What Is the Best Way to Invest $100K in Cash? (2024)

Here is a problem that most people would be happy to have: You find an extra $100,000 in discretionary cash on hand, and you're not sure what to do with it. The operative word here is discretionary. We're assuming that your $100,000 of extra cash really is extra and that you do not have any outstanding debt, especially high-interest credit card debt.

If you have outstanding debt, most finance professionals would say that your priority for that chunk of change is to pay down your debt.

Once that is done, and if you already have some other assets in place—such as a viable retirement plan, an adequate emergency fund, and some other well-placed capital—you're already ahead of the game. If so, you probably already know what some of your options are. However, if you are new to investing, you may want to start with some research.

There is no one best way to use this cash as there are many options. Your goal is to choose the investment vehicle—or combination of vehicles—that is right for you. Cited below are some of the best options for your cash windfall.

Key Takeaways

  • If you find yourself with so-called discretionary cash, first take care of the basics:pay off debt, set up or continue funding a retirement plan, and set aside an emergencyfund.
  • If the source of your money is from a retirement account such as an IRA, explore tax-free rollovers into other qualified accounts.
  • Investments such as stocks, bonds, mutual funds, and CDs, are a good way to use cash.
  • Real estate can be a rewarding option, with a potential for generous profits.
  • For the risk-averse, CDs and high-yielding savings accounts are viable options.

Savings accounts and CDs are paying better interest rates than they have in years, due to inflation. As of late 2022, rates above 3% can be found for savings accounts and short-term CDs. Compare offers for the best rates.

Real Estate

Although it may not be the most exciting prospect, consider paying off your mortgage if you have one. If you do not own your home or another investment property, consider investing in real estate. Real estate can be a solid investment. However, it has risks and requires that you do your due diligence.

Traditional Real Estate Investing

When most people think about investing in real estate, they think of purchasing and flipping properties or purchasing and renting out for income. Several factors contribute to whether gains would be realized quickly, over a long period, or even at all.

First: location, location, location! A property's location is one of the most important determinants of its value. For the biggest bang for your buck, choosing the right location is just as important as choosing the right property.

The condition of the market is perhaps the best indicator of whether traditional real estate investing is a good idea. If prices are volatile it might be a good time to sit back and wait for them to settle.

Real estate purchases command a significant outlay of capital. An investor should consider their return on investment (ROI), the property's profitability, and the associated costs before investing. Consider how much of your $100,000 will be used towards the purchase, repairs, renovations, and marketing of the property.

For flips, selling costs should be factored in. For rentals, maintenance costs must be considered.

Real estate is one of the few assets that tend to appreciate over time. As a result, some investors hold their properties until such appreciation is large enough to generate the desired profit.

Real Estate Investment Fund (REIT)

If you want to invest in real estate without the complexities associated with directly purchasing property, a real estate investment trust (REIT) could be a great option. Investing is simple and does not necessarily require a lot of money. Some investment platforms allow investments as low as $100.

Unlike traditional real estate investments that are flipped and resold, REITs have properties in their portfolios that generate income. They include retail spaces, medical facilities, residential properties, and commercial properties such as office buildings.

You can purchase REIT shares through a broker or directly from the REIT company. REITs pay their shareholders dividends, which are taxed as regular income; however, gains are taxed as capital gains.

Taxable Investments

You can put your extra cash into taxable investments. That is, your earnings or capital gains will be considered taxable income.

Among the more common taxable investments are stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Some of these instruments, like dividend-paying stocks, could generate periodic income.

This approach is made more attractive by a tax policy that generally treats capital gainsfavorably compared to earned income and ordinary interest income.

Low-Risk Investments

If you are squeamish about investing in themarketand want your money to be safe, you can invest in high-yielding certificates of deposit (CDs) or a high-interest savings account. Your principal is even insured by the federal government if it is an FDIC member (as almost all banks are).

Don't just drop by your local bank branch. You should shop around for the best bank rates. The best rates for high-yield savings accounts may be offered by the online platforms of various financial services firms whose names you might already know—such as Goldman Sachs, American Express, and Barclays Bank. You can also find out-of-state banks with competitive offers online.

Retirement Accounts

If your retirement plan is an individual retirement account (IRA) or a 401(k), both of which are tax-deductible but not tax-free, you could look into opening a Roth IRA account.

With a Roth account, you pay the income tax due in the year you deposit the money but owe no further tax on the principal or investment gains when you withdraw the money.

Converting to a Roth IRA is a taxable event, with the amount of the conversion reported as ordinary taxable income.

Not only can Roth earnings grow tax-free, but the account is not subject to the IRS required minimum distribution, allowing funds to accumulate past retirement. Unlike for traditional IRAs, there is no maximum age limit to participate.

Unless rolling over from an eligible retirement account, investing the entire $100,000 would not be possible because the IRS limits how much you can contribute to a Roth annually. For 2022, the maximum contribution is $6,000 or $7,000 for individuals age 50 or older, rising to $6,500 ($7,500 for those age 50 or older) in 2023.

Also, the taxpayer's adjusted gross income (AGI) must not exceed the limit for Roth eligibility. Married couples filing jointly and widowed persons cannot contribute if their incomes are $214,000 or more, rising to $228,000 in 2023.

Diversify, Diversify, Diversify

Your $100,000 is a respectable enough sum to be able to apply the Investing 101 mantra of diversification. In other words, you'd be wise to divide up the $100,000, putting a portion of it into vehicles that you already own, like your IRA, and trying some new investment tools with the balance.

Deciding how to allocate this kind of extra capital involves weighing your options carefully, considering your short- and long-term financial goals, and being realistic about your risktolerance.

As always, it is a good idea to seek the advice of a financial professional before investing.

Additional Tips

There are plenty of options for investing your $100,000, including building and managing a portfolio of investments. If you're a savvy investor, you might be able to go at it alone, picking your stocks, bonds, and other securities.

If you are a novice investor, enlisting the services of a licensed financial advisor makes sense. These professionals create investment solutions that help you achieve your financial goals. In addition to making recommendations, they can also manage how and where to invest your money.

Understanding how your money will be taxed is crucial for protecting it and determining where you should put it, as different investments produce different tax situations. If your $100,000 is tax-free, you'll want to consider tax-efficient investments. If the source of your $100,000 is a qualified retirement account, consider rollover or transfer options that defer taxation and offer features that match your financial goals.

How Can I Invest $100k to Make Passive Income?

You could invest your $100,000 in real estate, real estate investment trusts (REITs), stocks, or other securities. Thoroughly research your options and speak with a professional, such as a broker or investment advisor, to help you choose the investment that will generate the income you desire.

How Can I Invest $100k to Make $1 Million?

It is possible to make $1 million from a $100,000 investment but it likely requires long-term investing. Some investments have generated monstrous returns quickly, but they are extremely risky. Financial advisors can help you choose what best suits your needs and aligns with your goals.

What Real Estate Options Are Good to Invest $100k?

Real estate flipping, which involves purchasing, renovating, and later selling a property for profit, is one common real estate investment option. Real estate investors can also rent out the property to generate monthly income while the property's value appreciates.

However, purchasing real estate requires a large amount of cash. Another option is to invest in a real estate investment trust (REIT), which invests in income-producing real estate and requires less capital.

The Bottom Line

You have $100,000 and need to know where to invest it. The recommended first step is to research your options to make an informed decision. Exercise due diligence so that your funds land where you want them to. There are plenty of options available, from real estate to managed portfolios. The journey to find the right investment can be just as rewarding as the money invested.

What Is the Best Way to Invest $100K in Cash? (2024)

FAQs

What Is the Best Way to Invest $100K in Cash? ›

A sensible approach to investing 100k usually involves creating a mixed or diversified portfolio. This means you invest in a combination of high and low-risk assets, and a blend of active and passive strategies, to manage risk and maximise returns.

What is the best investment for $100 K? ›

Best ways to invest $100K in 2024
  • In a nutshell. ...
  • Pay off debt. ...
  • Invest in a high-yield savings account. ...
  • Invest in stocks. ...
  • Invest using a roboadvisor. ...
  • Alternative investments. ...
  • Engage the services of a financial advisor. ...
  • The AP Buyline roundup.
Apr 18, 2024

How to make money with 100K cash? ›

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

How to get the best return on $100,000? ›

A sensible approach to investing 100k usually involves creating a mixed or diversified portfolio. This means you invest in a combination of high and low-risk assets, and a blend of active and passive strategies, to manage risk and maximise returns.

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 to park 100k cash? ›

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

What is the smartest way to invest $100,000? ›

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

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 generate passive income with $100,000? ›

Invest in real estate

Of course, you could buy a home to live in and consider it an investment. 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.

How much money do I need to invest to make $3,000 a month? ›

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

What gives you the highest return on your money? ›

The U.S. stock market is considered to offer the highest investment returns over time. Higher returns, however, come with higher risk. Stock prices typically are more volatile than bond prices.

What is the best investment to get monthly income? ›

Best monthly income plans you should consider
Monthly Income PlanMinimum period of investmentRate of returns
Pradhan Mantri Vaya Vandana Yojana (PMVVY)10 years7.4% p.a.
Systematic Withdrawal Plans (SWPs)5 - 40 years7-13%
Long-Term Government Bonds10 yaers or more6-9%
Mutual Fund Monthly Income PlansELSS Funds : 3 years8-15%
5 more rows
Apr 10, 2024

Where should I keep my money to get the highest rate of return? ›

Long-term certificates of deposit. Overview: Certificates of deposit, or CDs, are issued by banks and generally offer a higher interest rate than savings accounts. And long-term CDs may be better options when you expect rates to fall, allowing you to keep your money earning higher rates for years.

How long does it take to double 100k? ›

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 long does it take for 100k to turn into a million? ›

1: Simply let compounding work its magic. Over the long haul, the stock market has provided average annual total returns somewhere in the neighborhood of 10%. If the future ends up like the past, $100,000 would grow into $1 million in just over 24 years from compounding alone.

How long does it take to turn $10000 into $100000? ›

If you're saving $10,000 a year and have an additional $7,100 you can put into savings, Singh said a high-yield savings account with a 4% interest rate could take you to $100,000 in 10 years.

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.

Where is the safest place to invest 100k? ›

  • Investing 100k In Real Estate. Many seasoned investors will argue that the best investment for 100K is in real estate. ...
  • Individual Stocks. Stocks are a great way to diversify your investment portfolio. ...
  • Investing 100k In ETFs & Mutual Funds. ...
  • Investing 100k In IRAs. ...
  • Investing 100k In Peer-To-Peer Lending.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Laurine Ryan

Last Updated:

Views: 5936

Rating: 4.7 / 5 (57 voted)

Reviews: 88% of readers found this page helpful

Author information

Name: Laurine Ryan

Birthday: 1994-12-23

Address: Suite 751 871 Lissette Throughway, West Kittie, NH 41603

Phone: +2366831109631

Job: Sales Producer

Hobby: Creative writing, Motor sports, Do it yourself, Skateboarding, Coffee roasting, Calligraphy, Stand-up comedy

Introduction: My name is Laurine Ryan, I am a adorable, fair, graceful, spotless, gorgeous, homely, cooperative person who loves writing and wants to share my knowledge and understanding with you.