Imagine you’ve got a hefty sum of $250,000 ready to invest. With the global economy teetering on the edge of a recession and stocks at sky-high prices, figuring out where to put your money is no easy task. Plus, inflation is at its peak and we might see interest rates drop by the end of 2024.
The past few years have been a rollercoaster for stocks and bonds. 2022 was a rough year, but 2023 bounced back with the S&P 500 and the NASDAQ soaring 24% and 43% respectively. Now, the stock market seems a bit overpriced, trading at about 23 times forward earnings.
Despite the ups and downs, the key takeaway here is to keep investing. Your strategy might differ from mine, but as long as you keep putting your money to work, you’re likely to see benefits in the long run. Especially considering inflation is eating away at your purchasing power.
So, how would I invest $250,000 today? Well, I usually keep between $50,000 and $100,000 in my main bank account. But at one point, I had over $250,000, mainly due to a windfall from a private real estate investment.
In addition to building up cash, I also regularly invested in the S&P 500 and Sunbelt real estate, even when they were struggling. These investments were usually in increments of $1,000 to $5,000.
Now, let’s talk about my investment strategy. I’m 47, my wife is 42, and we have two kids aged 7 and 4. We’re moderately conservative investors, mainly because we haven’t had a regular income from a day job since 2012 for me and 2015 for my wife.
We’re not afraid of work, but we don’t want to lose our freedom to spend time with our kids. So, we’re not willing to take on too much investment risk until both our kids are in school full-time in fall 2024.
Even though we don’t have day jobs, we do have passive income that covers most of our living expenses. That’s our definition of financial independence. We also earn online income, which we usually reinvest to generate more passive income.
Our kids’ education expenses are on track, thanks to two 529 plans we superfunded when they were born. We also have life insurance and estate planning in place.
So, how would we invest $250,000 in today’s market? Here’s our plan:
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Treasury Bonds (50% of cash): We’d put half of our cash in Treasury bonds. The 10-year yield is currently around 4.3%, and we might see rate cuts starting in September 2024.
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Stocks (15% of cash): About 18% of our net worth is in stocks. We usually max out our tax-advantaged accounts at the beginning of the year and regularly contribute to our taxable online brokerage accounts.
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Venture Capital (15% of cash): We enjoy investing in private funds because they’re long-term investments with no daily price updates. We’ve already made commitments to a couple of venture capital funds and will continue to contribute to these funds.
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Real Estate (20% of cash): We’re bullish on real estate in 2024. Real estate provides shelter, generates income, and is less volatile than stocks. We’ll continue to invest in private real estate funds that focus on single-family homes and industrial properties in the Sunbelt.
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Debt Pay Down (0% of cash): With Treasury bond yields higher than mortgage rates, paying down mortgage debt doesn’t make sense for us.
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Financial Education (0.1% of cash): Education is one of the best long-term investments. There are plenty of affordable or free resources available today to help you boost your financial knowledge.
The key to successful investing is consistency. While you might face market downturns, over the long term, risk assets like stocks and real estate have historically yielded positive returns. But remember, the goal of investing isn’t just to accumulate wealth. It’s to use your money to improve your quality of life.
So, how would you invest $250,000 in today’s market? Even if you don’t have that much, where would you put your money? What investments do you think will yield a return of over 5% in the next 12 months?
If you’re interested in real estate, check out Fundrise. They manage over $3.3 billion across multiple funds that primarily invest in the Sunbelt region. If you’re interested in private growth companies, check out the Innovation Fund. They invest in private companies in the artificial intelligence, prop tech, fin tech, and datacenter space.
Remember, every investment decision should be based on your personal financial situation and goals. Happy investing!
