How to Invest $2-$3 Million Dollars [What to do in 2024's Market] (2024)

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Got $2 to $3 million to invest? Lucky you.

Now that you’ve got the money, here’s the next important topic:How to invest 2 million dollars. Or,how to invest 3 million dollars(depending on what level you’re at, moneybags).

In this article, I’ll guide you through what to do with 2 million dollars (or more) — including important considerations like diversification and risk tolerance, and how to preserve capital while generating income.

Below, you’ll learn the best ways to invest 2 (or 3)million dollars so you can generate passive income and reach your financial goals.

At-a-Glance: Best Ways to Invest $2 or $3 Million

We’ll talk about all of these assets + platforms in more detail below, but here’s a quick guide to some of the best ways to invest $2 to $3 million…

The 11 Best Ways to Invest $2 to $3 Million in 2024

Wondering what to do with 2 million dollars (or better yet, what to do with 3 million dollars)? Start here.

1. Invest in Stocks, ETFs, and Funds

Wondering what to do with 3 million dollars? Don’t YOLO your entire account into GameStop Corp. (NYSE: GME). After all, it’s not 2021 anymore.

If you’re curious about how to invest 2 million dollars (or how to invest 3 million dollars) to live off the interest, dividend stocks could be a winning addition to your portfolio.

Companies like Pepsi (NASDAQ: PEP), Johnson & Johnson (NYSE: JNJ), Coca-Cola (NYSE: KO), and International Business Machines (NASDAQ: IBM)have consistently shared company profits with shareholders over the years — Coca-Cola has been paying a dividend to shareholders for over 100 consecutive years!

(Of course, dividends depend on company profits.)

The long-term growth secret to dividend investing? Reinvest dividend payments — this lets you compound your investment over time.

Prefer a vehicle that gives you build-in diversification? Consider exchange-traded funds (ETFs for short) — you could think of them as a bucket of securities that holds assets like stocks and bonds.

Here are some popular ETFs:

• The Vanguard S&P 500 ETF (VOO)– Tracks the S&P 500 index
• The Invesco QQQ (QQQ) – Tracks the Nasdaq 100 index, primarily containing tech stocks
• iShares US Real Estate ETF (IYR) – Tracks real estate investment trusts
• iShares MSCI Japan Index (EWJ) – Tracks the Japanese foreign stock exchange

By tracking an index, most ETFs can maintain lower expense ratios (cost to operate a fund) since they are passively managed. On the other hand, actively managed funds can have higher fees.

If you’re ready to invest in dividend stocks and ETFs, platforms like M1 Financesimplify portfolio management.

I personally like M1 because of their low fees and prebuilt portfolios (or “pies). Take advantage of automated investing, no trading commissions, and access to 6,000+ stocks and ETFs.

2. Invest in Master Limited Partnerships (MLPs)

In our current heavy inflation environment, you may want to look for investments to hedge against inflation. Master Limited Partnerships are viewed as an inflation hedge since cash distributions are higher than other asset classes.

MLPs are publicly traded infrastructure assets in the natural resources and real estate sectors. The main appeal to investors? Potential high yields and tax advantages.

An MLP is structured as a limited partnership and therefore, shareholders are called ‘limited partners’ or ‘unit holders.’ The MLP makes distributions to unitholders and earnings are taxed once based on the investor’s ordinary income tax rate.

The periodic distribution aspect of MLPs is similar to how a dividend stock operates. While dividend stocks are available across many sectors, an MLP must generate at least 90% of its gross income from the below qualifying sources:

• Oil, Coal, Biofuels, Natural Gas– Activities include mining, refining, storage, and marketing
• Real Estate– Activities include rents and sale of real property

You can purchase MLPs directly or through a fund. If you go the latter route, I like Publicas a platform — it’s got $0 commission trades and a social investing feed where you can see what other investors are up to.

3. Invest in Private Credit

Traditionally, a mix of stocks and bonds has composed the classic “60/40” portfolio. But if we’re talking about how to invest $2 million in 2024‘s market, it’s worth considering alternatives. After all, the classic allocation could leave opportunities (and potential returns) on the table in the current market climate.

Consider a recent studyfrom investment giant KKRthat examined the benefits ofadding alternative investments into the mix over almost a century of returns. Their findings?

The 40/30/30 portfolio(including real estate, infrastructure, and private creditassets)…

Offeredboth higher returns— with lower volatility— during periods of high inflation.

Until recently, private creditwas only accessible to an elite population of well-connected individuals and institutions.

But that’s changing, thanks to platforms like Percent, which offer accredited investors access to private credit investments.

As an investor, you’ll gain access to a wide variety of high-yield, short-duration (9-month average) offerings that have historically paid over $28 million in interest.

You can invest as little as $500 and unlock yields up to 20% APY.

But this opportunity won’t last…

Click below to find out more.

4. Invest in Private Companies

Imagine having the opportunity to invest in Apple or Amazon before their IPOs. The upside potential can be exponential with pre-IPO companies. But, with reward comes risk, and one major difference between public and private investment is liquidity.

You can easily sell shares of a publicly traded stock, but funds in a private investment can be tied up for years. This is because private companies can take longer to gain traction to reach profitability. A few other considerations:

• Financials:Can you access historical financials to see if the company is consistently growing revenue and is profitable?
• Leadership: What’sthe CEO’s track record?
• Competitive Advantage– Does the company have an edge?

Platforms like Equitybeeprovide access to high-growth startups for accredited investors. With Equitybee, you can fund employee stock options to gain a portion of future stock value.

Here’s how it works. Often enough, employees are given stock options as part of their total compensation. But they’re not much use to employees if they can’t sell them. Before a company becomes public, Equitybeehas a marketplace that allows employees to sell their stock options to investors.

As an investor, you can invest in hundreds of private companies like Reddit, Discord, and Stripe by funding employee stock options.

Equitybee is only available to accredited investors, but if you have an account worth $2 to $3 million, you’re definitely in that camp.

5. Invest in Real Estate

For many, the best way to invest 2 million dollars (or the best way to invest 3 million dollars) is through real estate. There’s no other investment where you can purchase an asset and make money in 4 different ways:

• Appreciation– The increase in property value over time due to changes in the real estate market
• Depreciation– Making annual deductions in the asset to reduce your tax liability
• Cash Flow– The monthly collection of rent minus operating expenses
• Mortgage paydown– Each principal and interest payment increases your equity in the property

With 2-3 million to invest, a realistic investment would be purchasing a small apartment complex in the $800k – $1 million range. Out of pocket, it would require a 20-25% down payment plus closing costs.

While location is one of the most critical factors when buying a property, here are a few additional factors to consider:

• Local job market– Multiple industries and low unemployment will draw a strong renter pool
• Population growth– Strong rental demand will be driven by local population growth
• Property management– A reputable property management company can handle the day-to-day operations to make the investment more passive (Typically costs 6-10% of gross monthly revenue)
• Historical financials– Looking at the last 12 months of a profit & loss will help analyze things like rent income and expenses, and find opportunities to increase profitability

Investment Options

The beauty of real estate is the wide range of investment options. You could purchase an apartment complex, a commercial building, an Airbnb, or a single-family home. There’s no right answer, but with any purchase, I’d recommend doing your due diligence by analyzing financials, the local market, etc.

If you’re early on your real estate investing journey, you can get started with a platform like RealtyMogul, a high-end platform for investing in commercial real estate through non-traded REITs and commercial real estate.

Non-traded REITs (as the name implies) can’t be traded on the stock exchange; you must hold them for several years before they can be sold, and they can only be re-purchased by RealtyMogul themselves.

RealtyMogul offers both income-focused funds and growth-focused funds. The former pays out in monthly or quarterly dividends; the latter aims for higher returns through improvements and capital appreciation.

If you’d like to allocate more funds to real estate, RealtyMogul also offers direct investments in individual properties, but this requires a much higher initial investment.

6. Invest in Fine Art

Similar to real estate, art is a long-term play and is a non-liquid asset. The subjective nature of art valuation puts it in a market of its own. Realizing gains in your art assets takes time and patience as the value is determined by an artist’s reputation and brand.

But if you’re looking for how to invest $2 million, it might not get you far in the art world.

An alternative is a platform like Masterworks. Their art experts carefully select contemporary artwork for purchase and allow investors to buy shares. Masterworks will source, store, and sell the art on your behalf. They earn a 20% profit share at the time of the sale and a 1.5% management fee is distributed in the form of equity.

For all the art enthusiasts, Masterworks is great for taking care of the heavy lifting — sourcing, researching, networking, and selling.

7. Invest in Farmland

Two of the biggest benefits of investing in farmland are diversification and a hedge against inflation. The illiquid nature of farmland investing has a low correlation to the stock market, making it a great addition to your portfolio.

Prices of commodities from farmland are positively correlated to inflation. So, when food prices rise, land values also rise and provide a long-term hedge against inflation.

In my opinion, farmland is somewhat overlooked as an asset class. You may agree that if you’re not the owner-operator, then how do you invest in farmland? Here are some other challenges with farmland investing:

• Lack of transparency– Most farmland stays within the family, and farming requires a unique skill set to be profitable (knowledge in soil cultivation, preparation, heavy machinery)
• Capital requirement– Reserves and prepaid crops, livestock, and machinery are required to achieve economies of scale
• Operational risk– Weather, pest damage and local regulations can impact day-to-day operations

If you’re trying to figure out how to invest 2 million dollars, keep farmland on your radar. Despite the risks, future food demand and historical returns prove it’s a solid alternative asset.

According to the NCREIF Farmland Income Index (which tracks the value of U.S. farmland), farmland has an average return of 10.71% from 1992-2022. U.S. stocks and real estate during that time frame had returns of 9.58% and 8.39%.

Happily, you don’t have to be an experienced farmer to invest in farmland. Newer platforms like AcreTraderare providing transparency and lowering the barrier to access farmland investing.

AcreTrader individually evaluates farmland parcels, then investors can purchase fractional shares. They will handle all administration and property management to help ensure you make money in two ways — land value appreciation and annual cash flow.

8. Invest in Gold

Investing in gold has long been considered a strategy to hedge against inflation and add portfolio diversification. In times of economic uncertainty investors look to gold as a wealth safeguard due to its low correlation to other asset classes.
In addition to the benefit of preserving capital, gold is highly liquid and can be bought and sold in the following forms:

Physical gold– Through a brokerage, you can purchase gold bars and coins which are held by third parties. The need for safe storage and insurance can result in additional costs when purchasing physical gold.

Gold ETFs– Purchase gold via funds is a way to gain exposure without the burden of physical storage. Gold funds can directly track the price of gold or invest in mining companies.

Mining companies– This can present the highest risk when investing in gold because companies may mine other precious metals. Investing directly in companies, like traditional stocks, exposes the investor to company-related risks.

Investing in gold also comes with its disadvantages. Gold’s value is entirely dependent on price appreciation, so storage and insurance costs can eat into profits. Although you can get around this by purchasing gold ETFs or mutual funds, the biggest disadvantage of gold is the inability to produce income.

If you’re interested in adding gold to your portfolio, Silver Gold Bullis my choice to help ‘build your wealth in ounces.’They not only have a wide selection of gold bars and coins but also provide peace of mind by ensuring your asset is properly stored and insured.

9. Professional Money Management

Confused about the best way to invest 3 million dollars (or even one or 2 mil)? A financial professional can help speed up the financial freedom process by developing a customized plan for your 7-figure nest egg. Here are a few other ways a professional money manager can help you determine the best way to invest 2 million dollars:

• Comprehensive approach to retirement– Take taxes, investing, estate planning, time horizon and risk tolerance into account
• Direct access to money professionals – Work 1-on-1 with financial professionals to make sure you’re staying on track and getting your questions answered

These sound like great services, but you may be wondering – what is the fee to work with a financial advisor? According to Forbes, advisors on average are compensated up to 1% of the annual assets under management.

With platforms like Empower, a 2-3 million dollar investment will put you in the private wealth client category. Enjoy the benefit of a team constructing a personalized portfolio with annual asset management fees of around 0.80% (the national average is 1-2%).

That might not seem like a big deal at first. But let me frame it this way: Say you invested $1 million with a legacy money manager. Your annual fee might be 2%, or $20,000. With Empower, the annual fee would be in the $8,000 range. That’s a big difference!

10. Set Up a High-Yield Savings Account (or a Few)

According to bankrate.com, the national average yield for a traditional savings account is 0.58% APY. Nothing to write home about…

In a high-interest-rate environment, you may want to consider a high-yield savings account. Current rates are approximately 5.5%, nearly 10x higher than a traditional savings account. Sounds like a no-brainer!

You can think of using a traditional savings account for daily expenses, whereas a high-yield account represents an emergency fund. So, it’s still accessible, but earning a higher return. Both accounts are more flexible than certificates of deposit (CDs may charge withdrawal penalty), and are typically FDIC-insured up to $250,000.

You may be wondering, when is a high-yield account better than a traditional savings account? In most cases, probably. If you park cash in a typical bank savings account, it might earn the national average of 0.58%.

On the flip side, a high-yield savings account with CIT Bankcan earn you 5% APY or more. Setting up a few accounts could help you grow your cash passively, and with less risk than stock investing.

11. Invest in Fixed Income

Interested in how to invest 2 million dollars to live off the interest?

A diversified portfolio typically includes fixed-income investments. The most famous fixed-income investment is probably bonds, which represent a loan (no ownership rights) made by an investor to a borrower — typically corporations or governments. You are essentially lending the institution money in exchange for a steady stream of interest payments.

Common types of fixed income include:

• Certificates of Deposit– Issued by banks for terms between 3 months to several years, FDIC-insured up to $250,000, one of the safest fixed-income investments
• Treasury Bills– Government securities issued for terms less than 1 year, backed by the U.S. government
• Treasury Notes– Government securities issued for 2-10 year terms, backed by U.S. government
• Treasury Bonds– Government securities issued for 10-30 year terms, backed by U.S. government
• Corporate Bonds– Issued by companies raising money to fund new products or projects, pay higher interest (higher risk) since they’re not FDIC-insured bank products or treasury-issued
• Municipal Bonds– Issued by states, cities, and counties and used to fund school and public projects, most terms range from 2-5 years

Annuities

Another type of fixed income is an annuity, which is another method for how to invest 2 million dollars to live off the interest. Both bonds and annuities are great vehicles for providing a steady stream of income. The biggest difference between them is how the contractual nature of annuities protects them from interest rate fluctuations.

Bonds are more sensitive to changes in interest rates, whereas insurance companies offering annuities take on the risk and in exchange, can offer steady payments based on the length of a contract. If you’re trying to figure out how to invest 2 million dollars in a crazy interest rate environment, you may want to consider an annuity.

Annuities are a great tool if you’re not trying to ‘outlive your money,’ where bonds have a maturity date. Annuities are also more flexible than bonds, with the ability to negotiate the contract to include riders or life insurance.

While there are many differences between bonds and annuities, they share the following benefits when looking for fixed-income investments:

• Steady stream of income
• Capital preservation
• Portfolio diversification
• Product variety

Both fixed-income vehicles offer a wide range of products to fit your goals, time horizon and risk tolerance.

If you want to explore your options, platforms like Charles Schwabare a great place to find the right product at the right price.

If you’re specifically interested in CDs, CIT Bankhas a lot of great options, including a “jumbo CD” starting at $100K.

Bonus: Crypto

Crypto appears to be making a comeback. But does that mean it’s investment-worthy?

Maybe. It depends on your risk tolerance and goals.

Before buying or selling crypto, here are some key factors to consider:

Lacking legal protection– Unlike debit card purchases, crypto transactions have no legal protection if something goes wrong. Transactions are irreversible and are not backed by a government or central bank.

Cryptocurrency is volatile– Early stages of Bitcoin have proven that crypto can be very volatile. This is because the lack of trust from either party of what is being exchanged can cause skepticism in its long-term value.

Cryptocurrency is unregulated– In the event of an exchange bankruptcy or criminal hack, lack of regulation means your assets could be at risk.

To get started with crypto you’ll need to choose a broker or crypto exchange, like eToro. Once you choose a platform, you’ll set up and fund an account so you can begin trading. Most platforms will allow you to use the U.S. Dollar to purchase crypto.

Once you purchase a cryptocurrency, like Bitcoin or Dogecoin, you’ll need to store it in a wallet to prevent hacks or theft. A crypto wallet is a software used to securely store your private crypto keys. Our top pick? Wallets by SecuX.

The ability to use crypto to purchase everyday items has not yet materialized. Currently, crypto is accepted as an exchange medium on some e-commerce websites, online luxury retailers, and some car dealerships.

If you’re looking to get started, take advantage of eToro’s social investing feature to mimic the portfolio of seasoned crypto traders.

How Important Are Tax-Advantaged Accounts?

Tax-advantaged accounts are savings or investment accounts that allow you to reduce taxable income now, or defer paying taxes on earnings until later. Some examples of tax-advantage accounts are a 401(K), IRA, health savings accounts, and 529 college savings plans.

“Tax-advantaged” generally refers to controlling the timing of your tax liability. Here are three concepts to understand under the tax-advantage umbrella:

Pre-tax contributions– Typically in the form of a 401(K), this will reduce your taxable income in the year you contribute.

Tax-deferred earnings– In an IRA and 401(K), dividends and interest are taxed later, or when you take a withdrawal.

Tax-exempt earnings– Roth IRA contributions are made with after-tax money, and earnings are tax-exempt – meaning tax-free at the time of withdrawal. Health savings accounts allow for pre-tax contributions AND tax-exempt growth, as long as the money is used for qualified health expenses.

A Note About Allocation…

Allocation refers to how you divide up your investments in stocks, bonds, cash, and other assets. Personal asset allocation will depend on your investment time horizon, risk tolerance, and retirement goals.

For instance, if your goal is to learn how to invest 2 million dollars to live off the interest — or how to invest 3 million dollars to live off the interest, for that matter — you’ll want to invest in investments that issue regular interest.

Final Word: Best Ways to Invest $2 to $3 Million Dollars

There are several ways to invest $2 to $3 million dollars. To figure out what’s best for your financial situation, consider the following factors:

• Time horizon
• Risk tolerance
• Retirement goals
• Current finances
• Current health

Overall, the most important concept is to understand your current situation so you can set goals for the future to make the most of your finances. The best way to invest $2 to $3 million dollars will depend on the goals and actions taken by the individual.

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