How to Invest 1 Million Dollars & Reap the Profits

Is a million dollars a lot of money?

Having savings of one million dollars is an important milestone. But this does not necessarily mean you are rich. When it comes to determining the health of your wealth, the answer is never black and white.

Your net worth may be at one million dollars, 10 million dollars – or more –  but consider these questions before you classify yourself as wealthy. Though numbers never lie, when it comes to personal wealth you need to know the variables: your overhead, your lifestyle, personal capital, and your stage of life. These will inform the best way to invest your one million dollars.

These considerations are not the same for any two people. Where to invest one million dollars will vary depending on lifestyle and income. If you are reading this and have one million dollars of your own money to invest, you should definitely be pleased. It isn’t everyone who can reach such a savings milestone! 

Are you rich if you have 1 million dollars? Well, it depends.

Where do you live?  What is your lifestyle?

High Income and High Expenses

Meet Paul. He’s a guy who swore he’d move to a big city and practice law. When most people were still figuring out how to make ends meet, Paul would be posting photos of his gourmet dinners and his designer condo in New York City. To everyone, it looked like he had the world on a string – but you’d be mistaken if you thought that.

That apartment in the city cost Paul $7,500 a month – before utilities. His fancy dinners and hip clothing set him back at least $3,000 a month, and his career as a lawyer, working 70 hours a week in order to become a partner, showed up as stress-induced sleepless nights and weight gain. His salary was $130,000 a year, but he was nowhere near wealthy.

Moderate Income and Low Expenses

In the meantime, Andrea was living in a low-rent apartment, paying well under $1,000 a month and going out once a week for dinners that usually cost about $50, tops. Because she worked in real estate, Andrea was not stuck all day in a boardroom, eating greasy take-out while sitting in on daily, non-stop meetings.

Andrea was always on the move and excited to meet new clients and expand their horizons and hers.  In order to keep up her energy, she got up by 6 AM and worked out most days. Her salary was commission-based and about $50,000 a year.

Where Can They Lead You?

Fast forward ten years and Paul is still renting in New York City because he doesn’t have the time or cash to purchase a one-bedroom NYC apartment, which costs about $1.5 million. After a decade of endless work and expensive habits, he has about $60,000 in savings along with a terrible cholesterol problem.

Andrea, however, has kept her lifestyle simple and has slightly above one million dollars in savings. After learning how to invest one million dollars in real estate investment properties, she purchased a simple, affordable home, boasting low taxes in an up-and-coming neighborhood. Due to her healthy lifestyle, she is ten years older but in the best shape of her life.

So, yes, if you ponder where and how you live, sometimes you can consider yourself wealthy if you have one million dollars. But if you live beyond your means and have no investments that grow your savings, you are most definitely not wealthy! As always, living a healthy lifestyle that extends your life for many active years is the best benefit of all!

Once you hit your milestone of having one million dollars to spare, here are some options and expected payouts to consider on your journey to financial freedom.

How Much Interest Can one Million Dollars Earn Per Year?

A $1 million investment can earn interest from $33,000 per year invested in US Treasury bonds to around $1.2 million invested in real estate after a ten-year investment term. If you want to know how to earn a million dollars to live off the interest, it all depends on where you invest your money. 

There are many roads that will lead you to earn different rates of interest or profits when you invest your 1 million dollars. Before you roll the dice with your money, it’s better to make sure you’re not too averse to risk since your potential profits will vary tremendously.

As you will see from the list below, the stand-out method to grow your million dollars is investing it in real estate. There is never a 100 percent sure winner in any investment, but real estate, time and time again, is a sure-fire way to grow your 1 million dollars because you actually have assets you can rent or sell if necessary.

Where to Invest a Million Dollars

US Year Treasury Bonds

Investing in US Treasury bonds could currently earn you up to $33k per year. However, this investment is not protected against inflation so interest earned will shift with economic changes over the term of your investment. You may not be earning as much as you think.

With a fluctuating US Treasury Bond rate of up to 3.33%, your one million dollar investment will reap  $33,300 a year. If it sounds too good to be true, that’s because it is!

Your $33,330 is not adjusted for inflation, which will grow at least 3 percent, so in 30 years your payout will be worth only about $13,590, and your $1 million principal will have dwindled down to about $412,000.

Unless you are very young and looking to park your extra 1 million somewhere, we don’t recommend this investment at this time.

Dividend Stocks

Investing in the stock market is a high-risk and high-reward game. It adds great diversification to your portfolio but it’s better to invest in the long term if you want to achieve maximum returns.

Dividend stocks are popular, and many people invest in them. Their volatility makes them a good choice for those with higher risk tolerance, but if you do your homework, you can benefit from this type of investment.

There are many dividend stocks you can purchase, and currently some yield about 2.11 percent. It’s low, and of course, it is in no way guaranteed by the FDIC. 

One downside is that dividend stocks can fall at any time, and companies can always just suspend dividends.

But in order to greatly enhance your one million dollars, taking some risk with dividend stocks can be exciting and extremely profitable. Just remember this one caveat: you must think long term.

You will experience some ups and downs along the way, but overall, if you are patient, your dividend stock should add a healthy profit to your investment of one million dollars.

Here’s a case in point: NerdWallet’s investment calculator shows a  $5,000 investment that grows at 6% annually for 20 years, and could grow to over $16,000. Bump that up to 8% growth to include dividends, and that $5,000 could grow to over $24,000.

CD for a 5-Year Term

Certificates of deposit earn you a higher interest rate the longer you sign on. Historically they were a greater investment strategy than they are today. CD rates are currently between 0.10 percent to 0.80 percent.

Once upon a time in the fiscal world during the 1980s, CD rates were booming, offering whopping rates of up to 18.65 percent. This was a magical time, but alas, those days are long gone.

In March 2020, the Federal Reserve lowered the range for the federal funds rate to 0-0.25 percent as a means to stimulate US economic growth. Unfortunately,  this created a  widespread lowering of interest rates on deposit accounts, including CDs.

Currently, CD rates are exceptionally low, from about 0.10 percent to a high of 0.80 percent. By the time you take your interest, you will be losing money due to inflation!

This is not an option you should consider.

Investing in Real Estate

A real estate investment is the best way to earn high interest on your investment. Depending on the type of real estate and the market you invest in, you could earn $1.2 million or more over a ten-year investment term.

Billionaire Andrew Carnegie once wisely said that 90 percent of all millionaires made their profits by buying real estate. Every year, real estate tends to be a very healthy source of profits for anyone looking to turn their investments into a growth-churning machine.

Commercial Real Estate

Owning a commercial property for the long term can bring in profitable income year after year. As your asset, the actual property grows in value, and, not only do you get tax write-offs, but you also enjoy the annual income from renting out the properties.

For example, a $1 million investment in multifamily properties could earn you $195k annually from rental income. That’s not to mention your tax savings!

Upscale Residential Properties

If you want to know how to invest one million dollars for income, look no further than high-end rentals!

Investing your $1 million in upscale residential properties is your best bet for reaping high annual profits since you will see the valuations of your high-end assets go up as your tenants are more than willing to pay a premium to live in splendor!

Another financial benefit to opening real estate is that you don’t tie up your money as you would with other investments. With the low-interest rates sweeping the market right now, investing your 1 million in real estate is the winner by far in how to grow your $1 million in the most robust manner.

Lastly, people will always need a place to live. Just like taxes, having a place you call home is a necessity of life. Investing in real estate can be a major boon for your nest egg!