How to Invest $500k After Selling Your Business

Vincent Wong February 9, 2022

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For many people, $500,000 is a life-changing amount of money that brings peace of mind for the future.

It’s hard to imagine receiving that much cash without an inheritance or through diligent saving, but we regularly see people make that much money by selling their business on our marketplace.

In fact, last year’s average deal size was around $475,000.

What one person could spend their whole life saving, sellers received in a single transaction. They didn’t have to depend on a lucky inheritance either.

All it took was knowing their business’s value and knowing there’s a hungry market for online businesses.

While having $500k is amazing, there is a problem if it stays in your bank account: inflation will erode its value. To keep your money safe AND let it grow, you have to DO something with it. 

We’ll explore the investment vehicles that will best serve your $500k, everything from tried-and-true stock market methods to more aggressive growth tactics.

Let’s talk investing.

How to Grow Your Wealth with $500k

Investing capital in different asset classes could significantly grow your wealth. However, investing is as stressful as it is exciting if you’re inexperienced. 

You might have heard stories of individuals earning millions of dollars in weeks or days thanks to investing in the latest trends, such as NFTs. It’s tempting to follow suit and hedge your bets in the same trends. However, by investing in assets that you don’t understand, you could lose your hard-earned money overnight.

To invest safely, you need a sound strategy for building a well-diversified investment portfolio. Building a well-diversified portfolio lowers the risk of losing money on a single investment.

We need to offer a disclaimer here: This article doesn’t constitute financial advice. Speak to your financial advisor or accountant before investing.

Invest in the Stock Market

Investing in stocks is the first thing that most people think of when building a nest egg.

So, where do you start?

The stock market features a wide range of investment options. Before venturing into stocks, consider the following:

  • How volatile is the market?
  • When do you want to see a return on investment (ROI)
  • How much ROI do you want?

Expert stock traders suggest you should invest in over 20 companies in different sectors to minimize risk. Owning stocks in more than 20 companies means you’re not vulnerable to single-security risks if there are market downturns. Keeping between 20 to 30 stocks is a sweet spot for manageability.

Experienced investors also recommend that you regularly review your portfolio. You can buy or sell assets based on performance, so you can better meet your goals. 

A baseline of owning at least 20 types of asset classes gives you plenty of room to invest. Let’s explore the different types of stocks to add to your portfolio.

Individual Stocks

Stocks are when you buy shares of a company and are traded on a public stock exchange. Once you’ve bought shares you own equity in the company.

Individual stock values fluctuate daily, sometimes by significant amounts. If you’re inexperienced in the stock market, this could represent the riskiest option to add to your portfolio. You may see short-term high rates of return, but you’ll need to conduct plenty of research before investing.


Bonds are when you help a corporation pay off its debt. You’re loaning them money and earning interest on what you lend.

Different types of bonds include: corporate, municipal, and treasury. 

Companies issue corporate bonds to investors when they need to raise money. Municipal and treasury bonds are issued by local governments and the U.S. central government, respectively.

Bonds are considered relatively safe options, but returns are lower compared to higher-risk stocks.

Dividend Stocks

Similar to individual stocks, you buy company shares, except dividend stocks pay you the interest on a regular basis.

Dividend-paying stocks are typically more mature companies, such as Coca-Cola and Apple. 

They’re considered safer than individual stocks as you’re usually investing in much larger corporations with an established foothold in the marketplace. Adding some dividend stocks as part of your portfolio can provide consistent passive income, although they come at a higher price.


Exchange-traded funds (ETFs) are a group of stocks that track the performance of a sector or index. For example, the SPDR S&P 500 ETF (SPY) is one of the most popular funds which tracks the S&P 500 index.

ETFs are managed by computers and algorithms and can be sold on the stock exchange.

While they are low-cost investments, the main risk is that investors panic sell. This means a fund won’t have the money to pay out earnings to investors; you could lose your long-term gains in that scenario. 

There’s a low likelihood of this happening, but to avoid this situation you can read about different types of ETFs before purchasing.

Mutual Funds

Mutual funds are like ETFs, except they’re managed by a group of investors.

A good example of a mutual fund is the DWS Blue Chip Growth Fund, which invests in Disney, Apple, 3M, and Google.

This type of investment is considered boring, predictable, and safe—great characteristics when it comes to investing money. Investors have an equal stake in growing this fund, so there’s an added incentive to invest well.

Index Funds

Similar to mutual funds and ETFs, you can invest in a wide variety of companies by purchasing a single index fund unit.

Index funds can only be traded at a specific point each day at a set price. On the other hand, ETFs can be traded like stocks throughout the day.

As index funds track indexes like the S&P 500, they are considered to be quite a safe investment. You could earn 8%–10% annual returns with the right index funds.

Money Market Account

A money market account is like a traditional savings account, but it comes with slightly higher interest payments and different restrictions. The average interest rate for money market accounts was 0.06% in December 2021, compared to 0.04% for the average savings account.

For US citizens, a money market account is considered a safe option as these accounts are backed and insured by the Federal Reserve. If your bank closes down, your investment and accrued interest are insured.

Invest in Annuities with an Insurance Company

If you have insurance, consider taking out annuities with your insurance providers. 

You pay a lump sum or installments and receive payments with interest over time, usually during retirement.

Annuities are considered low-risk options, but your returns may be affected by inflation. If interest rates are outpaced by inflation, your returns may be lower than investing in a money market account.

Real Estate

Real estate has long been seen as one of the safest long-term investments worldwide. 

However, the price of properties and real estate has outpaced the average salary. The median house in the U.S. cost $374,000 in 2021, and the average down payment in 2021 was $27,850. 

Buying a single property with your $500k could take up a significant portion of your portfolio.

Thankfully, you don’t need to buy an entire property to start investing in real estate. Like stocks, you can own a share of a property or a portfolio of real estate.

Real Estate Investment Trust

With Real Estate Investment Trusts (REITs), you invest in companies that buy real estate with investors’ capital. 

Investing in REITs means you can own shares in real estate without the need to manage the property or tenants. 

REITs can be traded on the public stock market, although most investors hold REITs as long-term investments.


If you’re not interested in trading REITs, crowdfunded real estate could be a better alternative to add to your portfolio. 

You purchase real estate with other investors on a crowdfunding site or a private social media group. 

This option could be an easier way to invest in real estate, as the minimal investment can be as low as $1,000. However, the largest risk is that you’re investing in a relatively unknown real estate company.

Real Estate Syndication

With $500k and a greater appetite to invest in real estate, you could explore real estate syndication.

This option is a privatized version of crowdfunded real estate. Investors going down this route typically have much more experience in real estate development.

As real estate syndications consist of more valuable assets, these groups aren’t promoted to the public. You need to be an accredited real estate investor with a proven trading record and sufficient liquidity.

Rental Properties

Purchasing properties and renting them out could net you the highest return compared to other real estate options.

It does, however, require the most sweat equity. You’ll be directly responsible for upkeep and managing tenants. With enough patience and luck finding good tenants, you could earn over 15% annual profit.

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Alternative Investments to Grow Your $500k

Buying an Online Business

Like the idea of entrepreneurship, but don’t want to spend that much time growing a business? You could acquire an online business instead.

Buying a business has three benefits. First, you skip the startup phase and avoid running into costly mistakes.

Second, you’ll be running a profitable online business from day one. As mentioned earlier, it can take months or even years before a new business has its first profitable month. 

You’ll be earning profits immediately after acquiring a business that starts paying for itself from the day you take ownership. If you can scale the business further, you can even sell the business for a profit in the future.

Lastly, online businesses offer a wide range of lifestyle flexibility. You can run them from anywhere in the world as long as you have a laptop and an internet connection. You’ll also have plenty of time to build your portfolio in other ways, since some business models are more hands-off than others, such as Amazon KDP or an affiliate site. 

Like any investment, buying an online business doesn’t guarantee success. You’ll need the basic skill set and knowledge of that monetization to ensure the business doesn’t drop in performance. 

It helps if you purchase a business using a broker, as sellers will offer post-sale support as part of the deal. In a private transaction, sellers might not give you the help you need.

Invest in an Online Business Passively

For an even more hands-off approach to online businesses, you could invest some of your capital in a diversified portfolio instead of owning and managing a business.

It’s well known that returns from online businesses can be strong, but they also require skill and technical expertise to manage. If you own an online business, it can never truly be a fully passive asset.

To allow non-technical investors to build a passive and diversified portfolio of online businesses, we created EF Capital, a platform that connects accredited investors with qualified business operators vetted by us. 

Through EF Capital, investors can buy fractional ownership of various business models: ecommerce, content sites, Amazon FBA, and Amazon KDP.

Our team oversees the investments, sets up the legal structures and compliance with all securities regulations, and provides quarterly reports to investors.

Owning a Piece of Art

Investing in artwork was once considered an option only for society’s elite.

The advent of Masterworks means anyone can own precious artworks (or at least a piece of it). Masterworks is a platform where you can invest in art, like you would invest in stocks. Instead of purchasing an entire artwork, you can buy smaller shares of the total piece.

On Masterworks’ site, they claim you can earn 15% annual returns.


Ten years ago, cryptocurrency was seen as just a trend with no real value. Just reflect on Pizza Day (May 22 in case you were wondering), where someone bought two pizzas with 10,000 mined Bitcoins.

Cryptocurrency is digital, decentralized, and encrypted. This means no governing body manages or maintains the value of cryptocurrency. It’s traded on blockchain technology, which is simply small coded packets of info that acknowledge transactions.

Bitcoin and Ethereum are the most famous examples. There are over 5,000 cryptocurrency coins in circulation currently.

Crypto is notoriously volatile. If you plan to invest in crypto, this is likely the highest-risk option with potentially high rewards. Some coins may be worth much more in the future, with Bitcoin expected to reach $1 million per coin in 2030.

Retirement Accounts

Using your retirement account isn’t a traditional investment route. However, you could benefit from trading funds from your ROTH IRA (for Americans).

Retirement accounts are exempt from capital gains tax. This means that if you use funds from your retirement account to trade stocks or invest, the profit isn’t taxable.

Starting an Online Business

If you’re willing to invest time into building an asset, you could use some of your $500k capital to create and scale your own startup. Starting an online business is quick and affordable. You can create a WordPress blog for as little as $429, or start an ecommerce business for less than $1,000

Growing a startup gives you the chance to work on a passion project that you’ve put off for years or grow your own brand instead of building someone else’s.

Entrepreneurship isn’t for everyone, though. 

Startups take time to grow. You may not see any returns for months. There’s always the risk of your business closing down if it doesn’t make enough money to stay afloat.

To succeed, you’ll need plenty of persistence and sweat equity. Even if your first company fails, you can start fresh and apply your experience to growing another business.

Angel Investing

You can invest in companies, even if they’re not publicly traded on the stock exchange.

By deploying a part of your $500k, you could support early stage startups by lending capital to help them scale. In return, angel investors receive equity and a portion of their profits. Through angel investing, you can support companies that align with your interests.

There’s a real risk that the company you invest in doesn’t make it. Your funding will have nothing to show for if the startup closes down.

There are potentially big returns if a startup’s minimal viable product draws interest from a large audience. Software companies have potential to become extremely valuable. It’s why SaaS companies can secure millions of dollars through the alphabet soup of funding rounds.

Peer-to-Peer Lending

Like angel investing, you can lend money to individuals for mortgages or loan payments. You could offer loans with competitive repayment terms compared to banks. Even if your interest rate is lower than financial institutions, the ROI from peer-to-peer lending could be higher than other investment options with annual returns of over 10%.

Keep in mind the high risks associated with this option. Lenders may not pay you back on time or at all.

Investing in Gold

There’s so much trust in gold as a precious commodity that global central banks stash large amounts of gold bars as emergency funds.

Adding precious metals such as gold to your portfolio could be a smart long-term investment. Investors buy gold to hedge against inflation. Historically, gold’s value has increased over time and has enduring value.

How Much Money Can You Make Investing $500,000?

The short answer: It depends. 

Several factors determine your portfolio’s growth, including:

  • Inflation
  • A global recession
  • A global pandemic

If you have a well-diversified portfolio, you could receive a 7% annual return, which is considered a “good” ROI as it’s the average annual return for the S&P 500 index. By taking out a mix of short- and long-term assets, you’re more likely to achieve this ROI.

With a 7% compounding interest rate, your $500k could grow into $1 million in 10 years.

Source: Compound Interest Calculator

Before you start investing your capital, it’s important to have a strategy in place.

Preparations Before Investing $500k

There’s no formula that guarantees profits from investing. Some gurus will try to sell you on the idea that you should have a net worth of $20 million by the time you’re 30 (and you can only do it if you take their $997 course).

The truth is that everyone has different goals, including you. Your investment strategy and allocation need to be customized and tailored to suit your aims and financial goals.

To help you start, here are a few considerations to factor in when planning your strategy:

Figure Out Your Risk Tolerance

While there’s a chance you could double your $500k in 10 years, there’s also a chance that you could lose money on your investments.

Your risk tolerance is knowing how much loss you can stomach from a single investment. We recommend that you don’t place all your allocation into the next Doge coin, even if you’re feeling super confident about the returns. You’ll want some sort of backup plan in case your risky investments don’t pay off. 

Many investors follow the Pareto principle to balance risk and reward. According to the principle, 80% of a portfolio should consist of less risky investments, and the remaining 20% consist of investments in a more volatile environment.

You could adopt this strategy and adjust over time. Like any skill, you need experience to discover what works for you. Just expect to lose some money while you’re learning the ropes.

Set Aside an Emergency Fund

A penny saved is a penny earned: If you want to have an emergency fund available, you’ll need to have investments that can be quickly turned into cash.

Pouring all of your capital into illiquid assets makes it tough to secure cash on short notice when something unexpected happens. Illiquid assets include long-term investments or assets that could lose money if you convert them into cash too soon, such as bonds or stocks. 

A money market account or a savings account can be used to deposit emergency funds.

Determine How Much You Want for Retirement Savings

Financial independence and retiring early (FIRE) is a growing movement among millennials and the personal finance crowd. By saving enough money, you could retire much earlier than 65 years old.

With $1 million at the age of 40, you could have a monthly fixed income of $2,000. Depending on where you live and whether you have any outstanding debt obligations, $2,000 each month could provide a comfortable lifestyle. You might not be jet setting around the world and frequenting Grand Hyatts on every continent, but you won’t need to worry about food on the table.

The key to retiring early is to start saving early. Experts recommend keeping 15% of your income stored for retirement.

How to Invest $500,000 for Passive Income

Hopefully, this article has given you some ideas on how you can invest $500k that generates monthly income.

To lower the risk of a single investment failing, follow the Pareto principle and diversify your portfolio to include 80% stable assets and 20% volatile investments. Diversification lowers your risks and gives you a chance to earn from multiple income streams.

If you’re planning your financial future beyond your online business, speak to a business analyst to start your exit planning. You might not be in a position to sell your business, but a free call can help you prepare to exit within 12 months. 

The earlier you start investing, the sooner you can grow your capital and wealth.

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