How to invest $100K

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Having $100,000 in your account opens up a lot of investment options. How to invest your funds largely depends on your age, risk tolerance and goals. That’s why I provide several options along with their nuances.

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4 best ways to invest $100K right now

Based on past performance and the risk adjustments you can make, the best ways to invest your funds include the stock market, real estate and maxing out your retirement account.

1. Invest in stocks or exchange-traded funds (ETFs)

Why it’s a good option now: Investing in the stock market has proven to be profitable in the long run. The S&P 500 index alone has had an average 10% annual return in the past 90 years. With compounding interest, you could earn around $1 million with a $50,000 one-time investment over 30 years.
Investing in an index means buying an ETF that tracks the index. This is often reserved for long-term investments with minimal risk.
However, with $100,000, you can take a risk with a small percentage of your account. For this, you need to find leveraged ETFs where the fund moves two or three times more than the index or other basket of assets.
For example, 2x leveraged S&P 500 ETF would return 20% annually in the past instead of 10%. But leveraged ETFs are extremely risky. If the index declines, you’ll lose two to three times as much as the index decline.
Unlike ETFs, investing in individual companies requires due diligence. If you find the next Tesla or Apple, the sky’s the limit. Of course, you don’t have to hit the jackpot to earn money in the stock market.
Invest in dividend stocks, which can pay up to 4% annually. This beats investing your money in certificates of deposit (CDs), which often earn 1% or less annually.
What to watch out for: Markets can fluctuate often. If you need to withdraw your funds during a financial crisis, you would likely suffer losses or have to settle for a low return on investment.

2. Let a robo-advisor invest for you

Why it’s a good option now: Automated trading, also known as a robo-advisor, removes human emotion and decision-making. You don’t even have to do the research. You simply set up some parameters, like your risk tolerance, and the robo-advisor will invest in mutual funds or ETFs that match your criteria.
What to watch out for: Robo-advisor investment options are often limited to mutual funds and ETFs. They may also come with fees. For example, 0.30% annually of your invested funds or a lump sum each year. Luckily, some robo-advisors don’t charge maintenance fees, such as SoFi’s automated investing feature.

Our pick for automated investing: M1 Finance

• Customizable investment strategies
• Automated portfolio management
• Commission-free stock & ETF trades and zero management fees (other fees may apply)

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3. Consider real estate

Why it’s a good option now: Investing in real estate through real estate investment trusts (REITs) or crowdfunding platforms is a cheaper way to get exposure to this type of investment than buying a property directly. Also, spending your entire $100,000 on a property is a high-risk investment with no diversification. REITs solve this problem.
Invest as much as you want in a REIT, but typically, the minimum is $5,000, which comes out at 5% of your $100,000. REITs can be publicly traded on a stock exchange or privately traded through an investor platform. Some REITs have paying tenants, meaning you can earn a passive income by owning a piece of the property.
Another cool feature of REITs is that you don’t have to screen the properties yourself. This is often done by the investment company that creates the trusts. Overall, this is a solid investment option for those who intend to keep their funds longer than five years and earn passive income with low risk.
What to watch out for: Private REITs have some limitations, such as locking your funds for a specific time frame — often five years — or making it hard to quickly sell your REITs due to low liquidity.

4. Prepare for your retirement with an IRA

Why it’s a good option now: No matter your age, you should always contribute to your retirement account until the time comes to reap the benefits. And if you can max out your account — even better. Assuming you already maxed out your 401(k), you can now max out your IRA account.
The maximum contribution for an IRA in 2022 is $6,000 – or $7,000 if you’re 50 or older. An IRA offers a higher variety of investment options than a 401(k). Plus, you can max it out whenever you want.
What’s more, you can invest your money in stocks and ETFs, thus combining your investments with the ones in your individual brokerage account.
What to watch out for: In most cases, there’s a penalty if you withdraw your money before you’re 59½.

How $100,000 can grow

With $100,000 you can build a diverse portfolio or add to an existing one you want to emphasize. Your money can grow dramatically long term and quickly even in shorter periods. Here’s a look at how it might grow in three common investment classes.

$100,000 saved or invested	Savings account	Bonds	Stocks
1 year	$101,000	$106,000	$110,000
5 years	$105,101	$133,823	$161,051
10 years	$110,462	$179,085	$259,374
15 years	$116,097	$239,656	$417,725
20 years	$122,019	$320,714	$672,750
25 years	$128,243	$429,187	$1,083,471
30 years	$134,785	$574,349	$1,744,940

For this table we assumed:

• A 1% annual return on a savings account, CD or money market fund (which is optimistic these days).
• An average 6% return for bonds or bond funds
• 10% on stocks, the market’s long-term annual return.

Bond returns vary widely based on bond types, and the stock market has down years while individual stocks can go to zero. So consider these benchmarks only and consider risk as well as return.

Before you invest

With $100,000, you have a lot of investment options. But before you dive in, you have to figure some things out and prepare.

• Consider your goals. If you’re looking for steady income until retirement, dividend and blue-chip stocks and ETFs are the ones to consider. If you want to take some risks for a higher reward, look at leveraged ETFs, meme stocks and even penny stocks. Note, these are considered high-risk investments, so make sure you don’t invest more money than you’re willing to lose.
• Diversify your holdings. Even if you invest your entire $100,000 in the stock market, make sure you spread out your funds across a variety of sectors through stocks and ETFs.

Alternative investments

The aforementioned investment options can be highly profitable. But if you’re willing to take more risk for potentially a higher return, or to prepare for your kids’ education, consider investing in:

• Cryptocurrencies. Being a relatively new investment option, it comes with high risk and high reward. To put this into perspective — if you invested $5,000 in Bitcoin in early 2016, your investment would have been worth around $600,000 at the peak in 2021.
• College savings plans. Consider investing in a 529 college savings plan to be ready when your kids go to college. This option lets you withdraw your money tax-free for eligible college expenses, which can be a huge benefit.
• TIPS. US Treasury inflation-protected securities (TIPS) are government bonds designed to protect your money against inflation. If inflation is something you worry about, consider investing some of your funds in TIPS directly or through ETFs.

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