How to Invest $100,000 the Smart Way (2024)

How to Invest $100,000 the Smart Way (1)

If you’re looking to invest $100,000, you have a lot of options, and what you decide to go with can affect what kinds of returns you earn. You could invest in real estate or put some of the money into a diverse basket of stocks on the market. No matter what you do, you always want to make sure you do your research and consider all of your options. One way to make things a bit easier is to find a financial advisor to help you invest your $100,000 and to manage the money as it grows.

Determining What Kind of Investor You Are Before Investing $100,000

There’s another thing you need to do before investing your money: Take a few minutes to think honestly about what kind of investor you are. Your investor profile can dictate the kinds of investments you make and which services or companies you use. If you’re interested in doing your own research, creating your own asset allocation and handling trades on your own, then you’re more of a do-it-yourself investor. You probably want to open a brokerage accountthat offers you access to a variety of financial products.

If you don’t have a lot of investing experience or just don’t particularly want to worry about the nitty-gritty of finding investments, you may want to use a robo-advisor. This is a service that builds and manages a preset investment plan, based on your situation and goals. Robo-advisors usually charge lower fees than financial advisors, and they cover the basics of investing.

Consider working with a financial advisor if you want more in-depth financial guidance. An advisor can help you create a comprehensive financial plan and manage investments on your behalf. This option is more expensive than robo-advisors, but it also provides the most personalized help. If you’re on the fence, check out this guide to whether or not you need a financial advisor.

The final piece of the puzzle in your investing style is your risk profile. If you have a high-risk tolerance, more of your portfolio will be invested in equities (stocks). You might also be more willing to invest in smaller companies, which means both a greater opportunity for growth and a greater risk of loss.

A robo-advisor or financial advisor can both use questionnaires to gauge your risk tolerance. You can also use anasset allocation calculator to measure your risk tolerance and choose investments accordingly.

Investing $100,000 for Retirement

Saving for retirement should be a major goal for everyone. If you haven’t saved much for retirement yet, putting your $100,000 toward your retirement accounts can make a big difference. How exactly you save will depend on your situation. If your employer offers access to a tax-deferred account, consider making a maximum contribution.

Common examples are 401(k), 403(b) and 457(b) plans. Here’s a look at the annual contribution limits for these types of accounts:

  • 2024: $23,000 (plus a $7,500 catch-up contribution for savers 50 and older)
  • 2023: $22,500 (plus a $7,500 catch-up contribution for savers 50 and older)

At the very least, make sure you contribute enough to max out any matching that your employer offers.

These accounts are useful for retirement savings because you don’t have to pay taxes when you contribute or as your accounts grow. You only pay income tax when you withdraw the money in retirement. Contributing the maximum means smaller paychecks, but if you have $100,000 to spare, then you can likely afford the dent in your monthly income.

After you contribute to your employer’s retirement plan (or if your employer doesn’t offer one), consider maxing out an individual retirement account (IRA). A traditional IRA provides the same benefits as a 401(k). You pay tax on your funds when you withdraw them, but the money that goes in is pre-tax; since it’s not a paycheck deduction like a 401(k), this means you get to deduct the money you contribute on your taxes. Another option is a Roth IRA, which allows you to contribute after-tax money.

A Roth IRA is probably preferable if you’re early in your career. Because you probably have a lower income than you will have later in your career, you can save money by paying the income taxes now instead of later. Here’s a look at the annual contribution limits for IRAs:

  • 2024: $7,000 (plus a $1,000 catch-up contribution for savers 50 and older)
  • 2023: $6,500 (plus a $1,000 catch-up contribution for savers 50 and older)

Best Investments for Your $100,000

Whether you’re investing for retirement or some other goal, the big question is: What investments should you buy? Below is a rundown of four popular options for you to consider.

1. Index Funds, Mutual Funds and ETFs

How to Invest $100,000 the Smart Way (2)

If you’re looking to invest, there are a lot of options. Mutual funds and exchange-traded funds (ETFs) are all good ways to create a diversified portfolio of investments. Mutual funds are effectively baskets of investments. They might be all stocks, all bonds, or a combination thereof. Mutual funds have a manager – a person who is choosing what to include within the fund.

This could provide a nice in-between for people who want to invest in individual companies or sectors but don’t have the time or know-how to research every stock. So instead, you just research a mutual fund and/or mutual fund company.Then you leave the specific investment decisions in the hands of the fund. The big trade-off is that some mutual funds, especially actively managed funds, can have high management costs.

ETFs are similar to mutual funds, but they trade like stocks. They often, but not always, have lower costs than mutual funds. You can invest in just certain types of companies (e.g. large corporations), specific sectors of the economy (like technology or healthcare) or in other types of investments, like bonds and real estate. Some ETFs center on an idea, such as supporting renewable energy.

Within the world of mutual funds and ETFs, one popular option is index funds. Rather than having a manager who actively picks stocks and makes trades, index funds attempt to track the performance of a single market index. For instance, an index fund might track the (the 500 largest publicly traded American companies). The result is that you can easily (and often cheaply) invest in a wide range of companies. This provides you with some protection in case certain companies or sectors of economic struggle. Index funds tend to outperform actively managed funds over the long term.

2. Individual Company Stocks

When many people think of investing, they imagine picking that one stock that’s going to take off as the next Apple or Amazon. The truth is that trading individual stocks is time-consuming and risky. You need to do thorough research on companies, and ideally, you’ll be well-versed in methods of equity analysis like technical analysis and fundamental analysis.

While there is potential for big gains for portfolios built around individual stocks, there’s also potential for big losses. There’s nothing wrong with using your money to invest in this way, but it does require a fair amount of time and knowledge.

3. Real Estate

If you want to invest in real estate but don’t know where to start, consider investment funds. Real estate investment trusts (REITs)are particularly popular and allow you to invest in real estate without buying any property yourself. There are also ETFs that include multiple REITs, allowing you to track the real estate market as a whole.

For people who want to purchase property, $100,000 is enough, in many places, to make a sizable down payment. If you live in a very expensive area like New York or Los Angeles, consider purchasing a property outside of your city or even out of state. Living in one state and owning property in different states could complicate your taxes, but don’t let that discourage you if you want to buy property. Just make sure to first speak with an expert, like a financial advisor, for advice on how to best set up and manage your finances.

4. Savings Accounts, MMAs and CDs

If you already have investments or if you just aren’t quite sure yet how you want to invest your money, there are some safe places you can store your money. The simplest way to save your money is in a savings account. Most big banks offer very low interest rates on their savings accounts (think 0.05% or less). Instead, look for a high-interest savings account, typically with an online financial institution.

Another safe place to park your money is in acertificate of deposit (CD). A CD has a set term, ranging from a month to up to 10 years.You can withdraw your money but you’ll forfeit part of the interest earned. The trade-off for this reduced liquidity is higher interest, and longer terms generally have higher rates. You might also get a higher rate with a jumbo CD, which is specifically for balances of $100,000 or more. CDs require you to give up access to your money for a while, but they offer a guaranteed payout. And so long as the bank is FDIC-insured, your money is safe.

Factors to Consider Before You Start Investing $100,000

Before investing any of your money, you should strongly consider making sure that your finances are in good order. You don’t want to hurt yourself financially just to put more money into your investment account. Your finances should all be working together towards a singular goal. Taking into account the following factors will ensure you’re in a good place to start investing.

Pay Down Your Debt

If youhave debt with a high-interest rate, your best bet is to pay this down before putting anything in the market. That includes credit card debt and debt from other loans, such as payday loans. The average credit card interest rate is 16%, which is significantly higher than the average annual stock market return. In many cases, this means that wiping out high-interest debt is a better use of your money than investing in the market.

If you have debt on multiple credit cards, consider a balance transfer credit card. This allows you to consolidate your debt and tackle it all at once. It might even have an introductory 0% APR, allowing you to put interest on pause while you pay it down.

Create an Emergency Fund

Another thing that’s important to prioritize is an emergency fund. An emergency fund is simply money that you set aside for yourself to use when something comes up. As an example, what would you do if you unexpectedly lost your job? Would you have enough savings to bridge the gap until you found another job? What if your car suddenly needed a big repair or if you got sick and had to pay some medical bills?

With an emergency fund, you have money set aside to help you through these challenges. Make sure it’s well-funded to account for any number of financial hardships you might encounter. For most people, a strong emergency fund covers six months’ worth of living expenses.

How much you put in your emergency fund, and where you keep it, is a matter of risk tolerance. The safe route is to go the full six months and keep it in a deposit account where there’s no risk of losing principal, like a savings or money market account. Others might keep as little as three months’ worth of expenses. They might also choose to invest the money in their fund, willing to risk their principal a bit if it means seeing a higher return. However, you approach it, though, make sure you have a liquid emergency fund that can last you at least a few months.

Account for the Capital Gains Tax

Capital gains taxes are an extremely important factor that you’ll want to account for when you invest your money. If you manage your money without following the sometimes very specific rules related to investment taxes, you could find yourself with a hefty bill at tax time. For example, choosing investment types that are more likely to be long-held will often afford you better tax treatments.

The capital gains tax is split into two categories: short-term and long-term. Short-term investments are those that are bought and sold within a year. Long-term investments, on the other hand, are purchased and held for at least a year and a day.

Short-term rates are the same as standard income tax rates, so if you make significant money investing $100,000 on top of your normal income, rates can get as high as 37%. However, if your investments can reach the long-term status, tax brackets will range from 0% to 20%, saving you quite a bite on your federal tax bill.

Employ Diversification in Your Portfolio

Whenever you invest any money, many experts recommend spreading it across many different areas of the market. This is done to avoid an “all eggs in one basket” approach that can lead to major volatility in your portfolio, particularly with assets like individual stocks. That’s because if you invest all $100,000 in a single company, you’ll be prone to the ebbs and flows of that company’s stock.

This same principle can also apply to larger sectors of the economy, like technology or healthcare. Putting all your money into, say, tech stocks and ETFs might seem like a good idea to some, but should that market see a major dip at any point, it’ll affect all of your assets at once.

Instead, many experienced investors and financial advisors alike will look to spread their money across multiple sectors and investment types. For instance, a diversified portfolio might contain ETFs, company stocks, municipal bonds, REITs, mutual funds and more. This, in principle, allows your money to avoid seeing major shifts in short periods.

Should You Invest All of Your Money at Once?

Even if you’re planning the perfect asset allocation, you may want to consider spacing out your investments over time through a strategy such as dollar-cost averaging. Dollar-cost averaging is a simple investing strategy where you invest a fixed amount of money at regular intervals. For example, let’s say you want to invest $6,000 in one ETF. With dollar-cost averaging, you might invest $1,000 a month over six months instead of investing it all at once.

The advantage of spacing out your investments is that you face less risk of spending all your money on an asset while it has a high price. While markets go up over time, corrections and even crashes do happen. If you have the bad luck to invest your entire $100,000 right before such a downturn, you’ll lose big. By spacing out your investments, you mitigate this risk. However, you may not realize quite the same level of growth compared to investing a lump sum at the right time, but timing the market perfectly is all but impossible.

As you might imagine, dollar-cost averaging is most useful for assets that see regular fluctuations in price. It’s not necessary if you’re putting your money in, say, a CD, where there’s little or no risk of loss.

Bottom Line

How to Invest $100,000 the Smart Way (3)

With $100,000 to invest, you have options. You can park it somewhere safe, like a CD or high-interest savings account, or you can take a little risk and invest in the stock market. If you go the investing route, you can choose how much risk you want to assume. The right index fund gives you adiversified portfolio for a low price, while trading individual stocks may produce big gains. There are also investment options outside of the stock market, such as real estate.

Tips for Investing

  • Getting professional help can make managing your investments easier. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Knowledge is half the battle. Make sure you know what taxes you may have to pay on your investments with SmartAsset’scapital gains calculator.

Photo credit: ©iStock/Tinpixels,©iStock/PeopleImages,©iStock/mapodile

How to Invest $100,000 the Smart Way (2024)


How to Invest $100,000 the Smart Way? ›

You can invest in the stock market

This means you get a decent return with low-risk, especially short-term, government bonds right now, even for long-term retirement savings,” says Escamilla. Exchange traded funds (ETFs), which are typically a mix of stocks and bonds can also add diversification to your portfolio.

What is the best thing to invest $100000 in? ›

You can invest in the stock market

This means you get a decent return with low-risk, especially short-term, government bonds right now, even for long-term retirement savings,” says Escamilla. Exchange traded funds (ETFs), which are typically a mix of stocks and bonds can also add diversification to your portfolio.

What is the smartest thing to do with 100000 dollars? ›

8 Ways to invest $100K
  1. Max out contributions to retirement accounts. ...
  2. Invest in mutual funds, ETFs, and index funds. ...
  3. Buy dividend stocks. ...
  4. Buy bonds. ...
  5. Consider alternative investments. ...
  6. Invest in real estate. ...
  7. Fund a health savings account (HSA) ...
  8. Park your cash in an interest-bearing savings account.
Apr 24, 2024

Where is the safest place to invest 100K? ›

Best Investments for Your $100,000
  • Index Funds, Mutual Funds and ETFs.
  • Individual Company Stocks.
  • Real Estate.
  • Savings Accounts, MMAs and CDs.
  • Pay Down Your Debt.
  • Create an Emergency Fund.
  • Account for the Capital Gains Tax.
  • Employ Diversification in Your Portfolio.
Dec 14, 2023

How can I double 100K in a year? ›

Doubling money would require investment into individual stocks, options, cryptocurrency, or high-risk projects. Individual stock investments carry greater risk than diversification over a basket of stocks such as a sector or an index fund.

How to turn $100k into $1 million in 10 years? ›

There are two approaches you could take. The first is increasing the amount you invest monthly. Bumping up your monthly contributions to $200 would put you over the $1 million mark. The other option would be to try to exceed a 7% annual return with your investments.

How much interest will 100k earn in a year? ›

At a 4.25% annual interest rate, your $100,000 deposit would earn a total of $4,250 in interest over the course of a year if interest compounds annually.

How to turn 100k into 1 million? ›

If you keep saving, you can get there even faster. If you invest just $500 per month into the fund on top of the initial $100,000, you'll get there in less than 20 years on average. Adding $1,000 per month will get you to $1 million within 17 years. There are a lot of great S&P 500 index funds.

How much monthly income will 100k generate? ›

For example, suppose you invest in a money market account offering a 5% annual interest rate. In that case, you can expect your 100k to generate around $5,000 in passive income annually, or approximately $416.67 per month.

How much money do I need to invest to make $4000 a month? ›

Making $4,000 a month based on your investments alone is not a small feat. For example, if you have an investment or combination of investments with a 9.5% yield, you would have to invest $500,000 or more potentially. This is a high amount, but could almost guarantee you a $4,000 monthly dividend income.

How to invest $100,000 for quick return? ›

If you want to put $100,000 into a short-term investment, here are six options worth considering:
  1. High-Yield Savings Account. ...
  2. Money Market Funds. ...
  3. Cash Management Accounts. ...
  4. Short-Term Corporate Bonds. ...
  5. No-Penalty Certificates of Deposits (CD) ...
  6. Short-term U.S. Government Bonds.
Mar 7, 2024

How to generate passive income with 100K? ›

But you could also purchase a property, renovate and resell it. Or if you're looking to invest $100,000 for passive income, you might buy real estate and rent it out. While rental income is considered passive income, being a landlord often requires considerable work, which can make it feel like a more active endeavor.

Where to get best return on $100,000? ›

Invest in Stocks and Shares

Stock investment markets are one of the best places to invest £100,000 and generate solid returns over the long run. The average annual return of the FTSE All-Share Index over the past 4 decades is around 7.48%.

How to get 10% return on investment? ›

Investments That Can Potentially Return 10% or More
  1. Stocks.
  2. Real Estate.
  3. Private Credit.
  4. Junk Bonds.
  5. Index Funds.
  6. Buying a Business.
  7. High-End Art or Other Collectables.
Sep 17, 2023

How can I turn 10k into 100k? ›

To potentially turn $10k into $100k, consider investments in established businesses, real estate, index funds, mutual funds, dividend stocks, or cryptocurrencies. High-risk, high-reward options like cryptocurrencies and peer-to-peer lending could accelerate returns but also carry greater risks.

How long does it take 100k to double? ›

How To Use the Rule of 72 To Estimate Returns. Let's say you have an investment balance of $100,000, and you want to know how long it will take to get it to $200,000 without adding any more funds. With an estimated annual return of 7%, you'd divide 72 by 7 to see that your investment will double every 10.29 years.

How to turn 100K into 1 million? ›

If you keep saving, you can get there even faster. If you invest just $500 per month into the fund on top of the initial $100,000, you'll get there in less than 20 years on average. Adding $1,000 per month will get you to $1 million within 17 years. There are a lot of great S&P 500 index funds.

Where would you put $100,000 to invest? ›

You could invest your $100,000 in real estate, real estate investment trusts (REITs), stocks, or other securities.

How much monthly income will 100K generate? ›

For example, suppose you invest in a money market account offering a 5% annual interest rate. In that case, you can expect your 100k to generate around $5,000 in passive income annually, or approximately $416.67 per month.

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