How To Invest 1 Million US Dollars

William Huston, AIF®, AIFA®

by in Published on March 16, 2022

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How To Invest 1 Million US Dollars

How To Invest 1 Million US Dollars

Assuming you have one million dollars lying in an account somewhere, or you're saving up towards $1 million or you just got an inheritance of $1 million. What do you do with that money? Do you enjoy it, save it or invest it?

A key thing in getting more money is always investing. That is a basic formula in the financial world. The people who end up getting rich are those that find ways to multiply their money.

In today's global economy, there are multiple ways of investing your money. But before you get to investing:

Here are some things that you should consider:

Be clear on your financial goals

It would be important to figure out what you want to do with your money. Would you want to lay back and enjoy it or would your priority be to grow and multiply it? Once you figure this out, you can then come up with a plan on how to execute your next move. There are numerous tools, apps and resources online that can help you achieve your financial goals.

Pay off your debt

If you want to enjoy high returns on your money, start off by paying your debts. High interest loans, credit cards, car loans, etc. can drain you over time as the interest rates are bound to compound.

To get maximum return on your investment, pay off your debts first. If you have high-interest loans like credit cards, start off by paying off those.

Build up your emergency fund

No matter the income level, every single person needs an emergency fund for those rainy days. Even with $1 million, you should make sure you have money that would cover your living expenses for 6 months, in case of an unexpected turn of events. It is highly recommended that when you're opening up an emergency fund, look for a high-yield savings account.

Review your retirement plan

It is very important to ensure that you're on track with your retirement plan before you invest. If you'll be funding your retirement fund directly, you can consider setting a base amount first and then come up with a plan of how you'll be paying monthly premiums.

Consider working with a professional

It would be wise to consult a financial professional who can guide you on the best ways to make use of and invest your money. Alternatively, you can use an automated service if that's your preference. However, working with a professional is more advisable as they can also offer you investment advice, not only on your money but on overall financial management.

Best Ways To Invest 1 Million Dollars.

Best Ways To Invest 1 Million Dollars

1. Stock Market

Stocks are a good investment choice as they usually generate returns through dividends and growth in share prices. According to Kiplinger, some of the great stocks to invest in in 2022 with high dividend yields include: Alphabet Inc, Lowe's Cos. Inc, Microsoft Corp, among others.

As you're choosing where to invest, it is important to note that some stocks that yield high returns may also be high-risk.

2. Bonds

When it comes to investing, a lot of advisers hold the belief that a traditional balanced investment portfolio consists of 60% stocks and 40% bonds. Generally, bonds are a safer way of investing money because they are backed by the government.

There are different types of bonds such as corporate bonds, municipal bonds, and treasury bonds that you can invest in. Being that they are a safer way to invest, the interest rates are not usually that high. They usually yield just about 3% interest. However, bonds are good for capital preservation in today’s lower interest rate environment and for a diversified portfolio.

Although bonds are often thought of as safe and secure investments, you can still lose money if you sell them cheaper than what you paid as your initial investment or in the case of default payments on the issuer's side.

3. Rental Properties

Another great investment avenue is in real estate. If you decide to buy/build rental property, it is possible for your investment(s) to yield up to 9% annually from monthly rental income. Real estate offers diversification of your investment portfolio while generating income.

Real estate allows your investment to grow through passive income from the recurring cash flow that is paid in form of rent, equity appreciation when the value of your property goes up long term and tax benefits, e.g. deduction of operating and business expenses and using depreciation expense to reduce your taxable net income.

Owning real estate is a good way to achieve financial freedom.

4. ETFs (Exchange-Traded Funds)

An ETF is a type of combined investments like stocks and bonds but operates very much like a mutual fund. ETFs will allow you to invest in multiple securities all at the same time, can be traded easily and have lower fees than other types of funds.

Usually, ETFs track a specific commodity, index or other assets and they can be bought or sold on a stock exchange, similar to how normal stocks are bought and sold.

ETFs are a good addition to your investment portfolio, as long as you understand the fact that they are designed to match the performance of the market segment they’re investing in rather than outperforming it.

5. Start or buy into a business

Another profitable way to invest your money is either by starting your own business or investing in an already existing business.

Starting your business is a high risk venture but in the long run, can generate very high returns. Investing in an already existing business poses a lower risk to the investor because there's already a proof of concept and a solid track record.

6. Peer-to-Peer Lending

You can also choose to use your $1 million dollars to fund loans to others. This way, you're able to get a stable income from the interest generated by loans that people have borrowed. In order to be able to participate in peer-to-peer (P2P) lending, you need to join a P2P platform that connects you to borrowers.

The P2P platforms may require you to pay some fees when joining their network as they act as the connect between you and the borrower. They issue out loans to borrowers after the investor funds them. They also assist in payment collection and taking legal action where need be, in the case of default borrowers. To diversify your investment portfolio, you can choose to invest in more than one P2P platform at a time.

P2P lending can be a high risk investment due to defaulters. However, the potential returns may help mitigate the risk that comes with this type of investment. It is however advisable that you invest a small percentage of your personal capital to P2P lending in order to manage the risks involved.

7. CDs and Money Market Accounts

A CD (certificate of deposit) is a product that is offered by banks and credit unions whereby the client agrees to deposit a lump-sum of money for a predetermined period and they get a premium interest rate. Generally, CDs and money market accounts are considered among the safest ways of investing your money while it accumulates interest. With these types of investments, you have easy access to your money. Although, a lot of institutions do have a penalty fee that you pay for frequent withdrawals.

Annual percentage yields on CDs and money market accounts are usually almost the same as the inflation rate.

These types of investment accounts are good if you're looking for a way to save and protect your capital, while still having relatively easy access to it.

8. Fixed Rate Annuities

Fixed-rate annuities are a type of contract offered by insurance providers that guarantees to pay a buyer a fixed interest rate on their contributions for a specific period of time.

This type of investment is good for a retirement fund as the risk is much lower and you might end up receiving more than what you'd have received while investing in a US Treasury bond or CD.

It is important to note that returns on A-rated or higher fixed annuities are approximately the same as the inflation rate. This means that if you're investing in fixed-rate annuities, you're more or less just breaking even.

9. Crowdfunding

Crowdfunding is a type of investment where various investors contribute their capital to finance a new business project. The projects are usually in various sectors such as TV series, real estate, video game creation among others. The good thing with this type of investment is that you can allocate a small portion of your money to the different business ventures. This will also help you mitigate the risks.

More often than not, crowdfunding investment opportunities with potential of high returns are usually limited to verified investors. However, with your 1 million dollars, you would be able to qualify as a certified investor.

It is important to note that with the potential of high returns on crowdfunding investment opportunities, comes an equally high level of risk. Also in the case of economic uncertainty, crowdfunding companies may not be able to give you back your money immediately as they have the right to limit or freeze withdrawals during such periods.

10. REIT

A REIT is a company that enables collective investment in real estate, with an aim of generating income from these properties. The investors who pump in their resources become beneficiaries of the trust.

REITs are usually traded publicly on the major stock exchanges. Because of this there is some risk associated with this type of investment because the volatility of the stock market directly affects the share prices of REITs either upwards or downwards.

As compared to crowdfunding, REITs offer a safer way to invest in real estate.

Bay Street Capital Holdings

Bay Street Capital Holdings is an independent investment advisory, wealth management, and financial planning firm headquartered in Palo Alto, CA. They manage portfolios with the goal of maintaining and increasing total assets and income with a high priority on managing total risk and volatility. Although many advisors may focus on maximizing returns, they place a higher priority on managing total risk and volatility.

Our founder, William Huston founded Bay Street after 13 years of supporting the United States' largest retirement plan ($650B) Thrift Savings Plan. He is recognized as Investopedia’s Top 100 Financial Advisors for 2021. In California, only two black-owned firms out of nineteen firms received this recognition. In Scottsdale Arizona, Ekenna Anya-Gafu CFP, AAMS is recognized among the Best Financial Advisors for his responsiveness, friendliness, helpfulness, and detail. Bay Street was founded to advocate for diverse and emerging fund managers and entrepreneurs. In 2021, Bay Street was selected as a finalist out of over 900 firms across the US in the category of Asset Manager for Corporate Social Responsibility (CSR).


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William Huston, AIF®, AIFA®
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