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How to invest $20K

The stock market offers the highest variety of investment options, but there are other options to consider.

How you invest your $20,000 largely depends on your age, your goals and your personal finances. Based on past performance, we selected the best six investment options.

6 best ways to invest $20K right now

Sure, $20,000 is a decent amount to invest, but you may still find your options to be somewhat limited. Because of that, you’ll likely achieve a higher diversification level if you invest a larger chunk in exchange-traded funds (ETFs).

To diversify further, you can also go with individual stocks, real estate through investment trusts (REITs) and max out your IRA.

1. Diversify your investment with ETFs

Why it’s a good option now: ETFs come in all flavors — you can invest in index funds — ETFs that match the moves of indices such as the S&P 500 or Nasdaq. There are also funds that focus on particular sectors, like technology and healthcare, and there are bond ETFs, commodity ETFs, currency ETFs and more.

Which ETF you go with depends on how close you are to retirement and how much risk you’re willing to take. In the past, index ETFs, blue-chip ETFs and dividend ETFs have consistently performed well with relatively low risk, making them a good choice to invest in.

If you’re willing to take a risk, there are 2x and 3x leveraged ETFs that move two or three times than the market they’re investing in. Still, it’s important to note that while you can double or triple the gains your index experiences, you could also lose double or triple the index’s losses, so it’s important to exercise caution when it comes to leveraged products.

What to watch out for: Investing in ETFs typically comes with an annual fee. Luckily, this is often less than 1%.

2. Add in some individual stocks

Why it’s a good option now: Traditionally, equities have outperformed other asset classes. So the sooner you put your money to use on the stock market, the sooner you can reap the benefits.

If you want to earn passive income, consider investing in dividend stocks, which can pay up to 4% annually. If you want to invest in the next Tesla or Google, look for growth stocks, which are often in the tech or healthcare sectors.

What to watch out for: Investing in individual stocks requires a lot of research. You would have to either do it yourself or pay for it. Also, avoid putting a huge chunk of your money in one stock because it may fail or get into legal trouble, both of which will negatively impact the stock price.

3. Let a robo-advisor invest on your behalf

Why it’s a good option now: If the previous option seems too complicated or if you don’t have the time to do your research, a robo-advisor is an excellent option for investments. You simply set certain parameters, and the algorithm allocates your funds based on that. Most robo-advisors invest your funds in ETFs or mutual funds.

What to watch out for: Robo-advisors typically come with fees, either a percentage of the invested funds — say 0.3% — or a flat fee. Make sure to compare robo-advisors because there are some, such as SoFi’s automated investing feature, that doesn’t charge fees.

4. Consider crypto

Why it’s a good option now: As you build out your portfolio, you may find you have some wiggle room for riskier investments, like cryptocurrency. Crypto can be lucrative, but it’s also highly speculative and should only be explored if your portfolio can weather the volatility.

This isn’t a set-it-and-forget-it investment. Cryptocurrency investments require careful monitoring. The market is open 24 hours a day and coin values may be impacted by any number of factors — including timely international news events.
Some brokers that offer cryptocurrency trading include:

If you don’t want to invest in crypto outright, consider a crypto savings account. These accounts let you invest in cryptocurrency coins. The account provider then lends your crypto to borrowers and you earn interest in exchange.

What to watch out for: Crypto investments carry more risk than traditional securities like stocks and funds. Crypto should only be considered if your investment portfolio can handle some volatility.

5. Invest some percentage into real estate

Why it’s a good option now: Although $20,000 may not be enough to directly buy a property, you can buy part of it and even earn rental income through REITs. REITs acquire, own and finance various properties and sometimes even earn income from tenants.

REITs can be publicly traded on the stock market, meaning you can buy it as a stock or privately through the companies that created these trusts. You can invest in REITs to earn passive income or to sell them at a higher price later on like you would with stocks and ETFs. This option is often reserved for those who want passive income and low risk, and especially those who invest for the long term.

What to watch out for: Private REITs aren’t as liquid as stocks. You may find it hard to sell them until a certain number of years have passed.

6. Max out your retirement account

Why it’s a good option now: Maxing out your IRA early on in the year is probably one of the best investment decisions you can make. Not only will you invest in your future, but you get to invest in the same assets as you would with an individual brokerage account. If you don’t have an IRA account yet, consider opening one.

Deposit a maximum of $6,000, or $7,000 if you’re 50 or older in one year. The maximum of $6,000 is 30% of your $20,000, and since you can invest in individual stocks and ETFs, you can consider this your main investment vehicle.

What to watch out for: Consider your money locked until you reach 59½. If you withdraw before that, you’ll likely pay penalties.

How $20,000 can grow

With $20,000 you should be thinking about the mix of investments you’re made, what else you own and if you’re taking too much or not enough risk. Here’s a look at how your money might grow in three common investment classes.

20,000 saved or investedSavings accountBondsStocks
1 year$20,200$21,200$22,000
5 years$21,020$26,765$32,210
10 years$22,092$35,817$51,875
15 years$23,219$47,931$83,545
20 years$24,404$64,143$134,550
25 years$25,649$85,837$216,694
30 years$26,957$114,870$348,988

For this table we assumed:

  • A 1% annual return on a savings account, CD or money market fund — which is optimistic these days.
  • An average 6% return for bonds or bond funds.
  • 10% on stocks, the market’s long-term annual return.

Bond returns vary widely based on bond types, and the stock market has down years while individual stocks can go to zero. So consider these benchmarks only and consider risk as well as return.

Before you invest

Before you invest your $20,000, make sure your finances are in order and that you have a clear goal of what you want to accomplish.

  • Pay off your debt. In theory, you could earn more money by investing your $20,000 than using it to pay off your debt. Unfortunately, we never know what the future holds. Consider paying off your debt first or at least have a repayment plan in place.
  • Create an emergency fund. You never know what could happen. Having an emergency fund is a must because if you need money and have to sell your investments, you could be looking at potential losses.
  • Consider your goals. If you’re near retirement, try to limit your risk and consider investing in high-quality assets. But if you’re in your 20s or 30s, you can go ahead and put some of your money on riskier assets because if you lose your money, you have time to recover them until you retire.
  • Diversify your holdings. Make sure to invest your $20,000 in ETFs first and then in a variety of stocks and other assets. That’s because various assets perform differently in different situations.

Alternative investments

The six investment options we mention are often the best way to invest your funds. But if you’re willing to take a risk or to prepare for your kids’ education, there are two more options:

  1. College savings plans. You and your children could benefit in the future with a 529 college savings plan. When the time comes to use these funds, you can do so tax-free for eligible college expenses.
  2. NFTs. A nonfungible token is a digital asset, usually a piece of art, music file or video game item. They’re popular but volatile. You can invest in NFTs using cryptocurrency on specialty NFT marketplaces, like OpenSea.

Compare investment platforms

Name Product Asset types Option trade fee Annual fee Signup bonus
M1 Finance
Free 1-year trial of M1 Plus
when you sign up for M1 Finance
Invest in your favorite stocks or in curated portfolios with automatic rebalancing.
SoFi Invest
Stocks, ETFs, Cryptocurrency
Get one free stock worth up to $1,000
Open an account
A free way to invest in most equities.
Stocks, Bonds, Options, Mutual funds, ETFs, Cryptocurrency
$0 + $0.50/contract
$0 per month
$10 of crypto
Open an account with access to crypto
A platform built for all kinds of traders and all styles of trading
Stocks, Options, ETFs, Cryptocurrency
Free stock (chosen randomly with a value anywhere between $2.50 and $200)
Sign up using the "go to site" link
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
Stash Invest
Stocks, ETFs
$1 per month
Add at least $5 to your Invest account
Stash is more than an investment app. You’ll have access to tools that can help you become a confident investor.
Stocks, ETFs, Cryptocurrency
$0 per month
Download and sign up with; approved accounts receive a free stock slice worth up to $300, selected from 9 popular stocks.
Open an account
Commission-free trading in stocks and ETFs with a social networking twist.

Compare up to 4 providers

*Signup bonus information updated weekly.

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