How to Invest $50,000 in Stocks for Above Average Returns
Looking for ideas about how to invest $50 000 in stocks? If you already have $50K in savings or have just received a windfall, the stock market is the best place to invest it. But wouldn’t this expose you to too much undue risk – you might ask? We’re going to be a bit creative with our nimble investment strategies here.
Going all-in with your $50k is also known as a lump sum investment approach (DCA is the inverse). The stock market has a number of opportunities for new or small investors. Small investors like you have different kinds of objectives. On the other hand, achieving better than average returns as a lone stock picker wouldn’t be easy. Although above average returns are possible, they are usually associated with more experienced institutional investors who have multi-billion dollar assets under management.
I will share how to invest $50 000 in stocks with a lower risk and above average growth rewards. We will be as practical as we can and hope to generate enough income to maintain your lifestyle. The objective is avoiding exposing your assets to too much risk. Your profit from the stock market can be transferred into real estate to help you retire as soon as you can.
Alternative Ways to Invest $50K in Stocks
You are about to jump into stocks and equity investments I know. Lets first review a number of competing alternative investments sought by individual investors like you. Here is a list of other asset classes your $50K could have be used for:
Other alternative asset classes:
- Savings Accounts
- Certificates of Deposits
- Mutual Funds
- Exchange Traded Funds (ETFs)
- Financial Advisor or Planner
- Robo-Advisors
- Bonds
- Invest on Trading Platforms
- Real Estate
- Online Side Hustle
- Investments in Gold
- Investments in rental businesses
- Small Business Startups
- Lending Club Contributions
- Investing in Yourself
- Investing in Your Kids
- International Stocks
Opening a Brokerage Account
As obvious as this may seem it’s quite vital that you get over this hurdle. This is because most beginners over think the process and lose time and miss opportunities. The stock market never waits for anyone. This is how to invest $50 000 in stocks without the procrastination paralysis.
Just select a good broker and register online. Choose one from the list of top online brokerage firms from my list. Keep in mind that, these accounts are transferable in future, if you ever find a better broker than your last. You could always request a transfer.
See also: My list of trusted and efficient Brokerage firms
How to Open a Brokerage Account
After you’re satisfied with the shortlist of candidates, choose the online stock broker that has good tools and great customer service. Look for low priced broker commissions. This data can be found on the features or fees section of their website. Open your new account.
Funding the Account
Modern Brokerage firms will provide you with a variety of funding options for a new account. They may even throw in some bonuses and perks. But don’t forget to read the fine print. You can fund your account using electronic transfer methods from a linked bank account. You can also use Wire Transfer, check deposit, or transfer assets from a previous broker. International investors can also find brokers that facilitate SWIFT banking transfers with minimal fees.
Operating Fees, Commissions, and Costs
Nearly all online discount brokers today have low fees. This is a competitive strategy to get new customers. However, be mindful of industry rats that have stricter annual maintenance requirements, and hidden costs that are not visible on their home page. The best way to get over the hump is to read the fine print. Check out their terms and conditions, and read up on the fees and commission structure before you start investing as a beginner. It’s the smartest way. That’s how to invest $50 000 is stocks without losing a chuck of that lump sum to unfair fee practices.
Investment Objective
Your investment goals and objectives should be a clear and concise reason for investing your $50K at this point in time. This could be any of the goals listed below. Keep the details as simple as you can with room for improvement and frequent optimization.
A list of objectives on how to invest $50 000 in stocks for the mid-term and long-term:
- Grow the sum to $100K in X number of years
- Grow and hedge your money against loss
- Grow your money for future use for Real Estate Investments
- Grow it as your primary investment nest-egg for early retirement
This key objective will inform the type of assets you’re going to hold in your portfolio. They will also dictate the weight of diversification needed, monitoring of expectations, and risk levels in general.
Sage Tip: How to Invest in Yourself in Your 20s
Portfolio Strategy
As you outline a clear set of investment objectives, your asset class of choice will clearly standout. For long-term investing for someone in their 20s to 40s may have 60% to 70% of their money in equities such as stocks and ETFs. For another investor nearing the age of retirement might want less risk and more liquidity. A larger chunk of funds in money market positions would be a good idea.
You may seek further clarity from a certified and licensed financial advisor or planner. Allow for flexibility and make small adjustments to your investments in the first couple of years. You would want to keep a close eye on your investments until your strategy is well refined.
Stock Market Trend Specific Strategies
To stand a good chance of achieving above average results, get to know the market trends. That is how to invest $50 000 in stocks or other equity based assets. On the stock market your capital can perform fairly well under three different kinds of market conditions. You will certainly encounter each market trend in your investment horizon as you invest long-term.
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These include the uptrend or bull market, the down trend – which is also called the bear market. Then also the sideways trend, named, the flat market. These are sometimes caused by economic conditions or investor sentiments. They may be short-lived or in some cases go beyond weeks, months, or even years. Our objective is to stay calm during these events and invest using a set of strategies we will discuss below.
Bull Market Strategy: How to Invest $50 000 in Stocks During a Bull Market
A bull market is simply a prolonged period of time where stocks in a broad index such as the S&P 500 are trading at higher prices. This happens alongside mass investor optimism. This price rally could be short-term or long-term as mentioned already. To be profitable in this era of high investor confidence, let’s take a moment to check out these strategies.
Buy & Hold
Buy and hold your stock positions and hold on while riding out the market peaks. This appears to be a no-brainer. But your long position will indicate a personal optimism on your side. You may at this point optionally perform some profit taking. Only do this if selling fits with your overall goals at the onset.
Retracement
Retracement shows you how to invest $50 000 in stocks properly. It is the active practice of looking for minor dips in prices during a bull market. These are a temporal short-lived price drop that occurs frequently – following a major jump. You can track these events and buy more stocks at cheaper price points to add to your portfolio.
Portfolio Re-balancing
When stock market valuation levels begin to appear like they’re on steroids, it is time to re-balance. Revisit your investment objectives and portfolio strategy you setup previously. If you have equity valuations that have outgrown their assigned threshold, then it’s time to trim by selling. Sell a few portions and re-distribute them at the asset classes that have fallen short of their planned allocations. You may choose to harvest the profits for other uses.
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Bear Market Strategy: How to Invest $50 000 in Stocks During a Bear Market
A bear market is the inverse of a bull market. It is the sustained period of time where stocks in major stock market indices are trading at lower prices. There is usually a lot of investor pessimism during that season. Bear markets can occur as a result of general economic downturns. They are likely to last as long as investors remain fearful.
The investor today could also take advantage of this trend and invest accordingly with a set of strategies we will discuss below.
Dollar Cost Averaging (DCA)
This investment strategy was first discussed in Benjamin Graham’s book, The Intelligent Investor in 1949. Dollar-Cost Averaging (DCA) is simply the purchase of marketable securities such as stocks with a fixed sum of money at regular intervals – such as monthly purchases.
This is how to invest $50 000 in stocks using DCA: In a bear market, the investor will keep building their positions with more stock ownership at averaged-out prices. On the other hand, it may not be a good idea to keep buying consistently is the market reverses its direction from bear to bull.
Playing Dead
This investment strategy is the moving of equity assets into money market investments. The investor will benefit from a short maturity and high-liquidity asset that will pay him decent cash flow while he waits it out for the stock market rebound. This move does not take you out of the game completely, but you’ll still be saving the money and enjoying compounding from another asset.
Look for Undervalued Stocks
Bear markets present the investor with great under priced stocks that have been battered due to investor pessimism. Many under priced stocks may deserve that valuation due to their poor fundamentals and performances. Investors would also encounter some good businesses that the market is unfairly selling below their intrinsic value. Your $50K will come in handy at this point.
Hold Dividend Paying Stocks
During a bear market when capital gains seem very unlikely, buying and holding on to dividend paying stocks can prove quite profitable. Depending on the dividend yields involved, the cash flow can become a nice form of compensation. This move is how to invest $50 000 in stocks that pay dividends. You will stay in the game much longer than other investors and traders.
Flat Market Strategy: How to Invest $50 000 in Stocks During a Flat Market
Flat markets or sideways markets occur when investor sentiments are calm. They are neither optimistic nor overly pessimistic. The market is in a state of waiting – with fewer peaks and dips for the next economic activity. As other investors wait for a trigger that could have material influence on the volatility of stocks, you could do the following without incurring significant risk.
Buy and Hold Dividend Stocks
During economic periods when stocks are trading in a flat market, there is very little the average individual stock picker or investor can do. But buying dividend paying stocks are a good use of capital at this point in time. The investor can expect dividend income that will elevate the overall value of his portfolio until the trend changes.
Hold Cash Reserves
Cash is indeed king. During periods where the stock market may experience unattractive valuation, the best move could be cash. Your cash and money market stash should give you capital to return to the market when a great buying opportunity occurs. This episode gives you a discounted entry opportunity to great companies that are yet to see a rebound when markets become active once more.
See also: How to save stock investment cash for retirement savings
A Few Parting Words
Investment success and high portfolio yields were the preserve of pros. Today the average independent investor can garner above average returns in stocks and other equities by using trend based strategies like the ones discussed above. This is how to invest $50 000 in stocks or any other sum of money.
For each market trend, there are strategies that can be applied. However, results may vary for each individual. Performance indicators may also show fractional wins of 1% to 5% or so. Beating the market does not always come in big chunks unfortunately. But weighted over a long period of time – say 5 to 10 years, results could be promising. Investing in foreign stocks in emerging markets could also bring great opportunities into play.
Drop me exploits you have undertaken with your savings. Share whatever goals you had with your savings amount.
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DISCLAIMER: This investment strategy (or ideas) does not constitute financial advice. I wrote it for your general information only. It does not seek to target any specific individual or cluster of investors. Please enjoy it for your personal entertainment, as well as a supplement to your own due diligence and research.
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