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How to invest $20k

Wondering how to invest $20k wisely? Here are our top five picks.


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You have $20k sitting in the bank and you’re wondering how to take that nest egg and turn it into even more money. Here are five ways to maximize returns on a 20k investment.

How to build a $20k investment portfolio

Your investment portfolio is a reflection of your financial goals. You could invest in stocks if you won’t need the $20k for another 10 years, but stocks are higher risk – with higher potential returns.

If you’ll need the money in three years, you may consider a less risky investment type with modest returns, such as a CD or bond.

Here’s one example of how a 20k portfolio might look if you’re aiming for higher returns over a longer period of time:

Investment type Percentage
CDs and bonds 0 to 40%
Stocks, ETFs and mutual funds 50% to 75%
Real estate and alternative investments 0 to 25%

Before you invest $20k

Before you invest $20k, make sure you have the following in place:

  • Emergency fund. Ideally, you’ll keep three to six months of expenses in a high-yield savings account. Depending on your cost of living, this could be a small or large portion of your $20k.
  • No high-interest debt. Paying off debt before you invest means you won’t have sky-high interest payments eating into your investment returns.
  • Kids’ college fund. If you have children, you may consider setting aside a portion of the $20k for their college education.

Invest in your 401(k)

Your employer deducts 401(k) contributions straight from your salary, so you’ll need to increase your contribution percentage to invest more money. This will make your take-home pay smaller, but you can supplement the missing income with your $20k investment.


  • Company match. You earn free money when your employer matches your contribution.
  • Tax-sheltered account. You pay into your 401(k) with pre-tax dollars, which lowers your tax bill for the year.


  • Illiquid investment. If you touch the funds before you’re 59 and a half you’ll pay an early withdrawal penalty.
  • Can’t make direct contributions. Your employer takes 401(k) contributions out of your paycheck, so you can’t make a one-time contribution.
  • Required minimum distributions. The IRS forces you to take distributions from your 401(k) at age 70 and a half, which means your assets have less time to grow and you could get bumped into a higher tax bracket.
How do I calculate my required minimum distribution (RMD)?

Calculate your RMD by taking your account balance as of December 31 and dividing it by your life expectancy factor on the IRS Uniform Lifetime Table.

What if I don’t have access to an employer-sponsored 401(k)?

There are several different options for retirement accounts, including options that aren’t employer-sponsored.

If you don’t have access to a 401(k), don’t fret. Individual retirement accounts, or IRAs, are another option for those looking to invest and prepare for retirement.

IRAs come in several forms, the most popular being Traditional and Roth IRAs. Traditional IRAs allow you to make tax-free account contributions up until you’re 70 and a half years old. The catch? Your account withdrawals are taxed once you start receiving distributions.

Roth IRAs, on the other hand, tax your contributions going in but withdrawals made once you retire are tax-free. Roth IRAs are particularly popular among younger investors and are sometimes also available in 401(k) form.

If you’re considering opening a new retirement account and don’t know where to start, a financial adviser may be able to help you pick the right one.

Our pick: Vanguard

Personal advisor services can help investors with more than $50,000 build a custom portfolio.

  • Low expense ratio
  • Investor-owned company
  • Wide variety of investment options
Go to site
on Vanguard's secure site

Read review
Available asset types Stocks, Mutual funds, ETFs, Forex
Stock trade fee $0
Option trade fee $1
Annual fee $20 per year

Invest with a robo-advisor

If you want professional guidance on how to invest without forking over money for a financial advisor, a robo-advisor may be what you need.


  • Automated strategies. Robo-advisors make portfolio recommendations based on your goals, risk tolerance and timeline.
  • Maintenance-free. Most robo-advisors keep your portfolio aligned with your ideal asset allocation through automatic tax-loss harvesting and rebalancing.
  • Low fees. You’ll typically pay lower fees with a robo-advisor than you would with a traditional advisor.


  • Limited recommendations. The level of personalized advice you receive depends on the company’s AI, and some offer better advice than others.
  • No in-person support. There’s not an actual financial advisor you can pick up the phone and call when you have questions.

Our pick: Betterment

Choose a risk profile and let Betterment create a diversified portfolio customized for you.

  • Automatic, passive investing
  • Customized retirement planning
  • Low management fees
Go to site
on Betterment's secure site

Read review
Available asset types Stocks, Mutual funds, ETFs, Real estate
Stock trade fee $0
Option trade fee
Annual fee 0.25% on balances up to $99,999

0.4% on balances of $100,000+

Invest in a brokerage account

If you’re more of a hands-on investor, $20k is more than enough to get started with a major online broker.


  • Variety. Many brokers offer stocks, mutual funds, bonds, ETFs and options.
  • Freedom. You have full control to invest however you want.
  • Help when you need it. Many top online brokers offer investment advice in the form of extensive research centers, in-person support and automated investment strategies.


  • Potential mistakes. You could make costly mistakes with your $20k if you don’t have a lot of investing experience.
  • Fees. Many online brokers are moving toward a commission-free model, but there are still some that charge hefty fees.

Our pick: You Invest

Free online stock, ETF and options trades with $0 minimum to start.

  • Industry-low pricing
  • No minimum deposit
  • Unlimited free trades
Available asset types Stocks, Bonds, Options, Mutual funds, ETFs
Stock trade fee $0
Option trade fee $0 + $0.65/contract
Annual fee 0%

Compare other online stock-trading platforms

Name Product Stock trade fee Asset types Option trade fee Annual fee
Stocks, Mutual funds, ETFs, Forex
$20 per year
Get a personal advisor when you open an account with at least $50,000.
Sofi Invest
Stocks, ETFs, Cryptocurrency
A free way to invest in stocks, ETFs and crypto.
Stocks, Options, ETFs, Cryptocurrency
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
Interactive Brokers
Stocks, Bonds, Options, Mutual funds, Index funds, ETFs, Futures, Cash
$0 + $0.65/contract, $1 minimum
IBKR Lite offers $0 commissions, and IBKR Pro offers advanced tools for professional traders.
TD Ameritrade
or $25 broker-assisted
$0 + $0.65/contract,
or $25 broker-assisted
TD Ameritrade features $0 commission for online stock, but watch out for high short-term ETF and broker-assisted trading fees.
$0 for US stocks
Stocks, Options, ETFs
Trade stocks on the US, Hong Kong, Shanghai and Shenzhen markets.

Compare up to 4 providers

Invest in real estate

There are several crowdfunding sites that let you invest in real estate with as little as $5k or $10k.


  • Generates income. Most real estate investments generate monthly or quarterly dividend payments.
  • Pre-vetted properties. Many crowdfunding sites pre-vet offerings, so you don’t have to find a local property yourself.
  • Tax deductions. When you invest directly in real estate, you can write the asset’s depreciation off on your taxes.


  • Illiquid investments. Real estate is an illiquid investment because there’s no guarantee a buyer will be available when you’re ready to sell.
  • Some require accreditation. If you can swing the minimum payment, you may need to be an accredited investor to qualify for some crowdfunding platforms.
  • Variable fees. Fees vary depending on the platforms and individual investments.

Our pick: Streitwise

Streitwise offers a beginner-friendly way to invest in commercial real estate.

  • $1,000 minimum to invest
  • Transparent fees
  • 9.8% annualized dividends since inception
Go to site
on Streitwise's secure site

Read review
Available asset types Real estate
Stock trade fee
Option trade fee $0
Annual fee 2%

Invest in peer-to-peer lending

With peer-to-peer lending, you loan your money out to other individuals in need.


  • Profitable returns. Many peer-to-peer lenders have seen returns above 6%, according to a 2018 Forbes article.
  • Simple. Investing through peer-to-peer lending is much simpler than choosing stocks for the first time.
  • Passive income. Receive monthly payments as borrowers repay the principal and interest on their loans.


  • Risky. Some borrowers may default, so mitigate risk by funding several loans from multiple borrowers.
  • Can’t get out of the loan. Once you commit to lending out funds, you can’t sell the loan to someone else.

Bottom line

There are a lot of different ways you could invest $20k. Your best option depends on your current financial situation and goals.

Prioritize paying off high-interest debt and establishing an emergency fund first. Then narrow down your top picks and start comparing top investment accounts.

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