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If you’re looking to invest $20,000, financial advisors recommend starting with proven strategies like index funds. Chad Olivier, CEO of the Louisiana-based Olivier Group, told Investopedia that this approach allows you to build a broad portfolio with exposure to hundreds of stocks.
This gives you more stability and less risk because you’re spreading your investment across many companies and sectors.
Whether you’re a seasoned investor or a beginner, understanding how to allocate your funds effectively—and avoiding emotional market buying or selling—is key to long-term financial success.
Key Takeaways
- Before investing, consider potentially better alternatives, like paying off high-interest debt or maximizing employer-matched retirement contributions.
- Diversified index funds like the SPDR S&P 500 ETF Trust (SPY) offer broad market exposure—reducing risk while delivering strong long-term returns.
- Use strategies like dollar-cost averaging to avoid emotional decision-making and maintain discipline during market volatility.
Should You Invest, Save, or Pay Down Debt?
Before deciding to invest, take stock of your finances and consider alternatives. For example, if you’re saddled with credit card debt, you may want to pay it down and avoid paying more in monthly interest than you’ll likely make on an investment.
Contributing to your 401(k) or retirement plan can also be a smart move, especially if your employer offers matching contributions, which effectively provide an immediate return on your investment.
How To Invest $20,000
If you can invest $20,000, you might start with the SPDR S&P 500 ETF Trust, which tracks the S&P 500. If you had done so 10 years ago, you’d have about $63,851 in May 2025, yielding a total return (with dividends reinvested) of about 163%.
If you invested the same amount in the Invesco QQQ Trust (QQQ), which tracks the tech-heavy Nasdaq, you’d have almost $97,558 in May 2025—a total return (with dividends reinvested) of 388%.
Once you’ve built a well-diversified portfolio, Olivier suggests researching and investing in individual stocks, which carry more risk than an index ETF but offer potentially higher returns in the long run. In particular, Olivier recommends investing in well-run companies that have strong cash positions and are at the cutting edge of technology.
“I always say that with a little bit of a concentrated position in some great, great companies, you’ll do really well in the long run,” Olivier said. Firms that have delivered outsized returns over the past decade include big-tech names like Apple Inc. (AAPL), NVIDIA Corp. (NVDA), and Amazon.com Inc. (AMZN), which as of May 2025, have annualized returns of 21%, 70%, and 24%, respectively, over the past decade.
An Alternative: Build Over Time
You may also want to incorporate a regimented investment strategy to help reduce the overall impact of price volatility. Dollar-cost averaging, for example, involves investing a set amount of money on a regular schedule, no matter how the price of the investment changes. Strategies like this help investors avoid the emotional pitfalls of trying to time the market. Plus, you’ll be making regular investments over time.
“No matter what the markets are doing, this strategy helps you stay consistent,” Olivier said. “And if you stay consistent, you’ll do really well over time.”
Tip
What about bear markets and periods of intense volatility? Olivier’s advice is simple. “It’s the Warren Buffett way of investing: Know your positions, and stick to them,” he said. “When everybody else is running for the hills, he’s holding—or even buying.”
The Bottom Line
Investing $20,000 wisely involves balancing risk, staying disciplined, and focusing on long-term growth. Diversified strategies like index funds and regular investing can help you build wealth steadily over time.
To put it in Buffett’s words, “Just keep buying,” the legendary investor said in 2023 about investing in S&P 500 index funds and weathering tough times. “American business is going to do fine over time, so you know the investment universe is going to do very well.”
