Asking how to invest $200,000 is a little like asking the question, “How high is high?”, because the answer depends on a number of factors. For instance, if you are in your 20's, you might consider ways to grow that amount so you will not only keep up with inflation but will have more assets later in your life than if you invested the money conservatively. However, if you are nearing retirement and you have fewer years to live, taking a more cautious approach to preserve capital should be your first priority. Here are some other factors to consider and some of the alternatives that are available to you.
Assess your tolerance for risk, regardless of your age. Some people stay awake nights worrying about whether they have made the correct investment decision. Life is too short to live that way. It is better to leave your money in a safe investment that will grow, however slowly over time, rather than be concerned with every one of your moves. If you fall into this category, like many people, talk with your bank about putting your money into certificates of deposit (CD) or a money market fund.
If you just came into this money but your interests lie in something other than investments, consider turning your money over to a professional. If you have an interest in the stock market, look for a full-service stockbroker who can recommend stocks to you and help you monitor your progress. On the other hand, if you view real estate as a sound and growing investment, find a real estate agent who can help you find appropriate properties to buy. In both cases, first ask your family, friends or someone at the bank whom you trust for their recommendations about whom you should choose.
Open an account with one of the many online brokerage houses that will help you learn about the various ways to invest your $200,000. An account with Scottrade or E-Trade, for example, will provide you access to a myriad of investment opportunities and will educate you about the pluses and minuses of each. In addition, you will pay considerably less in commissions per trade than you would if they were instituted by a full-service stockbroker.
Stick by your decision. This is particularly applicable for those who have chosen to invest in the stock market. Many neophytes react to the short-term movement of the stock market, often selling out when the market is down. If you have invested for the long haul, and you have put your money in the best securities, do like the seasoned professionals and stay the course. History has proven that this philosophy eventually triumphs.
Bill Herrfeldt specializes in finance, sports and the needs of retiring people, and has been published in the national edition of "Erickson Tribune," the "Washington Post" and the "Arizona Republic." He graduated from the University of Louisville.