Ensure you have enough cash set aside in an emergency fund to cover 6–12 months of expenses before committing the full $500,000 to long-term investments. This reduces the risk of being forced to sell assets in a downturn.
Use dollar-cost averaging if needed. If you are concerned about timing the market, consider spreading your investments over several months. This approach, known as dollar-cost averaging, can help reduce the impact of short-term volatility.
Review and rebalance regularly. Even a strong portfolio needs maintenance. Revisit your allocation at least once a year to ensure it still aligns with your goals, especially after large market swings or major life events.
Work with professionals if necessary. If managing $500,000 feels complex, a financial advisor can help you build a plan based on your objectives. This can include portfolio design, tax planning, risk management and income strategies.

Bottom Line

Real estate is potentially one of the investments you could consider for a return on a 500k investment.

With $500,000 on hand, several investment options open up to you. Just a few of the strongest include a safe, but typically profitable, index fund, investing in or being an entrepreneur, buying real estate or seeking out hedge funds and private equity.

Investing Tips

No matter how much money you have, it’s always smart to seek out sound advice. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Index funds are always a strong investment option, but at the time of writing, they were performing historically well. A 14% annual rate of growth is double what investors have historically gotten from their S&P 500 funds. That makes this a good time to look into that section of the market.