How to Invest $20,000

Read our Advertiser Disclosure.
Contributor, Benzinga
August 22, 2023

If you’ve recently come into a bank account surge of $20,000, you might be feeling a variety of emotions, ranging from excitement at the investing possibilities in front of you to an overwhelming feeling of dread when you realize just how many options are available to you. Make smart investments now to be in a more financially empowered situation later down the line. Assess your risk tolerance level and consider placing your $20,000 into one of these smart long-term investments.

Determine your Risk Tolerance

Your risk tolerance is the degree of investment return variability that you can withstand. Some of the factors that contribute to your unique level of risk tolerance include:

Your Age

Younger investors typically are able to take more aggressive risks with their money. In the event that the stock market takes a dip and the prices of stocks go down, younger investors have time before retirement to make up this lost money through compound interest. Older investors who look plan to retire sooner rather than later will want to take fewer risks with their money and invest in securities with a more guaranteed rate of return.

Your Employment Status

If you are self-employed or in the first years of your career, your income probably isn’t as secure as you’d like it to be. If you aren’t stable in your career or you have a variable income, you will want to take fewer risks with your money in case you are laid off or lose a major client.

On the other end of the spectrum, if you’re firmly established in your career and you’re in a salaried position, you can afford to undertake riskier investment options.

Your Income and Family Situation

Investing is important, but some things are more important than having a secure retirement account, including supporting your family and keeping an emergency fund to cover an unexpected auto or medical bill. If you are only supporting yourself, already have an emergency fund secured and have excess income to invest, then you’re in a position to take greater risks with your money.

How to Invest $20k from Least Risky to Riskiest

Investing isn't just buying and selling stocks - it comes in many different forms and risk profiles.

Invest the $20k with the Least Amount of Risk

First, for those who prefer the least risk:

Pay Off Debt

The least risky way to invest an extra chunk of change is to pay down your outstanding debts. Debt — especially high-interest rate debt like charges to an in-store credit card or a payday advance — accumulate interest for every month that you do not clear the balance. This interest piles up much faster than you can see a return on an investment, meaning that the longer you allow your debt to stick around, the more money you lose to the bank or creditor.

What you can do: Meet with a nonprofit credit counselor, talk to your bank and create a plan to pay down your debt as fast as possible.

Invest the $20k with Mild Risk

Max Out Your Retirement Accounts

Whether you have an Individual Retirement Account (IRA) or an employer-sponsored 401(k), maxing out your retirement account for the year can be a safer way to invest. If you’re under the age of 55, you can invest up to $6,500 in an IRA and $22,500 into a 401(k) in 2023.

Though you take on risk by investing in the stock market, you can help manage this risk by making sure that your money is held in a diverse range of assets.

What you can do: Talk with your employer and set up a 401(k) at your work or open an Individual Retirement Account or Roth IRA and start contributing.

If you don't have a 401(k), it might be in your best interest to open an IRA sooner rather than later. Benzinga compiled a list of the Best IRA Accounts. You can learn more about the rankings or take a look at a short list of the picks below.

Invest the $20k with Some Risk

Invest in Higher Education

The pursuit of higher education is an investment in yourself and can put you on the path to climb the next rung of your company’s corporate ladder or give you the tools and certifications you’ll need to start a whole new career. More employers expect employees to hold some kind of degree or certification. If you are unemployed, earning a bachelor’s degree can act as a bargaining tool to help you negotiate a higher salary or move into a more advanced position. Some fields of employment legally require that employees attain a certain level of post-high school education to practice.

You should only pursue higher education if you are sure that you have enough time to devote to the endeavor. If you’re a working professional who can’t afford to take time away from your career or family, online instruction and part-time enrollment can help you pursue your degree.

What you can do: Start brainstorming degrees you'd like to study, potential salaries and calculate payoff and college programs, then contact a college adviser.

Invest $20k with the Most Risk

If you’re up for the highest level of risk and potential returns:

Start Your Own Business

If you have a passion, opening your own business has the potential to be your first step toward financial freedom. You can open a physical business with just a few thousand dollars, or you can start off as a freelancer working from home and use your $20,000 to cover living expenses while you find your first clients.

Starting a business is a risky venture; an estimated 20% of small businesses fail before the end of their first year in business and about 50% will close their doors before the end of year five. You can limit your risk by starting small, creating a business plan and working with mentors and industry veterans to turn your passion into a profitable business.

What you can do: Create a business plan and let friends, family and trusted individuals review it.

Knowledge is Key

The next step will be determined by the investment you’re pursuing. If you have chosen to pay down debt first, start by assessing your debts, paying down the smallest debt first while making minimum payments on the other debts and working up the ladder until you eventually conquer your biggest debt. This technique is called the debt snowball method of debt reduction.

If you’re looking to invest for retirement and you do not already have a 401(k) plan, you’ll first need to choose a provider and open an IRA. Check out Benzinga’s Best IRA Accounts.

If you’ve decided to open a business or head back to school to pursue higher education, your first step is research. Research and apply for college scholarships, create a business plan, meet with potential investors and take advantage of as many free sites and resources as you can to increase your knowledge to set you up for a better chance at success in your field.

Frequently Asked Questions


Why should you invest?


Investing is a beneficial way to grow wealth and achieve investing goals. It allows money to generate passive income, diversify risk, stay ahead of inflation and build a retirement nest egg. Thorough research and professional advice are important for informed investment decisions.


How much should you save vs. invest?


The amount to save versus invest varies based on personal financial goals and risk tolerance. It is advised to have an emergency fund before considering investments, and after that, allocate income towards investments based on objectives and time horizon. Diversification and seeking professional advice are important for a balanced approach.


What are the risks of investing?


Investing comes with various risks, including the potential loss of capital, market volatility, economic downturns, poor management and industry disruptions. Investors should carefully research and evaluate these risks before making any investment decisions.

About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.