$20,000 can be an incredible foundation upon which to build a decent nest egg for the long haul. If you can invest it early enough in your career and the market returns to its historical long-run return rates, that one investment on its own can be enough to make you a millionaire retiree.

Of course, as 2022 reminds us, the market can go down as well as up. Investing your entire nest egg all at once can be incredibly unnerving, especially if you happen to put your money to work for you just before another downturn in the market. On the flip side, if the market is near its bottom and you don't invest at all, you'll feel just about as upset if you miss out on any recovery that may follow.

The uncertainty on both sides is enough to drive "paralysis by analysis." Yet despite the uncertainty in the short term, it remains likely that the stock market will be a strong engine of wealth creation over the longer term. As a result, if you've got $20,000 to invest, now may be a decent time to start putting that money to work.

A couple putting money into a piggy bank.

Image source: Getty Images.

How I'd invest that kind of money if I were starting from scratch

If I were a new investor and it were my money, I'd take $12,000 of it right now and get $6,000 of it into a Roth IRA for myself and another $6,000 into a Roth IRA for my wife. $6,000 per person is the maximum contribution allowed for most people under age 50 for calendar year 2022 .

Once it's in those accounts, I'd use the money to start buying the Invesco S&P 500 Equal Weight ETF (RSP 0.66%). This being October, I'd commit to buying $2,000 per account per month, to have the full contributed $12,000 invested by the end of December.

Then, in early January, 2023, I'd take the other $8,000 of cash and split it between my wife's Roth IRA and my own. Once in those accounts, I'd again commit to buying $2,000 per month per account of the same Invesco S&P 500 Equal Weight ETF, ultimately having the full $20,000 invested by the end of February.

Why Roth IRAs?

Roth IRAs are quite possibly the best long-term wealth-building accounts available to most Americans. While money goes into the account after tax, it compounds tax deferred while in there. Once you reach a standard retirement age, you can generally take money out completely tax free, or if you prefer, you can let it compound tax-free within your Roth IRA for the rest of your life.

In addition, you can take money you directly contributed to your Roth IRA out of it at any time for any reason, without any tax or penalties. You can also withdraw money you contributed to your Roth IRA via a rollover without paying additional taxes or penalties once that money has sat in your Roth IRA for at least five years. That combination of flexibility and tax advantages make Roth IRAs tremendously strong tools for building and managing your wealth over time.

Why the Invesco S&P 500 Equal Weight ETF?

Over time, index investing tends to beat money managed by Wall Street's best and brightest. Even Warren Buffett -- arguably one of the best investors of all time -- would rather bet on an index fund than a basket of hedge funds. By including all 500 of the companies in the S&P 500 index, the Invesco S&P 500 Equal Weight ETF gets access to the same businesses as a typical index fund does.

By buying approximately equal dollar amounts of each pick -- instead of market-cap weighting the picks like a typical index fund does -- the fund has less exposure to the biggest companies in that index. That's important to investors who are worried about diversification, as the top 10 companies in a typical S&P 500 index fund represent nearly 30% of the total index. 

Contrast that with the Invesco S&P 500 Equal Weight ETF, where the top 10 holdings only take up around 2.7% of the fund. With that design, you get a fund less exposed to troubles affecting the biggest companies, while still getting low-cost ownership access to the same 500 businesses.

Why split the investment up over time?

As for the timing of the investments, there are three key reasons to split them up. The first is a legal one: folks under 50 can only contribute up to $6,000 to their Roth IRAs in a year. With a married couple, both under age 50, that's $12,000 per household. To get all $20,000 into Roth IRAs requires splitting the investment up over two calendar years.

The second is a psychological one. With the market having such a tough time in 2022, investing only a portion of the money at a time makes it easier to put some money to work. If the market continues to drop, then you still have more money to invest, and your investments buy that many more shares. If, on the flip side, the market starts rebounding, then you will at least have invested something near the lows, while still having a plan to put the rest of your money to work.

Third -- and perhaps most importantly -- it encourages making investing a regular habit. With this plan, you're buying a total of $4,000 of stocks every month for five consecutive months. Make that not just a one-time event, but rather the starting steps of a lifelong journey of investing, and you'll put yourself on a much stronger path to the possibility of a comfortable financial future.

Even if you can't come up with $4,000 per month after that initial $20,000 gets put to use, getting into the habit of investing will make a world of difference over time.

Get started now

Regardless of whether you have $20,000 ready to invest right now or just a little bit left over each payday, now is a great time to get in the habit of making regular investments. The longer you keep at it, the more time you have to let compounding work its magic for you. You will never again have more time before you retire than you do right now, so make today the day you make the commitment to yourself to start building your own long-term nest egg.