The travel industry has been booming since the pandemic concluded, and even with lockdowns remaining a distant memory, the desire to travel continues to grow. That’s why an aspiring traveler is setting aside $50,000 and letting it grow over the next five years. Once those five years are up, the traveler aims to visit a bunch of destinations with their family.
However, there’s one problem. The traveler doesn’t know where to put the $50,000 to maximize returns.
“I would love some suggestions on what to do,” the traveler posted on Reddit while looking for some investment ideas.
Fellow Redditors jumped into the comments and shared what they would do with the $50,000.
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Spread The $50,000 Across High-Yield Assets And Equities
One of the top comments came from a Redditor who suggested investing in a mix of short-term debt obligations and a broad ETF that follows a benchmark like the S&P 500 or Nasdaq Composite. The aspiring traveler can create a CD ladder to lock in high interest rates and make some of the funds quickly accessible.
When it comes to ETFs that follow an index, it’s best to choose funds with low expense ratios. You can find plenty of ETFs on Vanguard, Fidelity, Schwab, and other brokerage firms that have expense ratios under 0.10%.
The equities serve as growth investments, while the CD ladders are stable investments that are guaranteed to produce a positive nominal return. It’s possible that CD returns fall below the rate of inflation, but with inflation dipping in recent quarters, CD’s real returns should remain elevated.
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Stocks Offer A Better Tax Rate
One investor explained that they hold shares in Microsoft (NASDAQ:MSFT) and won’t sell them for at least a year. This person is using Microsoft shares to fund their travel, similar to the original poster.
While stocks outperform high-yield assets during bullish markets, they also come with lower tax rates. Interest income from a high-yield savings account or a CD is treated as ordinary income, which results in a higher tax rate.
Meanwhile, stocks like Microsoft have their capital gains and dividends taxed at the special capital gains tax rate, as long as you hold your shares for at least one year. If you sell your shares within one year, your gains and dividends get taxed as ordinary income.
See Also: Can you guess how many retire with a $5,000,000 nest egg? The percentage may shock you.
Get A Travel Credit Card
Putting $50,000 to work in various investments can set the aspiring traveler up for more options, but you don’t have to stop with $50,000. A travel credit card can accumulate various rewards while providing a bunch of perks that can give the Redditor more options.
Travel credit cards offer points that hold additional value if you use them for travel-related purchases. Airlines and hotels offer credit cards that can give you special deals and help you save a lot of money. If the aspiring traveler saves money with a travel credit card while letting the $50,000 compound over time, the original poster can get more mileage out of their investment.
It’s important to plan how you will travel, your ideal destinations, and which hotel chains you want to prioritize. Mapping out how you will spend money when you travel can help you decide which travel credit card is right for you.
Read Next: If You’re Age 35, 50, or 60: Here’s How Much You Should Have Saved Vs. Invested By Now
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This article An Aspiring Traveler Asks How To Invest $50,000 So They Can Go On More Vacations In The Next Five Years originally appeared on Benzinga.com
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