How to Invest One Hundred Thousand Dollars

By Abby Hayes

December 30, 2022 at 6:25 pm

If you’ve got $100,000 available to invest, you’re doing better than the vast majority of Americans. The median American household currently only has about $11,700 between their bank accounts and retirement savings! So you’re definitely in a good place.

But figuring out how to invest that much money can also be tough, especially if it’s a windfall and you haven’t saved it up slowly over time. Luckily, there are lots of excellent options around right now that let you easily diversify this big investment.

If you’re not sure how to diversify your investments, check out this article on asset allocation. Then, use some of these options below to help yourself build the diverse, robust investment portfolio that works best for you.

Robo advisors are best for broadly-diversified, hands-off investing
Stock investing is best for speculation, more control over your portfolio, and potentially higher returns
Real estate is best for cash flow
Peer-to-peer lending is best for diversification (though it is high risk)
Cash (savings accounts, money markets, or CDs) is best for a safety net or emergency fund

What to Do Before You Begin Investing

Before you start investing, there are a few things you should do to make sure you’re in a financially secure position.

Build an emergency fund

One of the first things that everyone should do is build an emergency fund. Many Americans don’t have enough money in the bank to handle a $500 emergency. If something happens, such as your car breaking down or you getting injured, you don’t want to compound the stress by having to scramble for money to pay the bills.

If you have an emergency fund, you can just tap the fund for the money you need, saving you from borrowing money or putting the bill on your credit card, which charges a hefty interest rate.

Common advice is to maintain an emergency fund equal to between three and six months’ expenses. That means that if you spend $3,000 in the average month, you should aim to have between $9,000 and $18,000 saved up. A fund of that size can help you weather most unexpected bills and even longer-term financial issues like losing your job.

A good place to keep your emergency fund is an online savings account, such as the one offered by Chime. In general, online savings accounts have fewer fees and higher interest rates than the ones offered by brick and mortar banks while still making it easy to get your money when you need it.

Pay off high-interest debt

Paying off debt is like an investment that offers guaranteed returns. As you pay down the balance of a loan, you reduce the amount of interest that accrues on the loan. You can think of the loan’s interest rate as the guaranteed return you get from paying it off.

If you have high-interest debt, especially credit card debt, paying it off is a good idea before you start investing. There isn’t a single definition of high-interest debt as it depends on each person’s situation and risk tolerance.

Over the past century, the S&P 500 has returned about 10% per year but there aren’t many financial advisors who would recommend keeping debt that charges 9% interest and investing your extra money in the market. More frequent advice is that debt at or below 4% or 5% is alright to keep while you invest extra money, while you should try to pay down loans with higher rates first.

Keep in mind that finance isn’t a pure numbers game. If you have a mortgage at a low-interest rate, you may come out ahead financially if you keep the debt and invest instead. However, there is significant value to the peace of mind offered by being debt-free, so it’s up to you to decide how to prioritize paying off debt and investing.

Max out your retirement savings

Everyone wants to retire someday, but actually reaching retirement and having the financial resources to have a good retirement is a different story.

If you have extra money to invest, saving for retirement should be a priority. To help make saving for retirement a bit easier, the government offers special retirement accounts, such as 401(k)s and Individual Retirement Accounts (IRAs) that offer tax incentives when you use them to save. Traditional retirement accounts let you deduct contributions from your taxable income, meaning you pay less tax when you use a retirement account to save.

If your employer offers a 401(k) plan it’s a good idea to use it to save, especially if the company offers matching contributions. You can also open an IRA with any brokerage of your choice.

Investing can be stressful, especially if your retirement is riding on your success. If you want a hand with managing your 401(k), or just a second opinion on whether you’re on target to reach your goals, you can use Blooom to help you.

Blooom is an app that looks at your 401(k), the funds offered by the account, and your retirement goals. It then helps you design a retirement portfolio that can help you reach your goals. You can also get advice from a human financial advisor whenever you need it.

Blooom offers three levels of service with costs ranging from $45 to $250 per year, meaning you can choose the service that you need and don’t need a platform through which to buy and sell stock investments.

1. Robo Advisors

One thing you’ll likely learn as you figure out your investment allocation is that you should put a good portion of your $100,000 in low-cost mutual funds and similar investments. These options keep your investing costs low, which is essential. And while they’re tied to the market and can have good growth, they’re also less risky than buying individual stocks.

Advertiser disclosure – This content was reviewed by Vanguard but the opinion is the authors alone.

You can go with a traditional investment advisor to buy these types of funds, but your costs can sometimes be higher. That said, one of the best advisors out there with low fees is Vanguard. Vanguard offers a Personal Advisor Service that rivals the robo-advisors below, with regard to fees but blows them away in customer service.

The Vanguard Personal Advisor Service offers dedicated support from one of their many professionals that will work with you every step of the way to develop your own portfolio. The fee is only 0.3% of the invested amount (billed quarterly) and the minimum investment required is $50,000.

So one of the best options is to choose a robo advisor. These automated investing services are able to manage loads of investments at once and make algorithm-driven decisions. This means their costs are much lower, which can lead to much more growth of your investments over the long run.

As technology gets better and better, more and more robo advisors are popping up. One of our favorites is Betterment.

However, if you have as much as $100,000 to invest, you might be better off with Wealthfront, which offers lower pricing for higher net worth investors. That said, the services are quite similar, so check out our comparison here to decide between them.

Another option is M1 Finance, which is a free-to-use robo advisor. However, it has a limited number of investing options available. It does give you almost 2,000 exchange-traded funds (ETFs) to choose from, so that may be plenty of choices for you. Though with $100,000 to invest, you may want to put some of your money with M1 and some with other options to keep your portfolio diverse.

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2. Stock Investments

Investing in stocks is riskier than investing in mutual funds or some other options, but it’s still a good way to diversify your portfolio and potentially increase your overall earnings. However, you’ll need a platform through which to buy and sell stock investments.

If you have this much money to invest, you probably only want to put a small portion of it into stocks. And you’ll want to be sure you’re staying up-to-date on the market so that you can make trades, or buy and hold appropriate stocks, that suit your needs.

You might even want to look into alternative investments like blue-chip art. Historically the preserve of multi-millionaires, Masterworks makes it possible to buy a share in a Warhol or Van Gogh. Find out how it works in our Masterworks review.

Related: How to Invest in Art

But look, $100,000 is a LOT of money. If you don’t know what you’re doing, you could lose it all. Not to scare you because I think investing on your own is super valuable, but with this kind of money, it’s smart to make sure you know what to do with it.

So one option to consider is working with a Certified Financial Planner (CFP) who can give you advice and recommendations on how to manage your money and–more importantly–your investments.

Also Read: The Best Online Stock Trading Sites for Beginners

3. Real Estate

In some areas of the country, $100,000 is more than enough to buy an investment property and become an individual landlord. And if this money is just part of your portfolio, that’s sometimes a great idea. But if $100,000 represents all your investable cash, you probably shouldn’t tie all of it up in a single property.

However, you can invest in real estate along with other investors in order to bring diversity to your portfolio and, in some cases, get a fairly quick return on your investment. Platforms like Fundrise and Realty Mogul are crowdfunding platforms for real estate investment. This means that you invest in real estate projects and properties along with potentially hundreds of other investors.

Each offers slightly different types of investments. Realty Mogul lets you purchase shares in an LLC or LP that invests in a property. It offers pre-vetted investments and a low investment minimum. Fundrise has an excellent track record of great returns and offers investment options through REITs, which are ways to invest in a diverse portfolio of real estate. You have to be accredited to invest in Realty Mogul but not to invest in Fundrise.

Other options for accredited investors who want to invest in private real estate are Origin Investments and CrowdStreet. While Realty Mogul focuses on helping people invest in specific properties, Origin offers portfolios containing many properties, letting investors easily diversify their real estate portfolios.

4. P2P Lending

Lending your money is another option for getting a good return. Again, this is one that used to only be open to the truly wealthy. But now P2P lending platforms have made this option accessible to the masses.

With a P2P lending platform, you can typically decide who you’ll lend to, with varying information available based on the platform. Then you’ll lend your money and get your investment back as the loan is paid back. Higher-risk loans can give you a great return if they’re paid back, but you can also make fairly safe loans to individuals with excellent credit and recommendations.

You can practice P2P lending through platforms like Lending Club and Prosper. These platforms aren’t available to investors in every state. And if you live in a state where they are available, you’ll have to meet minimum qualifications based on your annual salary and net worth. These requirements aren’t as high as those for some real estate investing, but you’ll need to be sure you meet them before you can invest.

Related: Prosper vs. Lending Club

5. Savings

If this $100,000 is over and above your three- to six-months worth of living expenses in an emergency savings account, you may not need to save much more. But maybe you want to portion off some of the money for a mid-term or long-term savings goal. In this case, make sure you’re getting the most bang for your buck by choosing a savings account with a good APY.

Right now, APYs are still fairly low on savings accounts, but you should try to find the best return you can get in the market. Some savings accounts and money markets to consider are from Chime, CIT Bank, Ally Bank, and Capital One 360. These all have similar FDIC-insured savings accounts with great APYs.

Another option would be to create a CD ladder. If you want to save $10,000, you can invest the money in CDs of varied lengths. That way you always have some money coming mature if you should need it to be liquid, but you’re taking advantage of the higher APY you can get from a CD versus a savings account. Here’s an explanation of how to build a CD ladder.

6. Vehicles for Investing

Some of these investing platforms are their own vehicles for investing, but others offer different options. For instance, you can open a taxable investment account with TD Ameritrade, but you can also invest your IRA there.

Generally, your best bet is to invest first in an IRA and then in taxable options. The tax savings you gain with tax-advantaged accounts like an IRA or 401(k) make for potentially huge long-term gains in your accounts.

So if you just happened into a $100,000 windfall and haven’t fully funded your tax-advantaged retirement accounts, do that first. If you can, bump up your payroll deductions for your employer-sponsored account, and then open or fully fund an IRA on the side. You can also make sure you’re doing the best you can with your employer-sponsored account with a service like Blooom, which helps you manage your 401(k) plan to ensure you’re getting the most bang for your buck.

Once you’ve maxed out your tax-advantaged options, then you can spread your investments into various taxable accounts, whether that’s with a robo advisor, a real estate investment option, or a P2P lending platform.

7. Cryptocurrency

It doesn’t matter if you’re new to the cryptocurrency world or you’ve been investing in Bitcoin since day one, nothing changes the fact that it’s quickly becoming one of the most popular alternative investments. Furthermore, it won’t be long before it’s considered a mainstream investment.

There are thousands upon thousands of cryptocurrencies to invest in, with Bitcoin, Ethereum, and Litecoin leading the way.

The best way to invest in cryptocurrencies is through an online platform, such as Coinbase. This allows you to buy and sell cryptocurrencies, while also managing every aspect of your portfolio.

With $100k available for investing, there’s a lot that you can do with cryptocurrencies but you don’t want to go overboard. As a riskier investment, it’s best to keep it at 10 percent or less of the value of your portfolio.

How to Keep Track

Now that you know about these options for making investments, you can make a truly diverse portfolio that will balance risk with reward. But keeping track of all these various investments can be difficult, to say the least.

One of our favorite platforms to pull it all together is Personal Capital. This management tool plugs into your existing accounts, including spending and investment accounts, and pulls all your data into a single dashboard. You can use it for everything from budgeting to keeping track of your investments and overall net worth.

Another resource to consider is Paladin, a free service that connects you with reputable financial advisors. You’ll tell them what you’re looking for and the service will match you with three advisors that you may interview and find out which is best for your needs. Did we mention using Paladin is free? You can find out more about Paladin here.

With $100,000 to invest, you’re off to an amazing start. Now just take things slowly as you learn to invest and make smart decisions to keep that money growing.

Learn More: The Best Online Financial Advisors

How Did We Come Up With This List?

When we designed this list, we looked for investing strategies that are available to most people. Very wealthy people often have access to investments that people who aren’t accredited investors cant use, so we focused on strategies that will work for almost anyone.

We also considered the costs and the risk-return ratio of the investments. We tried to focus on low-cost investments while offering multiple options at different levels of risk and reward. Those who don’t mind risk and who want big gains might decide to invest in real estate or P2P lending while those with less risk tolerance may find mutual funds or even CDs more appealing.

Why Should You Trust Us?

When you’re looking for help online, it can be hard to know whether the sources you find are trustworthy. That’s especially true if you’re looking for information about finances and investing.

We always aim to offer the best, most accurate information we can. Our team of writers has showcased their expertise and been featured in many major publications, which means that you can feel confident that they know what they’re talking about.

FAQ

How much interest will I earn on $100k?

How much interest you’ll earn on $100,000 depends on your rate of return. Using a conservative estimate of 4% per year, you’d earn $4,000 in interest (100,000 x .04 = 4,000). To use a more aggressive assumption say, 9%, you’d earn $9,000. Just take the invested amount and multiply it by the assumed interest rate for your total dollar return that year.

How can I invest $100k to make $1 million?

Turning $100k into $1 million is quite challenging, as you’re effectively trying to 10x your investment. Doing this isn’t impossible, though, you just need to invest in high-risk/high-reward investments, such as real estate and peer-to-peer lending.

Using the Rule of 72, which tells you how long it takes to double an investment, you can do this a few times to understand how long it’ll take to turn $100k into $1 million. The Rule of 72 has you divide 72 by the expected rate of return, which will give you the amount of time it’ll take to double an investment. So if you’re expecting a 10% rate of return, you can surmise that it’ll take just over 7 years to double your investment (72 / 10 = 7.2 years). So after 7.2 years, you’ll have $200,000. Meaning, approximately every 7 years you’ll double your principal with a 10% rate of return. So to get to $400,000 it’ll be 14.4 years, and $800,000 will be 21.6 years. At 28.8 years you’ll be up to $1.6 million, passing your target.

So, it’s safe to say that if you do nothing else but invest $100k in a high-return investment (targeting 10%) you can turn it into $1 million after about 25-26 years.

Obviously, you can accelerate this by adding to your investments, compounding the interest, and avoiding the assumption you are going to net 10% in returns each year.

How can I invest $100k wisely?

$100,000 isn’t enough to retire on, but it’s still a lot of money. To invest $100,000 wisely, you should put it in a broadly diversified portfolio (such as using a robo advisor) or into a handful of diversified and inexpensive index funds.

What’s the best way to invest $100k short term?

To invest $100k short-term, focus on relatively safe and diverse investments. This means a mutual fund, ETF, or an index fund that is already diversified and has lower costs.

Bottom Line

Having $100,000 to invest is a big accomplishment. Whether you obtained it through a windfall or an accumulation over time, it’s a sizable investment. That being said, you want to make sure you’re investing it appropriately. This article lays out several options, but you should always do what is best for you and what suits your long-term financial objectives the most. Overall, stick to a relatively safe investment that is diversified enough to gain you a nice return, but also mitigate risks.

Vanguard Disclosure: Vanguard Personal Advisor Services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company. The services provided to clients who elect to receive ongoing advice will vary based upon the amount of assets in a portfolio. Please review the Form CRS and Vanguard Personal Advisor Services Brochure for important details about the service, including its asset-based service levels and fee breakpoints. VAI is a subsidiary of VGI and an affiliate of VMC. Neither VAI nor its affiliates guarantee profits or protection from losses.

Learn More:

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Abby Hayes

Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University Purdue University Indianapolis, and lives with her husband and children in Indianapolis.

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