If you have a whooping $100k, that is a good start. The next stage is knowing what to do with the money or investing it properly.
But the question is, what to do with the $100k.
Having $100k puts you in an advantageous position, but you’re probably wondering about the best strategy to handle the money.
Not to worry, we will show you many strategies so you can choose the best place to invest.
Table of contents
- Why Invest Your money?
- How Do You Invest?
- What To Do With $100k: Where To Invest
- Other Things To Do With $100k
- Steps to Take Before Investing $100k
- What To Do With $100k: It’s All Your Decision.
Why Invest Your money?
The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff.
Here are some benefits of investing: investing is more than building rainy day savings. On a practical level, saving involves putting aside money today for use in the future.
Also, by investing early over time, your money grows in value, benefiting from the magic of compounding. You will beat inflation, and you earn additional income.
How Do You Invest?
The first thing is to ask yourself, how do you want to be involved in handling your money? In other words, would you like to take a more passive approach to managing your money’s growth? Do you want to invest on your own, or do you want advice from a professional?
You will need an online discount broker if you wish to make your investments. You make the assets using an internet broker’s platform. Before deciding, consider the following:
- The kind of investments you’re interested in.
- What type of trading do you want (active or passive)
- Platform charges (this is especially important for day traders)
- Also, the required minimum balance.
You need a financial advisor if you like personalized advice. Here are two categories of financial advisors that exist:
- Robo-advisor: A robotic advisor is a smart option if automated investing is more your style. After you provide information regarding your risk tolerance and schedule for goals, Robo-advisors invest on your behalf.
- Full-Service Financial Advisor – A full-service financial advisor is a better choice if you want full-service investment advice, including guidance on how to manage your money otherwise. Please pay special attention to the costs for both alternatives because they can quickly eat up any gains you could have from your investments.
What To Do With $100k: Where To Invest
Once you decide the type of investment you want, it’s time to think about what to do with $100k. Note that where you invest depends on your risk tolerance and goal timeline.
For example, investing your money in stocks is a riskier investment with a long-term goal, whereas investing in bonds is a lower risk.
Here are strategic investments to consider if you are thinking about what to do with your $100k.
#1. Exchange-Traded Funds
ETFs are a low-cost investing option that diversifies your portfolio for you. They are collections of stocks that cover various sectors or topics.
ETFs are a terrific method to profit from the market’s performance without paying the high cost of stock trading because they are already diversified and are not actively managed.
You can select broad or specific topics, the market segment in which you are most interested, and pay inexpensive fees for the passively managed fund. The strategic investment you can make with $100,000 is also this one.
Investing in individual stocks is risky. It may pay off if you know what you’re doing and diversify your portfolio. Most do-it-yourself investors utilize a financial advisor to buy individual stocks.
There are a few outliers, but most Robo-advisors stick to ETFs and mutual funds rather than equities.
If you want to make your portfolio more aggressive, investing a tiny amount of your $100,000 in stocks is a fantastic way to do it.
#3. Peer-to-Peer Lending
You become a lender as well as hundreds or thousands of other investors through peer-to-peer (P2P) lending.
Based on the information given, you decide who and how much you will invest your $100k using a P2P platform.
With most platforms, you may diversify your investments by funding each loan with as little as $25. P2P investments frequently provide 5–10% returns and offer a passive income in the form of interest payments.
In addition, this is one of the strategic investments to do with $100k.
#4. Investment Real Estate
You can purchase a property outright for $100k or make a substantial down payment on an investment home. If you’ve always wanted to, this is your chance to become a landlord.
It’s straightforward: purchase a property, do any necessary repairs to make it livable for tenants, and rent it out.
The rent becomes your monthly cash flow after deducting any outgoing costs, such as the mortgage on the home.
Additionally, you are building equity in the house and capital gains for a potential sale in the future.
There are several tax benefits to owning an investment property in the form of business write-offs, but be cautious of capital gains taxes when you sell.
#5. Real Estate Investment Trusts
Consider a real estate investment trust (REIT), a specialized type of exchange-traded fund if real estate is your primary emphasis.
You put the money into the trust, and the fund manager takes care of everything else, including diversifying the fund’s capital among different investments. Like an ETF or mutual fund, REITs are traded on the open market.
Other Things To Do With $100k
If investing your $100k in a risky investment doesn’t go well with you, here are some alternatives that aren’t as exciting. They result in lower rewards but require less risk.
#6. Money Market Account
A money market account is a hybrid of a checking and savings account. Because they have more significant minimum balance restrictions than savings accounts, you receive higher interest rates, but you can still write checks, usually up to six per month.
A money market account with FDIC insurance has a shallow risk. The strategic investment you can make with $100,000 is also this one.
Bonds issued by governments and corporations provide great low-risk investments. It’s OK to balance a portfolio of hazardous stocks or properties with bonds for lesser risk.
Although bonds have significantly lower rates of return, your money will certainly be returned.
#8. Certificate of Deposits
Certificates of Deposit (CDs) are accounts you tie your money up for a predetermined amount of time.
You receive a set interest rate if you leave the capital until maturity. You’ll pay the penalty if you withdraw the funds before the term expires.
So only choose CDs with the terms you are comfortable with, ensuring you’re OK with leaving the funds untouched for that time.
In addition, this is one of the strategic investments to do with $100k.
Steps to Take Before Investing $100k
Take stock of your present financial status before investing $100,000. You can ask yourself:
#1. Does my emergency money exist?
You should have three to six months of spending in your emergency fund. Check to see that it is completely financed first if you don’t have one or have used any of it. If you can’t afford to cover the cost of essential emergencies, investing won’t help you at all.
#2. Can I keep track of my investments?
You must keep tabs on them after choosing where to invest and carrying it out. Tracking is essential whether you utilize a Robo-advisor, a human advisor, or an app like Personal Capital.
You will always be aware of your net worth, as well as your fees and the degree to which your portfolio is balanced.
#3. How will I rebalance my portfolio?
Even a portfolio that is well-planned will undergo changes throughout time. Your stock allocation will become heavier than your bond allocation as your stocks rise. This upsets your diversification efforts.
If you previously had a 50/50 portfolio but now have one that is 70/30, it might be too hazardous for you.
It’s important to plan how you’ll rebalance or who will rebalance for you. Helpful hint: many robot advisors will carry out this task for you.
Also, check this: What Is Investment Banking And How Does It Work?
What To Do With $100k: It’s All Your Decision.
Ultimately, deciding what to do with $100K is your choice: It necessitates some introspection. Consider your objectives and risk tolerance. How much risk can you take? What are your financial objectives?
You can consider riskier portfolios, including stocks and real estate investments, if you have long-term objectives, like retirement. Less risky investments will enable you to achieve your objectives more quickly if you are a more cautious investor or have a shorter time frame. Bonds and ETFs are excellent options.
Also, if you want to diversify your funds even further, you can put some away in a CD or money market account while investing the rest, allowing each portion to grow at different rates.
According to Wells Fargo, investing effectively puts your money to work and potentially builds wealth. Smart saving may allow your money to outpace inflation and increase in value.
You can invest $100k in:
– Exchange-Traded Funds
– Peer-to-Peer Lending
– Investment Real Estate
– Real Estate Investment Trusts
– Money Market Accounts, etc.
You need to know where to invest $100,000 if you have it. So, to make an informed decision, it is advised that you do your research before taking any other action. Use due diligence to ensure your money goes where you want it to.
The journey to find a suitable investment on what to do with $100k can be as rewarding as the money invested.