How to Invest $1 Million in 2024

If you’re fortunate enough to have $1 million ready to invest, you have several investment options to choose from. Before you invest, you need to address several issues about why you’re investing and your goals. Once you lay the groundwork, you can start looking at your options.

Today, you have more investment options than ever before. You can invest in a traditional manner, such as buying stocks and mutual funds. You can also explore newer forms of investing, such as real estate and collectibles crowdfunding.

What to consider before you invest

Whether you’re investing with $1 million or a smaller amount like $100, understanding a few basic concepts about how to invest money may help you make smarter decisions.

Your goals

First, you must decide what goals you want to achieve with your money. Some people may need to address primary financial goals; others may be in a good initial position. Your goal could be to generate income to pay your monthly expenses. In this case, you’d likely want a reliable stream of income with little risk of decreasing value.

Others may want to grow their investment account to retire later on. These investors may seek longer-term growth at the risk of shorter-term losses. Once you know your goals, you can move on to other important factors.

Your timeline

Next, you need to understand your timeline for when you plan to use your money. People who don’t intend to touch the money for 40 years have more options than those who need to withdraw the money tomorrow.

You can generally take more risk if your time horizon is longer because you have more time to recover from potential losses. Those who need the money within the next few years may not want to put their money in riskier investments. These investments could potentially quickly decrease in value.

If your timeline is flexible for a short-term goal, such as buying your dream car, you may be able to take more risks. In this case, you should feel comfortable putting off your goal if your investments decrease in value toward the end of your timeline.

Your risk tolerance

Your risk tolerance can help determine which investments fit your investing style. Essentially, this term defines the amount of risk you’re comfortable with before you start to worry about your assets when markets drop. People who would be comfortable with a 50% decline in their investments without selling have a higher risk tolerance than people who would sell their assets if they declined 20%.

Many of the best online brokers and best investment apps offer risk tolerance quizzes to help you determine where you fall on the risk tolerance spectrum. Those with a higher risk tolerance may consider investing in riskier assets. These have the potential to offer higher returns but may come with more extreme price swings and even losses. People with lower risk tolerance generally invest in less risky assets, which may not have as much potential to increase in value.

Whether you need expert help

Perhaps you don’t want to take the time to learn the terms and tools needed to start investing, or you might not feel comfortable investing without expert advice. Hiring a financial advisor could help outsource this part of your finances and give you some peace of mind.

Don’t hire any financial advisor, though. Not all advisors are the same. For instance, robo-advisors are technology-based solutions that help you invest without human financial advisor interaction. They ask you questions as a regular advisor would and help put together a plan to reach your goals.

Robo-advisors like Betterment may handle managing your portfolio, rebalancing your assets, tax-loss harvesting, and other investing maintenance items you may not want to take care of on your own. Because these apps are technology-based, their fees are often lower than the fees of a human investment advisor.

Human financial advisors still have a place in some people’s lives, though. You may feel more comfortable meeting with a human in person and having someone to call for financial advice. If you’re considering a human financial planner, make sure you understand how they make money.

Typically, fee-only financial advisors are bound by the fiduciary standard, which means they have your best interests in mind with regard to your investments. Fee-based financial advisors are typically bound by the suitability standard, and may only recommend suitable investments. Unfortunately, suitable investments could result in the advisor earning larger than necessary commissions from your hard-earned money. For instance, a fee-based advisor could potentially earn a commission if their clients invest in a certain mutual fund or variable annuity.

8 ideas for how to invest $1 million

After you’ve defined your goals, timeline, and risk tolerance, you’re ready to start figuring out where to invest $1 million.

1. Pay down your debts

People with high interest rate debt, like credit card debt, should consider paying it off before investing. Think of this option as investing in your financial well-being, as opposed to investing in a savings or brokerage account. Paying down your debts could be a worthwhile investment, especially if you have high-interest debt.

Being completely debt-free could give you a powerful sense of accomplishment. By paying off debt, you reduce your monthly expenses. That said, paying off low-interest rate debt, such as a mortgage with a 3% interest rate, may result in giving up extra returns you could earn by investing your money elsewhere. Whether this is the right choice for you depends on your financial situation.

2. Build your emergency fund

An emergency fund may not feel like a traditional investment, but it can help your finances in ways you may not think of. An emergency fund gives you a stash of cash you can turn to during rough times, such as a job layoff or natural disaster.

Your emergency may come at a time when your investments have decreased in value. If you invest all of your money without establishing an emergency fund first, you could potentially need to sell at a loss to cover your immediate financial needs.

An emergency fund gives you a way to avoid doing this as long as you can cover the financial emergency with the money you set aside. Most experts advise having an emergency fund of three to six months of your monthly expenses, depending on your situation. Opening a high-yield savings account could be a good option if you're looking to build an emergency fund. These accounts typically offer a higher rate of return than traditional savings accounts.

3. Invest in the stock market

Once you have your bases covered, investing in the stock market could help you reach your goals, though it’s important to remember all investments come with the risk of loss. You have the choice to invest in various assets to build a diversified portfolio, including individual stocks, mutual funds, exchange-traded funds (ETFs), index funds, and more. If you invest with a taxable account, you can typically withdraw the funds at any time without paying any early withdrawal penalties.

For those just getting into investing, mutual funds and ETFs do a lot of the hard work for you. These products hold a variety of investments based on the fund’s goals. They may help spread out your risk by holding several assets, which is called diversification.

Alternatively, you could choose to pick your investment allocations with individual stocks. When you purchase individual stocks, you determine which assets you feel will perform best. You could still diversify your holdings by owning several companies in different industries.

Investing in mutual funds, ETFs, and individual stocks require having a brokerage account. You can open brokerage accounts at traditional brokerage firms or with several investing apps. If you want to invest in mutual funds, companies such as Fidelity or Vanguard could make the most sense. Those that prefer investing in ETFs or individual stocks may want to consider companies like Stash.

4. Boost your retirement savings

In addition to investing in a taxable brokerage account, you could also choose to invest in specialized accounts for retirement. Retirement accounts may offer a tax benefit either today or in the future in exchange for not withdrawing the funds from your account until you reach age 59 1/2, in most cases. If you need to withdraw money before you reach that age, you may have to pay penalties and taxes on the amounts withdrawn.

Two common types of retirement accounts include traditional IRAs and 401(k)s. The traditional versions of these accounts may allow you to contribute money on a pre-tax basis or give you a tax deduction, which means you may not pay income taxes on the money today. Contributions are tax-free, and you pay ordinary income tax on the money when you withdraw it in retirement.

These tax benefits can be powerful, but these accounts typically limit the contributions you can make to them each year. You can’t invest your full $1 million in a retirement account in one year.

5. Start a college fund

A college fund may offer another place to invest some of your $1 million. The cost of college continues to increase drastically. Investing early could help you build a portfolio large enough to avoid needing to pay for college out of your monthly cash flow down the road.

You have several options, depending on where you live and anticipated college needs. Coverdell Education Savings Accounts (ESAs), 529 plans, Roth IRAs, trusts, or even taxable investment accounts may work for you. Consider consulting with a financial advisor to see how these options could impact your child’s future eligibility for financial aid before you start investing.

6. Invest in cryptocurrency

Cryptocurrency, a decentralized digital asset which can be used as a medium of exchange, could provide another option for investing part of your $1 million. It’s grown from an obscure concept few people knew about to a commonly discussed investment.

Most people consider cryptocurrency an alternative investment because it’s relatively new and unproven compared to traditional investments. Once you learn how to buy cryptocurrency, there are a number of platforms that will allow you to trade cryptocurrency if you want to add it to your investment portfolio. That said, it can be a volatile asset so if you choose to go this route, invest with caution.

7. Get started in real estate

Learning how to invest in real estate can be tricky because you have several options with $1 million. Those who prefer to take a hands-on approach can purchase rental properties and manage them on their own. That’s often more work than most people want to take on, though.

If you prefer a more hands-off investment strategy, several crowdfunding real estate investment options have popped up in the past decade. This includes companies like Diversyfund and Crowdstreet. Diversyfund lets you invest in its real estate investment trust (REIT), which takes the money pooled by investors to invest in real estate projects. Crowdstreet focuses on commercial properties and allows you to invest in individual projects or their real estate funds.

These platforms manage real estate investments on your behalf. The assets aren’t always liquid, which means you may not be able to sell your part of the investment at any time. For that reason, people considering these options may want to view them as long-term investments.

8. Invest in art and collectibles

People with $1 million to invest may also want to have a small amount of exposure to collectibles in their portfolio. Collectibles may appreciate over time or decrease in price during economic downturns or if they become overvalued. Common collectibles people may invest in include artwork, sports memorabilia, and even collectible card games such as Pokémon.

Some of the most famous artists have artwork that sells for more than $1 million, so you may not be able to purchase a full painting. But alternative investment platforms such as Masterworks give you the opportunity to purchase a portion of some of these assets.

Masterworks pools money from several investors to buy prominent artwork. Its goal is to sell the artwork after three to ten years, and then distribute the profits to shareholders.

FAQs about how to invest $1 million

The bottom line

Learning how to invest a million dollars can feel overwhelming. Not only is it a large amount of money, but you also have more options to choose from than in the past. Thankfully, the educational material to help you learn how to invest is more accessible today thanks to technology.

Whether you want to invest the money yourself or hire a financial advisor to help, you now have a decent list of investment options. Remember, all investing comes with risk. Although the goal is to grow your wealth, you could lose money. Diversifying your investments might help protect you from market volatility, but the risk of loss still exists.