So, you’ve gotten your hands on $30,000. Awesome! Saving up money is challenging, so having saved a substantial amount like $30k is a major achievement.
And it is now time to decide how you will treat that massive stack of money.
If you still have debts, deal with those first and save three to six months’ worth of living costs for any unforeseen emergencies.
If you’ve handled these things, you’re ready to begin investing, and here’s how you can invest $30k.
Variables That Affect How You Will Invest $30k
Prior to actually investing $30k, you should consider these variables that influence your next steps.
The very first step is to decide how you will treat those $30k. Is this money going to be used for household expenses, invested in some big tech, or spent on traveling around the world?
Realizing what your needs and objectives in life will help you figure out whether you actually want to invest this money in trading and stocks or elsewhere.
The time frame reflects the amount of time you intend to keep a specific investment.
If you have a short-term outlook, you should seek a rather flexible investment plan.
An investor who needs the full $30k investment in a couple of weeks or months, or even after a year or two should not enter the stock trading world.
Stocks, in general, rise or fall in value, unlike any other investments, with the exception of course of cryptocurrencies.
So, if you intend to make quick money, stocks are not for you.
Therefore, before entering the stock-trading world, think about how long you can afford to invest your $30k.
If you are investing for old age, your timeframe will be influenced by your current age and the number of years between now and the date you intend to retire.
What’s your age? Are you healthy? How much money do you make? How much money do you save?
Are there any prospects for marriage or divorce in the near future?
Questions like that need to be answered to figure out how much money you will spend and save in the future and whether you can afford to invest such a big amount today.
All of the aforementioned factors will influence your risk tolerance, which implies how much of your invested capital you can afford to lose.
If your $30k gets stolen but you can still live a wealthy life after that, then your risk tolerance is quite high.
On the contrary, if losing that money means you can’t pay for your monthly rent, then your risk tolerance is incredibly low.
In such a case, you’d undoubtedly be better off investing your 30k in something less risky, such as a cash equivalent that pays back.
A retirement fund or a high-yield savings investment fund may be suitable.
How you feel and how you handle your feelings have a significant impact on the choice you’ll make when investing your money.
If you are easily stressed, then you certainly don’t want to invest all that money on your own and then start panic trading when the market is unstable.
All risky investments necessitate some self-control to commit to your investment plan even when things don’t look very optimistic.
It is probably best to take a risk survey or consult with a financial advisor (see also ‘What Is An Investment Consultant?‘) before making any big investments to check how you feel and how willing you are to go through good and bad times in the trading world.
Best Practices To Invest $30k
Every person is different and factors like the ones mentioned above are important to consider before advising anyone on how to invest such a big amount of money.
So, without knowledge of your case, it’s difficult to advise you on where to invest your money. However, we want to offer you some advice on how to best invest those $30k.
Try Keeping The Fees To A Minimum
Fees, like tax payments, are an investor’s nightmare; if you don’t control them, they can ruin your good night’s sleep.
“Killing” fees will save up way more money than you could ever imagine, especially when in most cases managed funds have a management fee of 1%.
This indicates that irrespective of the success or failure of the fund, 1% of its total value will be taken on an annual basis to pay the people working on it. 1-2% may not seem like a lot, but what if we told you that a service charge of just 2% can cut investment returns by 50% over the course of 25 years? That’s quite a lot of money, isn’t it?
Play around with a fee calculator to check how switching from a 2% MER to a 1% MER affects k investments (see also ‘How To Calculate Net Investment‘).
Purchase A Passive Portfolio
You might be thinking that since mutual fund managers are exceptionally skilled at choosing the optimum assets, the profit they make will not be an issue.
The investments will produce profitability that greatly outperforms that of the stock market world in general.
Most research shows that experts compensated to invest in stocks will underperform the overall market in the end.
Therefore, if active traders can’t outperform the market while still charging fees, is there another preferable way?
Passive funds are an especially efficient method for most objectives, timeframes, and risk tolerances.
This is possible with the help of Robo-advisors. Instead of trying to outperform the market, most Robo-advisors try to mimic it by making an investment with your money in a variety of ETFs.
That is a task that software programs can efficiently handle. Low-fee passive ETF portfolios can be created with any objective, timeframe, or risk tolerance in mind.
The Bottom Line
Investing #30k is not an easy thing to do and you must think clearly and consider all the factors that can influence your investments, be it psychological or financial.
So, make sure you think this through by taking into account the things mentioned in this article!