how to invest 20k for passive income
If you’re looking to receive passive income with your investments, there are many ways to do it. While your best choice will depend on certain factors, such as your age and risk tolerance, there are many ways to invest $20,000. The right investment options for you are going to depend on what your goals are for the long haul. You can also work with a financial advisor to help you pick your investment options.
Invest in a Retirement Account
Investing in a retirement account is often one of your best options, especially if you haven’t invested much yet. Retirement accounts, like a 401(k) or individual retirement account (IRA), have tax advantages as an incentive to stash your money in them. That means you get to keep more of your money.
How to prioritize different retirement accounts depends on your situation. Some employers will match your contributions, so it makes sense to at least invest up to the match. On the other hand, IRAs tend to give you more control over your investments. Your situation and investment goals will determine how you should prioritize different retirement accounts. However, these accounts can provide great passive income down the road.
Pay off Debt
You may not consider paying off debt as an investment, but it can be a great move. If you have a lot of debt and receive $20,000 in a lump sum, wiping out your debt could provide the best return. For example, you might have a lot of credit card debt with 15-20% APR. Unfortunately, even the savviest of investors can’t earn returns that high – at least not consistently. Paying off your debt can set you on the right path; not only will it put you in a better position today, but it means you’ll have less interest to pay going forward.
Open a High-Yield Savings Account
how to invest 20k for passive income
If you don’t already have an emergency fund, now is the perfect opportunity to change that. You can use a high-yield savings account to earn passive income on the money in your emergency fund. Of course, having an emergency fund will help ensure you have cash when the unexpected happens. But having cash on hand has the added benefit of allowing you to avoid high-interest debt when these things happen. For example, you can avoid putting big expenses on a credit card, thus accruing more of that debt we discussed earlier.
Invest Using a Brokerage Account
Brokerage accounts are investment accounts you open with a broker, such as an …….
