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How to invest $1 million

How to invest $1 million wisely

Eric Rosenberg

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Coming into $1 million is a financial milestone, but figuring out how to invest it wisely is what really matters. Your investment strategy should reflect whether you want to grow your wealth, preserve it, generate steady income or whatever your goals are.

With the right plan, $1 million can open doors to diverse investments, from the stock market and real estate to alternative assets and automated tools that manage your money for you. Let's explore smart, strategic ways to put your $1 million to work.

How to invest $1 million: 3 portfolio approaches

These strategies are not recommendations but potential frameworks for your investment planning. It’s always wise to do plenty of research and due diligence before making any investment decision.

Quick take

  • Your investment strategy should reflect your risk tolerance, whether you prioritize stability, balanced growth, or aggressive gains.
  • Low-, moderate-, and high-risk portfolios offer different mixes of stocks, bonds, real estate, and alternatives to match your financial goals.
  • Real estate and alternative assets like art, farmland, and wine can enhance diversification but may carry higher risk and complexity.
  • Before investing, it’s smart to pay off debt, build an emergency fund, and take advantage of tax-advantaged retirement accounts.

Investing $1 million with a low-risk investment strategy

If you want to avoid losses, even if that means lower long-run earnings, you may prefer a low-risk investment strategy.

What type of investor uses a low-risk investment strategy?

Low-risk investments tend to be best for people nearing or in retirement who can’t afford a decade or more to recover in the event of a significant economic downturn. Following a low-risk strategy can also make sense if you’re nervous about potential losses and okay with lower returns.

What does a low-risk portfolio look like?

A low-risk portfolio could follow a target allocation strategy similar to this:

  • 40% Government bonds and treasuries
  • 40% Investment-grade corporate bonds
  • 20% Large-cap dividend stock fund

Bonds are a cornerstone of lower-risk portfolios, as they tend to be more stable and offer investors predictable interest payments. Government bonds are the closest investment option to risk-free you’ll find, and highly rated corporate bonds are also relatively low risk. A small portion of your portfolio invested in larger company stocks gives you some potential for appreciation while also enjoying the cash flow of regular dividends. Most low-risk investors should buy these assets through ETFs or mutual funds.

Related read: How to buy bonds

Investing $1 million with a moderate-risk investment strategy

A moderate-risk strategy involves a more even split between bonds and stocks, plus other potential investments with upside potential.

What type of investor uses a moderate-risk investment strategy?

Moderate-risk investments are suitable for people around the midpoint to later in their careers and households looking to earn from the markets without going all-in on riskier but potentially higher-return investments.

What does a moderate-risk portfolio look like?

While everyone’s allocation will look a little different, a moderate-risk portfolio could follow this strategy:

  • 60% Stock ETFs
  • 20% Bond funds
  • 15% Real estate
  • 5% Alternatives

The core of a moderate-risk portfolio is the stock market, ideally a mix of diversified stock ETFs. Bond funds bring a low-risk, stabilizing factor. Real estate can include REITs (Real Estate Investment Trusts, which are often bought and sold on the stock market), REIT ETFs, or managed real estate investment platforms, which tend to offer a mix of cash flow and a potential for appreciation if property values grow. Alternatives can include riskier assets like precious metals and cryptocurrencies.

Related read: How to invest in real estate investment trusts and best Canadian REITs

Investing $1 million with a high-risk investment strategy

If you’re looking to maximize your capital gains and cash flow, a high-risk investment strategy offers the best potential return on investment (ROI), but also carries the highest risk of losses.

What type of investor uses a high-risk investment strategy?

High-risk investing is best for people earlier in their careers and higher-net-worth households. Even if the market takes a big dip, these investors can typically afford to stay invested through the recovery and long into the future as the markets rise.

What does a high-risk portfolio look like?

Again, this isn’t a rule, but an example of how an investor with a high-risk tolerance may want to allocate their holdings:

  • 70% Stocks and stock ETFs
  • 20% Real estate
  • 5% Alternatives
  • 5% Bond funds

A higher portion of your portfolio in stocks, real estate, and other alternatives can be much more volatile, but the long-term payoff is often greater than with lower-risk holdings. In this scenario, the investor may want a mix of riskier stock funds and single stocks, a heavier weighting in real estate investments, and exposure to a mix of alternatives and bonds to round out their portfolio.

Compare different investment types

All investments are unique. Here’s a look at some of the most common types of investments you’ll come across when building your portfolio:

Investment type
Definition
Individual stocks
Individual stocks are an investment in a specific company, where you get a small share of ownership.
Bonds
Bonds are loans to companies or governments that typically earn regular interest payments and a full repayment at maturity.
Blue-chip stocks
Blue-chip is a term for large, stable companies in the stock market that typically come with less risk than newer companies.
Dividend-paying ETFs
ETFs are a group of stocks you can buy with a single purchase. Some ETFs offer regular cash payments to investors in the form of dividends.
Cryptocurrency
Cryptocurrencies are high-risk investments in digital assets. You can buy them through a centralized exchange, digital wallet, or managed investment funds.
Private equity
Private equity investments are generally reserved for accredited investors and allow riskier investment strategies, including in private companies.
Public REITs
Public REITs are bought and sold like stocks, exposing you to a managed real estate portfolio where a minimum portion of income must be paid to investors as dividends.
Private REITs
Private REITs are real estate investments managed by companies offering investment funds outside the stock market.
Crowdfunding real estate
Crowdfunded real estate platforms combine a pool of investor dollars to invest in specific real estate projects or portfolios of projects.
Fractional ownership of real estate
With fractional ownership, a group of investors purchases a property together, each owning a portion based on their investment size.
Alternatives (wine, art, farmland, gold, etc.)
Alternative investments include precious metals, commodities, and other less-traditional asset classes that may not be appropriate for all investors.

Breaking down real estate investments

Because real estate investing can be complex, and there are many ways to invest, here’s a closer look at different ways to gain exposure to the real estate market with varying levels of risk and knowledge. Remember, not everyone should invest in real estate, but it can be lucrative if you invest well.

Type of real estate investment
Main difference from directly owning property
Accredited investor requirement?
Risk level
Public REITs
Public REITs are bought and sold like regular stocks in your investment account.
No
Lower risk.Relatively less risk compared to buying properties directly. Sell at any time.
Private REITs
Buying off-market REITs gives you more fine-tuned control over the type of properties in your portfolio.
Varies
Lower risk.Often riskier than public REITs but less risky than buying individual properties. Sales may be more limited.
Crowdfunding
Crowdfunding brings together a larger group of investors who buy properties or groups of properties.
Varies–Typically yes
Medium risk.Riskier than REITs, but typically less risky than buying properties in full. A lower financial commitment is generally required. Sales may be very limited.
Fractional ownership
With fractional ownership, you own a larger portion of a property split with a smaller investor group.
Varies–Typically yes
Higher risk.Riskier than REITs, but typically less risky than buying properties in full. A larger financial commitment is generally required. Sales may not be allowed until a specific future date.

When comparing different types of real estate investing, we considered the typical financial commitment and diversification. Carefully review the prospectus and financial statements to ensure an investment aligns with your goals and risk tolerance.

Other smart moves to consider before you invest

If you’re new to investing or want to refresh your strategy, you may want to move slowly and take these steps to solidify your financial footing. Otherwise, you could see losses or be forced to sell a portion of your $1 million portfolio to cover other costs.

  • Pay off high-interest debt

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    High-interest debt, such as credit cards, personal loans, and some student and car loans, often charge 20% or more per year. Paying off high-interest debt can free up your cash flow from large monthly payments and put you on track for improved financial security.

  • Build a robust emergency fund

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    Most households should hold at least three to six months of expenses in an emergency fund. While we never expect it, layoffs and other unexpected income losses can happen. And many of us see surprise expenses, such as medical visits or major repairs. Keeping cash on hand in a high-yield savings account helps you avoid going into debt for a financial emergency.

  • Max out retirement accounts (IRA, 401(k), etc.)

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    Retirement accounts come with special tax advantages. Contributing the maximum allowed per year to a 401(k) or similar account through your employer, as well as an IRA or Roth IRA, can lead to significant tax savings over time.

  • Create or review an estate plan

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    An estate plan explains what you want to happen to your money after you pass away. An estate plan typically includes a trust or will, end-of-life healthcare planning documents, and other healthcare directives.

  • Consider tax-advantaged accounts or strategies

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    In addition to retirement accounts, you may be interested in a Health Savings Account (HSA) or 529 Plan for education, both of which allow tax-advantaged investing. Because penalties can apply to non-qualified withdrawals, reading more about how the accounts work is a good idea to ensure you don’t run into any expensive surprises.

Work with a financial advisor

Finally, you may benefit from working with a financial professional, such as a financial planner or advisor. It’s best to only work with an advisor who operates as a fiduciary, which means they must put your financial needs first. Fee-only planners are also preferred, as some commission-earning advisors have conflicts of interest. You’ll generally pay a flat fee per period or a percentage of your assets for investment advising services.

10 Ways to Invest $1 Million

  1. 1 Stocks. Stocks offer growth potential and can help hedge against inflation. You can invest in ETFs for diversification or build a self-directed portfolio. Stocks have long-term returns averaging 10% annually but can be volatile in the short term. Read all about how to invest in Canadian stocks
  2. 2 Bonds. Bonds provide capital preservation and steady interest income. They balance stock risk, with government, corporate, and municipal options available. Short-term bonds are stable, while long-term bonds can fluctuate with interest rates.
  3. 3 ETFs. ETFs are low-cost funds that invest in stocks or bonds. They’re ideal for those who prefer diversification without picking individual securities, offering a safer way to match market performance with minimal fees.
  4. 4 Robo-advisors. Robo-advisors automate investing in diversified portfolios of stocks, bonds, and other assets. With low fees (around 0.25%), they’re great for passive investors and include platforms like Wealthsimple and Questrade.
  5. 5 P2P Lending. Peer-to-peer lending offers the potential for higher returns by investing in loans on platforms. It carries some risk, but can boost fixed-income returns if managed carefully.
  6. 6 Business investment. Invest in a business, either by starting one or becoming a silent partner in an existing venture. Crowdfunding platforms allow you to invest in small businesses and startups for potential high returns.
  7. 7 Rental properties. Investing in rental properties can generate steady income and capital appreciation over time. Though hands-on, it offers long-term wealth-building potential through rents and property value increases.
  8. 8 REITs. Real Estate Investment Trusts (REITs) allow you to invest in commercial properties without owning them directly. They’re a liquid, low-maintenance option with regular income distributions.
  9. 9 Real estate crowdfunding. Platforms like Addy invest let you invest in specific real estate projects. It offers high reward potential but carries greater risk, especially for non-accredited investors.
  10. 10 Alternative investments. Explore alternatives like artwork (with Masterworks), wine (with Vinovest), farmland, or precious metals. These investments can hedge against inflation and diversify your portfolio, though they require specialized knowledge and may have higher risks.

FAQs

  • What is the safest way to invest $1 million?

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    The safest way to invest $1 million is in a combination of U.S. government bonds and securities, including treasury bills, treasury notes, treasury bonds, and inflation-protected securities. While these investments pay less than many others, they’re considered ultra-low-risk investments.

  • Can I retire with $1 million?

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    Many households can retire with $1 million. Considering your budget, expected future expenses, and projected investment gains can help you understand if $1 million is enough to cover you for the rest of your lifetime.

  • What is a good return on a $1 million investment?

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    Historically, the S&P 500 index has returned approximately 10% per year. That’s an ideal return for many investors, though it’s essential to consider volatility and the risk of losses.

  • What are the tax implications of investing $1 million?

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    When investing $1 million, or any other amount, your capital gains and dividends are typically taxable. If you sell an investment for a profit or earn cashflow from your holdings, it’s a good idea to set aside a portion for tax purposes.

Eric Rosenberg Freelance contributor

Eric Rosenberg is a finance, travel and technology writer in Ventura, California. He is a former bank manager and corporate finance and accounting professional who left his day job in 2016 to take his online side hustle full time. He has in-depth experience writing about banking, credit cards, investing and other financial topics and is an avid travel hacker. When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers and spending time with his wife and little girls.

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