Where I’d Invest a $20,000 Windfall Right Now

Do you have some cash coming your way? This is how I would spend it on the TSX today after paying down the debt that’s causing me pain.

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It’s not often that Canadians come into a huge amount of money. But nothing is impossible, and it could be that Canadians might have a large amount sitting doing nothing in their Tax-Free Savings Account (TFSA).

But let’s say you all of a sudden have a huge cash influx coming your way. What would you do with it? In my view, spending should be a small part. Instead, here’s what I would do with a $20,000 windfall today.

Pay off debt

First off, any debt that I would have would be gone straight away. To manage this, I would make a list of all the debt I owe and organize it from highest interest rate to lowest. This would likely put my credit card first, so I would pay that down in full. From there, perhaps at lower rates, I would simply put just some cash towards these other items.

Create a passive-income portfolio

Next up, I would use that money to make more money — no, not by investing in some growth stocks. Instead, I would use my windfall to find valuable passive-income investments on the TSX today. This would include a broad mix of companies as well as exchange-traded funds (ETF).

But again, the goal is to make more income. While, over time, the TSX rises up, as well as stocks you invest in broadly speaking, if you want income now, it means investing in passive-income stocks. These can be dividend stocks, passive-income ETFs, or simply companies that provide a large dividend.

In that case, here’s how I would invest that $20,000 to create passive income.

Three dividend stocks I’d choose

Here’s the long-term passive-income portfolio I would go with on the TSX today. First, let’s look at a dividend stock. NorthWest Healthcare Properties REIT (TSX:NWH.UN) is a top choice. It has a 8.51% dividend yield and trades at just 8.15 times earnings as of writing. This would bring in stable income for me for years. That’s because NorthWest stock invests only in healthcare properties and does so around the world.

Then I would look for ETFs with similar stability. For those, I would look to iShares S&P/TSX 60 Index ETF (TSX:XIU) and Vanguard Balanced ETF Portfolio (TSX:VBAL). XIU would allow me exposure to the top-performing stocks on the TSX today. This would allow my stocks to recover quicker than the broader market and even offers a 2.82% yield to lock in as well.

As for VBAL, the reason is in the named. It’s balanced between equities as well as fixed income through bonds. It therefore tends to do quite well even during a downturn, with shares down just 3% in the last year. Further, you get a 2.11% yield as well. And in both of these ETFs, you get access to a management team looking after your investments for you rather than choosing them all yourself!

Bottom line

If you have an influx of cash coming your way and don’t know what to do with it, these are the three investments I would consider. After you’ve paid down debt, passive income can be used to help keep you afloat and to reinvest as well. These three options are a great starting point for any investors looking to get their investments up and running.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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