How to Invest $200k?

If you have $200,000 to invest, there are many ways to make your money grow. Let’s take a look at how you can invest in the stock market, real estate and other common investments, while keeping a few practical tips in mind.

A financial advisor can help you create a financial plan for your investment needs and goals.

What to Consider Before Investing $200k

Before you put your money into a six-figure investment portfolio, financial experts will recommend that you diversify your assets to minimize your risk. When putting together a portfolio, it is important to keep in mind the time horizon in which you intend to access your investments.

If you are decades away from retirement, for example, then you may want to make riskier investments to get higher returns. But if you have a shorter time horizon, then you may want to scale down those riskier investments in favor of safer securities.

In addition to your time horizon, you will also want to be clear with yourself about how much risk you are willing to take on. This will drive your asset allocation. The last several years after the COVID pandemic, for instance, rising inflation and ensuing interest rate hikes would have played directly into your investment strategy, and depending on your risk tolerance, you may have considered keeping a traditional 60/40 portfolio (60% stocks and 40% bonds) or adjusting it for the market.

4 Common Ways to Invest $200k

Where you choose to invest can make a huge difference in your eventual outcome. What you decide to invest in will depend on your long-term financail goals. With $200,000 to invest, here are four common choices to make your money grow:

Stocks: Investing in stocks is a popular choice. You may want to put your money into big company names like Apple, Google, Microsoft or Tesla. Or invest in the future of smaller companies that have positioned themselves in the market for future gains. In either case, you will need to decide whether you want to put your money directly into a company through a stock plan or buy mutual funds, equity index funds or exchange-traded funds. Whichever path you take, experts caution: avoid putting too much money into one investment or a specific area of the market.

Real estate: Traditionally considered a consistent investment, this asset can offer investors long-term capital gains. You can invest in real estate through REITS, which are companies that own commercial property like office buildings and hotels. You can also buy a rental property directly, but you will need to make sure that your operating expenses fall under your rental income to turn a profit.

Health savings accounts: HSAs can be a practical way to invest money for future medical expenses in exchange for tax breaks. First, when you contribute to an HSA, your taxable income can be reduced and that money grows tax-free. Second, your withdrawals are also tax-free if you use the money to pay for qualified expenses. And third, you can take your HSA savings and invest them further into mutual funds or index funds.

Fixed-income investments: These include financial vehicles like corporate, government or U.S. savings bonds, as well as certificates of deposits (CDs), high-yield savings accounts and preferred stocks. With all of these investments, you may know how much you are going to earn. Preferred stocks, for instance, pay a fixed dividend rate. They are generally considered to be well-rounded investments that are less vulnerable to market volatility. They may typically earn less than riskier investments, but you can also hold hybrid securities like convertible bonds that have both fixed-income and equity components.

Factors Impacting What You Should Invest In

When determining what investments make sense for your portfolio, start by examining your financial goals. Short-term objectives like saving for a vacation require different investment vehicles than long-term goals such as retirement planning. Your timeline directly influences how much risk you can reasonably take on and which investment types align with your needs.

Understanding your personal comfort level with market fluctuations is crucial when deciding what you should invest in. Some investors can sleep soundly despite market volatility, while others experience significant anxiety with even minor downturns. Your emotional and financial ability to withstand losses should guide your investment selections toward an appropriate balance of stocks, bonds, and other assets.

Your age and life stage naturally affect your investment horizon and objectives. Younger investors generally benefit from higher allocations to growth investments like stocks, while those approaching retirement typically shift toward more conservative options. Major life events like marriage, having children, or purchasing a home may necessitate adjustments to your investment strategy.

Working with a financial advisor can help clarify which factors most significantly impact what you should invest in based on your unique situation. An advisor can provide objective analysis of your financial picture and help create an investment strategy aligned with your specific goals, risk tolerance, and time horizon.

Bottom Line

Knowing how to invest $200k requires careful planning and a strategic approach tailored to your financial goals. Whether you choose to diversify across stocks, bonds, and real estate, or focus on retirement accounts like 401(k)s and IRAs, the key is creating a balanced portfolio that aligns with your risk tolerance and timeline. Remember that professional guidance from a financial advisor can provide personalized insights, especially when dealing with substantial sums. Regular portfolio reviews ensure your investments remain on track as market conditions and personal circumstances evolve.

Investment Tips

A financial advisor can help you understand how your time horizon and risk tolerance will impact your financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and 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.
As we already emphasized, rebalancing your portfolio is crucial for the success of your investing goals. Here’s what investors need to know when rebalancing.