Having $35k to invest can open up many good opportunities to grow your money. With proper investing, that $35k could turn into much more over 5-10 years. This article will overview 5 solid investment options for someone looking to invest $35k. Key factors when investing $35k include assessing your risk tolerance, investment timeline, and financial goals. Aspects like diversification, fees, liquidity, and tax implications also need consideration when choosing investments.
Index funds provide broad market exposure and low fees
Index funds can be an excellent choice when looking to invest $35k. They provide instant diversification and ownership of hundreds or thousands of stocks and bonds. Popular index funds track major market indexes like the S&P 500. With index fund investing, returns closely match the underlying index while fees stay ultra low, often less than 0.10%. Leading providers of index funds include Vanguard, iShares, and Schwab. One recommendation with $35k would be putting 60% into a US total stock market index fund and 40% into a total international stock index fund for global diversification.
Target date retirement funds offer an all-in-one set and forget option
Target date retirement funds provide investors with a diversified, automatically rebalancing mix of stocks and bonds in one fund. The asset allocation becomes more conservative as the target retirement year approaches. These funds provide a simple hands-off approach to investing $35k without needing to choose specific funds and rebalance. Target date funds exist with target years in 5 year increments, so an investor can pick the date closest to their anticipated retirement. Major providers like Vanguard, Fidelity, and T. Rowe Price offer target date options. With $35k, putting the full amount into a single target date retirement fund aligned with your estimated retirement timeline can be reasonable.
Real estate investment trusts gain exposure to income generating properties
Real estate investment trusts (REITS) allow investors to gain exposure to portfolios of various commercial real estate assets. REITs own properties like apartments, hotels, offices, shopping centers, and more. They receive rental income from tenants and pay 90% of taxable income as shareholder dividends. Publicly traded REITs offer liquidity to enter and exit positions. $35k could be allocated across 5-10 REITs specializing in areas like residential, retail, healthcare, and warehousing real estate for diversity. REIT dividends also hedge against inflation better than bonds over the long run.
Municipal bonds generate tax free income for those in higher brackets
Municipal bonds deserve consideration for anyone in the higher federal tax brackets of 22% to 37%. Interest earned on most muni bonds is exempt from federal tax and sometimes state tax too. This tax perk gives munis a yield advantage over taxable bonds like US Treasuries. Muni bonds are best suited for a fixed income allocation versus more aggressive equity exposure. Those earning over $170k married filing jointly stand to benefit greatly from munis. $35k could be spread across 15-20 municipal bonds with medium term durations of 5-12 years and investment grade credit ratings for stability.
Robo advisors automate portfolio management at a low cost
For investors wanting professional investment management on a budget, robo advisors present an affordable option to invest $35k. Robos use algorithms to automate portfolio management, asset allocation, dividend reinvesting, rebalancing, and tax loss harvesting. This technology brings costs down significantly compared to human financial advisors. Leading robo platforms include Betterment, Wealthfront, and Schwab Intelligent Portfolios. Robo account minimums range from nothing up to $5k or $10k. Portfolio composition and strategy align based on an investor’s risk tolerance survey.
In summary, attractive options to invest $35k include low cost index funds, target date retirement funds, REITs, municipal bonds, and robo advisors. Assessing factors like fees, risk tolerance, time horizon, and financial objectives helps guide the asset allocation decision. Spreading $35k across a few different investment types also ensures adequate diversification.