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How to invest $20K

8 ways to invest $20,000: From conservative, long-term investments to risky, short-term options.

How to invest $20,000 largely depends on your age, goals and personal finances. Based on past performance and the current economic environment, we’ve listed eight strong investment options to consider.

8 ways to invest $20K

  1. Stocks
  2. Retirement accounts
  3. Conservative investments
  4. Exchange-traded funds (ETFs)
  5. Robo-advisor
  6. Alternative investments
  7. Real estate investment trusts (REITs)
  8. Cryptocurrencies

1. Buy stocks

Stocks are considered to offer the greatest potential for growth over the long term. Historically, the stock market has delivered annual returns of about 10%. In the last two and a half decades, technology stocks like Google (GOOGL), Amazon (AMZN) or Microsoft (MSFT), in particular, have offered some of the best returns of any financial asset. However, with these high returns comes greater volatility, making these stocks better for long-term investors or investors with a high-risk tolerance.

Investors with a lower risk appetite may instead favor dividend stocks like Coca-Cola (KO), General Mills (GIS) and Procter & Gamble (PG). Stocks that pay dividends tend to be less volatile and typically provide stability to a portfolio. Dividend investors give up the outperformance that comes with many high-quality growth stocks for the reliable income stream of dividends.

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While individual stock picking requires time and research, stocks are highly-liquid assets. Since there’s almost always a buyer, it’s usually quick to cash out your shares if and when you’re ready to sell. Most brokerages don’t charge stock trading fees, and holding shares gives you voting rights in the company.

Stock trading is more accessible than ever before. And with the advent of fractional shares, you don’t have to save up enough to buy whole shares of blue chip stocks like Tesla (TSLA) or Walmart (WMT). Many brokers let you buy shares for as little as $1.


  • Great performance over time. The average annual return of the stock market has been around 10% historically. Dividend stocks provide the added benefit of income.
  • Variety of options. More than 4,500 companies are listed on the New York Stock Exchange and Nasdaq, from small-cap companies to large blue-chip stocks.
  • Fractional shares. Trade stocks for as little as $1 with many brokers.
  • High liquidity. Buy or sell most stocks during market hours without limitations.


  • Volatility. Stocks can be volatile — some more than others. If you don’t plan to hold the stock for the long term, you could end up selling for a loss.
  • Stock picking requires time. While you can pick stocks willy-nilly, developing a strategy and performing proper research on companies takes time and effort.

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2. Invest in retirement accounts

If you can wait until retirement to access your funds, consider investing your $20,000 through a tax-advantaged investment account like a 401(k) or an individual retirement account (IRA). These accounts are designed to provide individuals with tax benefits for saving for retirement, and their value shouldn’t be ignored.

The two main types of 401(k)s and IRAs are the traditional and Roth versions. Traditional provides immediate tax benefits — contributions to a traditional 401(k) automatically lower your taxable income for the year, while traditional IRA contributions are tax-deductible come tax season. Meanwhile, there’s no tax deduction, but Roth accounts offer tax-free withdrawals in retirement. And you can withdraw your Roth contributions at any time without taxes or penalties since you’ve already paid taxes on this money.

A majority of 401(k) plans include employer contributions, which amplifies these accounts’ value even more. If this applies to you, you may want to invest at least enough in the 401(k) to earn the full match — it’s free money you should prioritize. After that, if you want more flexibility in terms of investment options, turn your focus to maxing out an IRA. If you don’t already have an account, the best Roth IRAs feature plentiful tools, features and educational resources, have the most investment options and charge the fewest fees.

The 2023 IRA contribution limit is $6,500, while 401(k) contributions max out at $22,500.

Pro tip: Robinhood offers 1% in matching contributions to a Robinhood IRA. With a 2023 contribution limit of $6,500, that’s $65 in free money.


  • Tax benefits. Both IRAs and 401(k)s are tax-advantaged accounts — tax deductions today for traditional versions or tax-free withdrawals in retirement with their Roth counterparts.
  • Matching contributions from your employer. Many companies match employee contributions to a 401(k). This is free money you get just for saving.
  • Investment flexibility. Most asset types are allowed in an IRA. These include stocks, bonds, ETFs, mutual funds, options and futures. With a self-directed IRA, you can add alternative assets like gold, cryptocurrency and real estate.


  • Deposit limitations. The IRS limits how much you can invest in your 401(k) and IRA annually.
  • Withdrawal limitations. Aside from a handful of exceptions, IRA and 401(k) money withdrawn before the age of 59 and a half is subject to taxes and a 10% early-withdrawal penalty.

3. Conservative investments

For risk-averse investors or those with a short time horizon — like those nearing retirement — low-risk securities such as Treasuries, money market funds and bank deposit products provide an unmatched level of safety and reliability compared to riskier investments.

For instance, US Treasuries are backed by the full faith and credit of the US government, so there’s little chance of default. And aside from the guaranteed fixed rate of return on certificates of deposit (CDs), these bank products are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per FDIC-insured bank, in the event the bank goes under.

Conservative investments like these aren’t designed to produce large returns but rather are meant to preserve the purchasing power of one’s capital with low risk.

Types of conservative investments


  • Low risk. Enjoy peace of mind knowing your investments carry little risk. US Treasuries, for instance, are fully backed by the US government.
  • Stability. Low-risk investments, especially fixed-income assets such as bonds or Treasuries, can provide some stability to a portfolio in times of economic distress or market volatility.
  • Conservation of capital. Conservative investments are designed to preserve capital and minimize losses.


  • Low return potential. As a tradeoff for their safety, conservative investments typically don’t generate high returns like riskier assets, such as stocks or alternative assets.
  • Lower flexibility. Many conservative investments, such as bonds or CDs, require an investor to tie up their money for some time without incurring some sort of early-withdrawal penalty.
  • Inflation risk. If rising inflation outpaces the return on an investment, you risk the loss of your purchasing power.

4. Exchange-traded funds

If you want exposure to stocks but individual stock picking isn’t for you, an exchange-traded fund (ETF) might be an option. When you buy an ETF, you gain exposure to a basket of stocks, bonds, futures or whatever asset is of particular focus for that ETF. As a type of pooled investment, you’re a part owner of the fund and can trade it during market hours just as you would a stock. While you don’t have actual ownership in any of the stocks, ETFs provide instant diversification by investing in multiple stocks through a single fund, which can potentially lower your risk exposure.

ETFs come in many types, but index-based ETFs — ETFs that match the moves of indexes such as the S&P 500 or Nasdaq Composite — provide a simple way to invest without requiring much market knowledge. Examples of popular index ETFs include the SPDR S&P 500 Trust ETF (SPY), which tracks the performance of the S&P 500, and Invesco (QQQ). This ETF tracks the performance of the component stocks of the Nasdaq-100, an index of the largest 100 non-financial stocks listed on the Nasdaq.

Meanwhile, sector-based ETFs give you exposure to specific market sectors. For example, the Energy Select Sector SPDR (XLE) tracks the energy sector of the S&P 500, while the Utilities Select Sector SPDR (XLU) offers you exposure to the S&P 500’s various utility stocks.

Most people — including professionals — do not have a good record when it comes to stock picking. In 2021, about 85% of active US stock funds underperformed the S&P 500. ETFs are a solid option for most individual investors. Even Warren Buffett owns two.


  • Variety of focus investments. Some funds only hold stocks in particular sectors, like technology and healthcare. Bond ETFs, commodity ETFs, currency ETFs and other types of ETFs are also available.
  • ETFs trade like stocks. Buy and sell ETFs any time during market hours.
  • Convenience. Instead of buying stocks individually, ETFs give you exposure to numerous stocks through a single fund.


  • Expense ratios. A type of fund management fee, most ETFs cost less than 1% annually. But this is still a fee you must pay that doesn’t apply to individual stock picking.
  • Lack of control. Though you can choose the ETF, you can’t choose the individual stocks in the fund.

5. Robo-advisor

A robo-advisor is an automated financial advisor that manages your portfolio via an algorithm. Based on your responses to a handful of questions about your time horizon and risk tolerance, the algorithm trades and rebalances your portfolio on your behalf.

Many robo-advisors invest solely in ETFs, which helps keep management fees low. At about 0.25% annually, management fees for robo-advisors are a fraction of what a human financial advisor charges. Some robo-advisors also require a minimum deposit of between $100 and $500. Some of the best robo-advisors, like SoFi’s Automated Investing, have no minimum investment requirement and no management fees.


  • Great for hands-off investors. Fund your account and choose the investment strategy, and the robo-advisor takes over and continuously rebalances your portfolio.
  • Invests in ETFs. Most robo-advisors construct portfolios of ETFs, offering instant diversification at a low cost.
  • Less expensive than a financial advisor. Since robo-advisors are computer algorithms, they typically cost less than hiring a professional financial advisor.


  • Robo-advisors can’t get to know you. There’s no face-to-face interaction, so you can’t sit and talk to a robo-advisor to develop a long-term financial plan.
  • Limited personalization. Robo-advisors recommend one of a handful of strategies based on a questionnaire, so the investment strategy isn’t truly personalized.

6. Alternative investments

Alternative investments are those outside traditional stocks, bonds, ETFs or mutual funds. These include, but are not limited to:

A number of alternative investing platforms exist today that let everyday investors expand and diversify their portfolios with assets beyond conventional investments. Plus, many alternative investments aren’t correlated with the stock market, which means they could potentially be used as a hedge against poor market performance.

While some alternatives offer the potential for outsized returns, these assets tend to be risky investments. Alternatives can be volatile and illiquid. For example, it’s not uncommon for the price of NFTs to drop over 50% within one quarter. You might also struggle to find a buyer for the digital art or other alternative assets you’re looking to sell.


  • High return potential. Alternatives carry more risk, but they also carry the potential for greater returns.
  • Portfolio diversification. Diversify your portfolio beyond traditional investments, such as stocks, bonds, ETFs and mutual funds.
  • Generally uncorrelated to the stock market. Many alternatives move without relation to the stock market.


  • May be illiquid and difficult to sell. Many alternatives have lock-up periods, which prevent you from selling for a certain time. And a lack of a secondary market can make it difficult to find a buyer for certain assets.
  • Can be highly volatile. Certain alternative investments can be extremely volatile. The value of certain cryptos, for instance, can change dramatically and unexpectedly.

7. REITs

A real estate investment trust (REIT) is a company that owns and operates income-producing real estate. REITs let you invest in commercial property, including office buildings, shopping malls, hotels, resorts and apartment complexes, all without the burden of having to physically own and manage the property.

A REIT can be either private or publicly traded on major stock exchanges. Examples of publicly-traded REITs include Prologis (PLD) and Simon Property Group (SPG). To purchase private REITs, you either need to be an accredited investor — an investor of a certain net worth or income or certain investment professionals — or use a real estate investing platform like Fundrise.

One downside to REITs is that taxes on their dividends can be higher than the taxes you’d pay on dividends from certain stocks or ETFs. Many REITs are taxed as ordinary income, which can be as high as 37%, depending on your income bracket.


  • Earn rental income. REITs let you invest in income-producing commercial real estate, including offices, apartment complexes and warehouses.
  • Capital appreciation. REITs invest in physical properties that may increase in value over time.
  • Publicly-traded REITs are highly liquid. REITs that trade on public exchanges can be bought or sold anytime during market hours.


  • High taxes. Taxes on REIT dividends are often higher compared to dividend-paying stocks. Depending on your tax bracket, this could be as high as 37%.
  • Private REITs are less liquid. Private REITs have less liquidity than their public counterparts. Many REIT companies review liquidation requests on a quarterly schedule.

8. Crypto

Cryptocurrencies — or “crypto” for short — are digital assets that exist on a blockchain and can be used for peer-to-peer transactions. Unlike just about any other asset class, crypto trades 24 hours a day, 365 days per year.

Historically, the crypto market has had big boom and bust cycles — all crypto assets can be highly volatile. Value investors may aim to buy into crypto during the lows of the busts and not the highs of the booms. If you are new to investing in crypto, you may want to stick to investing in a blue-chip crypto asset like Bitcoin (BTC), which has held more of its value over longer time horizons compared to most other crypto assets.

To invest in this asset class, it’s important to find the best crypto exchange for your needs and to learn how to use a non-custodial wallet. A non-custodial wallet lets you hold the private keys to your digital assets, which keeps your crypto assets secure.


  • Potential safeguard against inflation. The limited supply of cryptos like Bitcoin (BTC) may protect its value during times of rising inflation.
  • Diversification. With crypto’s waning correlation to stocks, it may be a suitable source of portfolio diversification.


  • Volatility. While volatility can offer the potential for quick gains, the potential for quick and significant losses is also ever-present.
  • Risk of losing coins. Many crypto wallets require a private key to authorize crypto transactions. If you lose your private key, you can no longer access the wallet or your coins.
  • Lack of regulatory oversight. The crypto regulatory landscape is evolving, and new regulations could emerge that negatively affect crypto.

How $20,000 can grow

Here’s a look at how your $20,000 might grow in three common investment classes over various time frames.

Time-periodHigh-yield savings accountBondsStocks
1 year$20,878$21,066$22,000
5 years$24,792.74$25,929.28$32,210.20
10 years$30,733.99$33,616.37$51,874.85
15 years$38,098.99$43,582.41$83,544.96
20 years$47,228.91$56,503.02$134,550
25 years$58,546.70$73,254.13$216,694.12
30 years$72,576.65$94,971.33$348,988.05

For this table, we assumed:

  • An APY of 4.39%, based on the average APYs of 24 high-yield savings accounts as of August 2023.
  • An average bond return of 5.33%, based on data from Vanguard.
  • A 10% return on stocks, based on the market’s average long-term annual return.

Money moves to consider before you invest $20,000

Pay off your debt. Depending on the interest rate you’re paying on your debt, you may be paying more on your debt than you can earn investing. For example, if the interest rate on your student loans is 7% and you’re only earning 4% in a high-interest savings account, you may be better off paying down your debt than keeping your money in the high-interest savings account.

Create an emergency fund. Experts recommend saving three to six months’ worth of expenses in an emergency fund in case you lose your primary source of income. Without an emergency fund, you may find yourself in a situation where you have to take on debt or sell investments at a loss to stay afloat financially.

Consider your investment timeline. Moving your investments from riskier to more secure assets as you get older is recommended to preserve your capital as you get closer to retirement. For example, you might invest primarily in stocks in your 20s and 30s and then transition into a larger bond portfolio as you approach retirement age.

Diversify your holdings. Even if you are younger and more risk-averse, it’s important to consider the potential drawbacks of only holding one type of asset in your portfolio. A diversified portfolio helps you mitigate risk during market volatility by spreading your money across multiple investment types.

Frequently asked questions

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To make sure you get accurate and helpful information, this guide has been edited by Holly Jennings as part of our fact-checking process.
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Frank Corva is business-to-business (B2B) correspondent for Bitcoin Magazine and formerly the cryptocurrency writer and analyst for digital assets at Finder. Frank has turned his hobby of studying and writing about crypto into a career with a mission of educating the world about this burgeoning sector of finance. He worked in Ghana and Venezuela before earning a degree in applied linguistics at Teachers College, Columbia University. He also taught writing and entertainment business courses in Japan and worked with UNICEF in Namibia before returning to the US to teach at universities in New York City. Earlier in his career, he spent years working as a publicist and graphic designer for record labels like Warner Music Group and Triple Crown Records. During that time, he was also a music journalist whose writing and photography was in published in Alternative Press, Spin and other outlets. See full bio

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Matt Miczulski is an investments editor at Finder. With over 450 bylines, Matt dissects and reviews brokers and investing platforms to expose perks and pain points, explores investment products and concepts and covers market news, making investing more accessible and helping readers to make informed financial decisions. Before joining Finder in 2021, Matt covered everything from finance news and banking to debt and travel for FinanceBuzz. His expertise and analysis on investing and other financial topics has been featured on CBS, MSN, Best Company and Consolidated Credit, among others. Matt holds a BA in history from William Paterson University. See full bio

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Matt has written 190 Finder guides across topics including:
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