It depends.
Do you need cash? When do you need it? Could you face losing part of it by making risky investments? Many factors would govern your decision.
One thing you should NOT do is to leave it in a bank account where its value will depreciate every month.
Buy Shares
Over the long term, the S&P 500 index has returned an average of 7-8% after inflation. Achieving that return is not guaranteed. How your investment grows depends on many factors; when you buy and sell, the particular stocks you choose, short-term factors, and the inflation rate.
The stock market is still the place you are most likely to grow your $20,000.
Penny Stocks
Penny stocks are those companies with shares priced below $5. They can give you high growth, but the prices of stocks in this market segment are volatile and the most successful traders are those who actively manage their accounts.
Choose which penny stock to buy based on your research, but never put all your money into one, or even two stocks. Aim for at least ten stocks to spread your risk.
Blue Chips
Blue-chip stocks are large companies that have excellent records of returning profits to shareholders. You can expect these stocks to give you an annual return in the 5-10% range after allowing for inflation over the long term. These are the stocks that insurance companies buy with savers’ premiums. Blue chips are the closest you will get to an investment you can buy and forget about.
Buy Gold
When you buy gold, you are gambling on the price going up. The same applies to silver, platinum, and other metals. If the price goes down or remains stable, your investment decreases in value. You should only buy gold if it is expected to rise in value.
In 2021, Gold is off its high of $2,081.94 per ounce (Aug 6th, 2020), but is still over $1,744 per ounce at the time of writing (September 2021). The price is high because of the continued uncertainty in the world’s economy post-Covid.
There is no ideal time to buy gold. If you buy when the outlook for the international economy is certain the price will be lower, but you might have to wait years for the next economic crisis to see any growth in the value of your investment.
Buy Bitcoin
Bitcoin is the definition of a risky place to put your dollars. Its price has gone up phenomenally over the past years, but that does NOT mean it will continue to rise in value in the same way.
Screenshot source
The bitcoin price has fallen in recent weeks because of increasing government regulation of cryptocurrencies. China’s actions to effectively make all cryptocurrency activity illegal has had a major impact on bitcoin investors’ confidence in the days immediately after the announcement, though confidence has improved again after consideration of possible futures.
Some sources are telling us to buy bitcoin because the price has fallen from its high. It just depends on which pundits you follow. Buying bitcoin is a gamble. The currency has no underlying value and has risen because of speculators buying coins and hoping for massive gains.
Your Home
Could you spend $20,000 on your home? Of course, you could, and probably many times over.
If your objective is to make your windfall work for you, think hard before you call in the contractors.
A new kitchen will certainly add to your home’s value, but you only get to realize that when you sell.
Spending your lump sum on improvements that will repay their cost with energy savings makes much more sense: Insulation, solar panels, window shutters, even new windows will all reduce your electricity and heating bills.
Window shutters image by suju-foto from Pixabay
Insulation is the first priority because it pays for itself in just a few years. Solar panels are getting cheaper every year, and if you combine them with batteries, could give you all the electricity you need. Window shutters will lower your air conditioning costs because they help keep your rooms cooler. New windows will reduce drafts, and if you buy modern double-glazed units they will reduce the sun’s heating effect in summer.
What Would You Do?
It would probably be a good idea to mix things up a bit.
Invest $10,000 for the long-term in a mixture of ten blue-chip stocks, Use $2,000 to start a trading account in penny stocks, and spend the remaining $8,000 on home improvements that will pay for themselves in reduced bills.
Forget gold, silver, and platinum, because prices are currently too high to limit any price growth prospects.
Forget bitcoin, it’s just too much of a gamble. If you do your research and think bitcoin will explode, then limit your crypto spend to $1000. Even $1,000 in bitcoin would give your cash reserves a nice boost if the price did take off again.
