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The good thing about reaching the $1 million mark is that it gives you plenty of investment options. But the basic investment objectives are the same as if you had a much smaller amount of money.
You’ll still want to develop the best combination of growth, income, and capital preservation. It’s possible to do, but it requires diversifying your funds. You’ll need to decide the best investments and best accounts for you.
Time and compound interest are two of the most powerful things investors have on their side. So, unsurprisingly, keeping investments simple and sticking to a gameplan often yields the best results rather than trying to micro-manage every aspect of your portfolio.
When you invest $1 million, consider your long-term investing strategy and how actively you want to manage your portfolio.
Options like investing with a robo-advisor or DIY investing are some of our favorite ways to invest $1 million because of the low fees. If you decide to go another route like real estate investing or dabbling in alternative assets, make sure you account for potentially higher fees for your projected returns.
There are so many ways you can invest $1 million dollars. But before you get started, here are a few more factors to consider when picking the investments and strategies that are right for you.
If you’re not comfortable investing your own money or even using an automated service, working with an investment professional may be the best choice. And many financial advisors work with high-net-worth clients on a one-on-one basis. They’ll not only manage your investments for you but can often provide advice on overall financial management, such as estate planning.
Investment advisers are commonly associated with large brokerage firms and generally charge annual fees between 1% and 2% of the assets under management. That can be a lot if you have $1 million.
An alternative is to work with Personal Capital. They’re a hybrid between a Robo advisor and a full-service personal investment manager. You’ll get one-on-one advisory services but at a much lower fee than you’ll pay to a traditional investment manager.
One of the benefits of investing a million dollars is that you can create a diverse portfolio because you have so much capital. And with alternative asset classes, you can do just that while potentially hedging against inflation at the same time.
Examples of popular alternative assets and how you can start investing in them include:
This is just scratching the surface for what’s out there. Some investors dabble in crypto investing, or even investing in sports cards or other collectibles.
Ultimately, you should consider your risk tolerance and how much of your portfolio you want to invest in alternative asset classes. But if you’re trying to move away from the stock market, these alternatives could be an excellent place to start.
If you like the idea of being more directly involved in specific real estate deals but don’t want to get involved in the day-to-day details of the process, you can consider investing through real estate crowdfunding.
There are many different real estate crowdfunding platforms to choose from, and each has its own specialization. For example, you can choose a platform that invests in individual commercial buildings. Or you can choose individual residential properties or even fix-and-flip opportunities.
| Highlights | |||
| Rating | 9/10 | 8/10 | 9/10 |
| Minimum Investment | $10 | $25,000 | $5,000 |
| Account Fees | 1%/year | None | 1-1.25%/year asset management fee |
| Private REIT | true | true | true |
| Sign UpRead Review | Sign UpRead Review | Sign UpRead Review |
Companies like Fundrise are an excellent way to start dabbling in real estate investing, and the company pays quarterly dividends and has low fees. CrowdStreet and RealtyMogul have more deals on their platforms, but with $1 million, you can explore several real estate crowdfunding sites if you want to test the waters.
Overall, real estate crowdfunding offers you an opportunity to invest in either an equity position or debt to finance real estate projects. It’s a classic high reward/high-risk venture, with the potential for loss. For that reason, many real estate crowdfunding platforms require you to be an accredited investor. But if you have $1 million, you’ll automatically qualify.
Perhaps the easiest way to invest in real estate, particularly commercial real estate, is through a real estate investment trust (REIT). These are essentially mutual funds that own and manage commercial real estate. That can include office buildings, retail space, large apartment complexes, warehouses, industrial space, and other property types.
Each trust holds multiple properties. This gives you greater diversification with a small amount of money. They’re often spread across different geographic markets, which avoids having your entire real estate investment concentrated in a single local market area.
One of REITs’ advantages is that they’re legally required to disperse at least 90% of their net income as distributions to shareholders. That means they’re an excellent source of annual revenue and can also provide capital appreciation upon the sale of properties held in the trust. If you’re an accredited investor with at least $100,000 to invest, the private equity firm Origin Investments might be for you, as it offers investments in diversified and carefully-vetted real estate funds.
Another way to invest $1 million is through renting individual properties, including single-family homes, multi-family homes, small commercial properties, or even specialized projects like fix-and-flip projects.
Historically, real estate has been one of the very best long-term investments. However, it has the disadvantage that it is a very hands-on venture. In fact, it’s really a hybrid between investing — because of the capital you’ll need to put into each transaction — and business because of the direct involvement you’ll have in the purchase, management, and sale of the property.
On a long-term basis, real estate can be very profitable. For example, if you make a 20% down payment ($60,000) on a $300,000 small duplex and rent it out for a combined $2,500 per month, you’ll make a monthly profit while also paying the mortgage. After 30 years, the combination of property appreciation and paying off your mortgage will give you a mortgage-free property. You can then sell the property at a huge gain or continue renting it and reaping an even larger net cash flow.
Plus, companies like Roofstock let you invest in single family rental homes in promising markets, and you can let Roofstock’s property management team manage properties for you to keep things passive. Our Roofstock review covers all of the details if you want to learn more.
This can be one of the most lucrative ways to invest $1 million dollars and is also a more entrepreneurial path you can explore. It can be done in one of two ways. Either you invest in a business that you will operate or act as a silent partner for an existing business.
If you’re going to invest in your own business, you can either start a business from the ground up or buy an existing business. Buying an existing business will typically require more capital, but it will be a lower risk than a startup since it’s already established. Either way, make sure you’re familiar with the business and feel confident you can make it a success. The failure rate of new businesses is uncomfortably high.
If the idea of starting your own business doesn’t interest you, you can go the silent partner route. This is when you invest money in a successful, established business that’s in need of capital for growth. In exchange for your investment, you’ll get a share of ownership of the business. This will also entitle you to a percentage of future income.
Finally, crowdfunding platforms like Mainvest also let you invest in business loans to help small American businesses, and the platform targets 10% to 25% returns for investors. Alternatively, you can consider investing in startups through crowdfunding platforms like OurCrowd and SeedInvest.
Interest rates on traditional investments — savings accounts, certificates of deposit (CDs), and even U.S. Treasury securities — are admittedly very low these days. If you want to increase the income level on the fixed-income portion of your portfolio, you can add some private lending to the mix to improve your portfolio’s overall yield.
An easy way to do this is through peer-to-peer (P2P) lending. These are online platforms where borrowers come to take loans that are funded by participating investors. Some P2P investors earn double-digit returns on their investments.
You won’t want to invest a large percentage of your portfolio in this type of lending. The loans you’ll invest in do carry the risk of default. But a small position can really improve your fixed-income returns.