10 Ways to Invest $20,000

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When it comes to building wealth, investing is a key component. Depending on how much you have to invest and your risk tolerance, your investment opportunities can vary.

Investing $20,000 at once opens the door for several opportunities that require a higher minimum investment. There are many options to make your extra cash more productive instead of letting it sit idle.

Here are some of the top ways to invest $20,000 or more and generate passive income.

How to Invest $20,000

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If you have $20,000 to invest, there are multiple short-term and long-term investment ideas you can consider. Better yet, they can give you exposure to various asset classes.

In alphabetical order, here are the best ways to invest $20,000.

1. 401k Swap

Putting $20,000 into your investment account can be one of your best options. This lets you enjoy tax-advantaged investing and high annual contribution limits while saving for retirement.

With a 401k swap, you “swap” your paycheck and investment money, investing your paycheck while living on the cash you have available to invest. You use this strategy because the funds for your 401k typically come from your paycheck.

A 401k or similar workplace retirement plan can have an annual contribution limit of $20,500 ($26,500 if you are 50 or older) in 2022. Your employer may also offer matching contributions, and this free money doesn’t count against your personal limit.

Traditional 401k vs. Roth 401k

Your employer may offer a traditional or Roth retirement plan. Both plans have the same combined contribution limit.

However, your tax treatment differs between these accounts:

  • Traditional 401k: Contributions are tax-deductible, taxes paid upon withdrawal
  • Roth 401k: Pay income taxes immediately, distributions are tax-free

Both account types only require you to pay income tax once on your contribution. Your annual dividend income and stock sales are not taxable like in a non-retirement brokerage account.

Any employer contributions you receive are tax-deferred even if you save for retirement with a Roth 401k.


  • Lifetime tax savings
  • Potential employer contributions
  • Save for retirement


  • Early withdrawal penalties
  • Potential limited investments
  • Account maintenance fees

2. Build a Diversified Portfolio

If you’re happy with your current stock and bond asset allocation, you may consider adding alternative assets to your portfolio.

These investment options may perform differently than the stock market, and you can also own a tangible item. This investment idea typically requires a multi-year investment horizon as your shares are illiquid and difficult to sell early.

There are several different asset classes to consider, and crowdfunding platforms can help you gain fractional ownership in items with a market value greater than $20,000.

Here are two niches you might consider investing in.


Investing in art can mean getting exposure to contemporary works and classical pieces. 

You might be able to buy paintings or sculptures to display at your residence or store in an off-site vault. 

Masterworks lets you invest as little as $1,000 in notable works along with other artists. The service also securely stores each piece. Some of the featured artists include Banksy, George Condo and Kaws.

Precious Metals

Physical gold is one of the most popular ways to gain exposure to precious metals. You can buy collectible coins or bars. Many consider this shiny metal to be an inflation hedge and long-term investment. 

You may also consider silver coins as the price per ounce is cheaper. However, the price movement can also be different than gold.


  • Potential fractional investing
  • Can own physical assets
  • Multiple investment options


  • Multi-year commitment
  • Potentially high platform fees
  • May need to store assets

3. Eliminate Your Debt

Paying off high-interest debt can be a smart financial move when your interest rates exceed your potential investment gains.

For example, paying off $20,000 in credit card debt with a 20% APR can save more money than your gains from an 8% investment return.

You might not pay off low-interest debt like a mortgage early since the interest rate is usually lower than your potential investment gains. Instead, consider weighing the opportunity cost to use your cash efficiently.

While you’re not building residual income, you’re improving your short-term finances and eliminating monthly payments.

As a bonus, the additional peace of mind can also reduce your stress levels.

After paying off your balances, you can start investing your interest savings.


  • Can become debt-free
  • Reduces monthly expenses
  • Prevents short-term stress


  • Delays long-term investing
  • One-time interest savings
  • Best for high-interest debt

4. Invest in Your Education

Investing in yourself by learning new skills can increase your long-term income potential. 

You may consider getting a quick certification for a career path that pays well. These accreditations are cheaper and less time-consuming than getting a degree.

For example, it might take six months to become certified. Then, you can start getting work experience with an employer.

Consider exploring in-demand jobs for your area that suit your skills. Some programs require more time to complete than others but may also have better salary ranges.

When you don’t have the time (or need) to go back to school, consider enrolling in short video courses from Skillshare. You can take classes on various topics that can help improve the skills you need for your day job or side hustle.

Additionally, you may also decide to use your money to pay for your child’s education with a 529 fund. This option can make sense if you’re satisfied with your career path and want to reduce your child’s future student loan amounts.


  • Long-term income potential
  • Learn new skills
  • Less demanding than college


  • May require apprenticeship
  • Requires active effort
  • Education costs can be high

5. Launch a Business

Dedicating some of your funds to start a business can be worth it if you’re an entrepreneur or you are looking for ways to make money from home.

Keep in mind that launching a business is risky and requires patience as you may not make money right away. 

You can use your funds to cover your startup costs, such as: 

  • Forming an LLC
  • Obtaining permits
  • Buying equipment 
  • Advertising

If you want a hands-off business idea that doesn’t require storing inventory or extensive work hours, you may consider partnering with a dropshipping supplier. Your investment can buy an item at wholesale price, and the supplier mails the product to the buyer.


  • Many income ideas
  • You own the business
  • Can work online or locally


  • Can be risky
  • Potentially high startup costs
  • May not make money immediately

6. Open a High-Yield Savings Account

Stashing your cash in a high-yield savings account can be your best option when you need easy access to your balance as you wait for a better investment opportunity.

For example, you might deposit $20,000 in a savings account while saving for a down payment on a home purchase or investment property. 

This interest-bearing account can be less volatile than dividend stocks or bond funds that have fluctuating share prices. High-yield savings accounts can also have up to $250,000 in FDIC Insurance.

However, your potential yield is lower as the best savings accounts earn less than 1% interest.

Stocks and alternative investments are usually better for medium and long-term investment periods of at least one year. Since you’re committing to a longer investment term, your potential performance can be higher even though the asset prices can be more volatile.

If you don’t need instant access to your cash, you may consider building a CD ladder. This investment method may help you earn more interest than current savings account rates.


  • Low risk and FDIC-insured
  • No withdrawal penalties
  • No account fees


  • Relatively low yields
  • Won’t outpace inflation
  • Up to six monthly withdrawals

7. Peer-to-Peer Lending

Peer-to-peer lending lets you lend money directly to borrowers and earn a higher interest rate than what a savings account offers. However, the tradeoff is more investment risk and an investment period of three to five years.

Several different platforms are available, and the investment minimums are usually low. You can typically buy notes with as little as $10 or $25 per personal loan.

Most platforms recommend investing at least $1,000 across several loans to diversify your portfolio since some borrowers will default.

This low investment minimum makes it easier to diversify your lending portfolio and reduce risk. Unfortunately, these loans are unsecured, and you most likely will lose your remaining investment if the borrower defaults.

You may have the option of investing in individual notes. Other services offer automated investing that automatically lets you invest in offerings meeting specific criteria. 

Worthy Bonds is one service you may consider. The minimum investment is $10, and you earn 5% interest. The investment period is three years, but you can redeem your notes early and penalty-free.


  • High interest rates
  • Invest in individual loans
  • Low minimum investment


  • Can be high-risk
  • Three to five year investment period
  • No FDIC insurance or collateral

8. Real Estate

Real estate is another way to earn investment income. If you want to be the sole owner of a local property, you may consider owning rental property for long-term or short-term rentals.

Of course, $20,000 may only cover part of your down payment, so you will need a mortgage to cover the rest. You also have more responsibilities if you own a property.

As an alternative, crowdfunded real estate can be a better way to get exposure to the real estate sector. In addition, you may spread your investment across several platforms for diversification since the minimum investment per service is between $10 and $5,000. 

You will buy shares of a managed fund that can hold multifamily properties and commercial real estate in most instances. These properties have multiple tenants and can be less risky than single-family homes.

Furthermore, you don’t have to manage the property or day-to-day affairs since you’re an investor. However, your minimum investment period is usually five years before you can redeem your shares without incurring an early redemption penalty.

You can earn recurring dividends from tenant rent payments. Another potential income stream is when the platform sells properties for a profit and distributes the sale proceeds.


  • Earn dividend income
  • Invest in expensive properties
  • Low minimum investment


  • Multi-year investment period
  • Early redemption fees can apply
  • Don’t own the entire property

9. Try a Robo-Advisor

Robo-advisors are an effortless way to invest in stocks if you don’t want to self-manage your portfolio. Instead, these platforms use your investment goals and risk tolerance to recommend a personalized portfolio with stock and bond index ETFs.

It’s possible to open taxable and retirement accounts. Usually, the minimum initial investment is $10 to make your first trade.

You can enjoy instant diversification and automatic portfolio rebalancing to reduce your investment risk. Unfortunately, most services only invest in index funds and don’t let you add individual stocks or sector ETFs that are less diversified.

Most platforms charge an annual advisory fee of 0.30% or less. Some venues don’t charge fees but may require a higher minimum cash cushion that downsizes your stock fund allocation.

This cost is cheaper than hiring a financial advisor at approximately 1%. In addition, an advisor may require a minimum $100,000 balance.

Some services do offer access to financial advisors through one-time advice packages. You can enjoy this hands-on support when you need it but continue to take advantage of the cost savings of a robo-advisor.


  • Automatic rebalancing
  • Personalized asset allocation
  • Low minimum investment


  • Annual advisory fee
  • Only recommend index funds
  • No hands-on advisor access

10. Use a Broker

If you’re comfortable managing your own portfolio, an online stock broker can be a good option.

Using an online stock broker can provide these benefits:

  • Commission-free trades
  • Fractional investing
  • In-depth research tools
  • Many investment options

You can invest in individual stocks, sector funds and index ETFs. If you want to invest in index funds primarily, you can build a portfolio similar to a robo-advisor and avoid the account fees.

A $20,000 investment can help you easily add several positions while maintaining a diversified portfolio.

To help find investment ideas, you may consider using a stock picking service like Motley Fool Stock Advisor. This platform provides two monthly stock suggestions that can potentially outperform the market over the next three to five years.


  • Many investment options
  • No trading fees
  • Taxable and retirement accounts


  • Must self-manage your investments 
  • Requires in-depth research
  • Can be riskier than robo-advisors


If you have $20,000 to invest, you can dabble in several investment opportunities to earn passive income with a diversified portfolio. 

Consider your investment goals and planned withdrawal dates as you compare your short-term and long-term options. Taking the time to analyze these factors can help you choose the best investment options for your needs.