Looking to learn the best way to invest 100k safely? Lucky you. If you need some help on how to invest $100,000 and avoid risk, let's get to work.
Because if you are reading this article, then it probably means you are either working actively towards amassing wealth to the tune of a 100k (by investing smartly) or you’re fervently hoping to win the lottery someday.
Either way, it’s smart to learn about how to invest and not spend this huge amount even before it hits your account. The reason is that $100,000 will not guarantee financial security unless the money is invested in ways that allow it to compound.
Want free money?
So it's important to invest your 100k with caution.
13 Ways to Invest 100K Safely
Before that $100,000 burns a hole in your bank account, let's work on investing it.
1. Pay off your debt.
The easiest way to invest your money is by paying off debt. It may sound odd but paying off your debt is the first and biggest investment you can make with $100,000 in your account. The interest on any debt you have grows with time and the sooner you pay it off, the more you will save.
You should know that the secret to success is paying off debt. Sure saving money and spending less is important but paying down debt is a worthy goal. Before you go off and invest $100,000, make sure your debt with the highest interest rates are paid off, in many cases that is going to be credit cards.
“So before you go dip your chunk of money into stocks, you'll likely get a better return on your money if you pay off your high-interest consumer debt.”
According to the latest reports, the average credit card interest rate is 17.98% for new offers and 14.58% for existing accounts. While the average stock market return for 10 years is 9.2%, according to Goldman Sachs data for the past 140 years.
Are you picking up what I'm putting down? Or is your debt all paid off? Let's move on.
2. Portfolio management
If you are working with $100,000 in liquid cash — you are considered a high-net-worth client who would benefit from a personal touch. With that amount of capital, you can start investing with Personal Capital.
Personal Capital has two options. The first is a free planning tool (similar to Savology) that collects information from your financial accounts and helps you make improvements to increase returns. That's a great option for anyone, no matter where you bank or invest. You can learn more about the app in this Personal Capital review.
The second option is using their asset management service that has a minimum account size of $100,000 to start. Once you join, you can get help setting goals for your money — primarily for your retirement. If you invest your money here, the app will invest your money based on the Modern Portfolio Theory (MPT) which ensures true diversification and they go a step beyond tax-loss harvesting. They will optimize your tax burden and your portfolio will be tax-efficient.
According to the company's own tests, they outperformed the S&P 500 by more than 1.5% annually with less volatility. Overall, it is a safe bet to open an Account at Personal Capital to help you grow your $100,000 safely.
3. Real estate.
Another one of the easiest ways to grow your money is to invest in real estate. Robert Kiyosaki, author of ‘Rich Dad Poor Dad’ learned to quickly grow his money by making down payments for rental properties and gaining profit by selling the property later at a higher price.
Another way to invest in real estate is by buying a property and renting it out. With the ever-increasing inflation rate, rents will go up while your mortgage payments stay the same. This increases your cash flow and your rental yield as an investor.
You could also invest your 100K in raw lands. Investing in lands is a profitable venture because of one key reason: land is scarce and its demand will always exceed its supply.
Lastly, you can invest in real estate through apps like Fundrise. Fundrise is the first investment platform to create a simple, low-cost way for anyone to access real estate's historically consistent, exceptional returns. Your $100,000 can go a long way through Fundrise as they consistently make 8.7% – 12.4% in historical returns ($12,400 in profit for your $100K).
You can learn more about Fundrise here.
4. Index funds.
Investing in index funds is like investing in the stock market without taking on too much risk. The risk of investing in index funds is very minimal yet the benefits are massive. The trick is to diversify your stocks by buying the largest companies through your index fund.
According to Bankrate, the best index funds to own this year are as follows:
- Fidelity ZERO Large Cap Index (FNILX)
- Vanguard S&P 500 ETF (VOO)
- SPDR S&P 500 ETF Trust (SPY)
- iShares Core S&P 500 ETF (IVV)
- Schwab S&P 500 Index Fund (SWPPX)
These index funds track the S&P 500 Index Fund and offer you a way to invest your $100,000 in stocks of the S&P 500 at a low cost, while still enjoying diversification and lower risk.
5. Start a business.
Invest your 100k in that promising business venture you put on the back burner for lack of money. If it is a high-risk business be sure to conduct research into your prospect, seek expert advice and develop a solid business plan before starting out.
Of course, the amount of money required to start your business depends on your business model and industry. However, a 2009 study conducted by the Ewing Marion Kauffman Foundation puts the average cost of starting a business is around $30,000, leaving you $70,000 for other investments.
Alternatively, starting a business with no money might initially seem like a far-fetched idea, but it's not impossible with this smart startup guide.
6. High-yield savings account.
This is another way to invest your 100k. It’s much more profitable than the normal savings account. Your money can sit in there and accrue some interest until you are ready to invest in bigger and more profitable ventures.
Most experts recommend CIT Bank's ‘Savings Builder account‘, where you can earn a very impressive .50% annual percentage yield. You qualify for that rate if you have a balance of at least $25,000 or you deposit at least $100 each month, building your savings. Here are some of the best high-yield savings accounts in 2021:
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7. Invest using a roboadvisor.
Last month, I had $100,000 to invest and I chose to invest some of it using roboadvisors. Who says you have stick all of your money in just one place? You should diversify in order to not put all your eggs in one basket.
So when choosing the best roboadvisor I looked for ones that had tax loss harvesting, low fees, and overall the best performance. The best roboadvisors I've found were:
- Betterment: Best overall
- Wealthfront: Best overall
- Blooom: Best for 401(k) management
- Acorns: Best for fees
I ended up using Acorns and Wealthfront and they've been going great so far and the platforms are very user-friendly.
Pro-tip: If you sign up for Acorns with an .edu account, you can get started investing with no fees for the life of your account.
You can see my results in my Acorns review and Wealthfront review. I opted to dollar-cost average (DCA) into the market using Acorns instead of making one big lump sum investment (would be unsettling if the market tanked).
Overall, roboadvisors are a smart way to invest any amount of money without much risk. In fact, since 1928, the S&P 500 (a collection of the 500 largest stocks in the U.S.) has averaged roughly 7% in annual returns, even after adjusting for inflation.
8. Invest in yourself.
Investing in yourself is one of the best investments you could ever make and it can take many forms: pursuing a creative project, nurturing a talent taking a course or learning a new skill.
This is a low-yielding investment which could pay as low as 3% on your capital. The advantage is that your capital is kept safe and your returns are guaranteed.
10. Donate to charity.
One of the best ways to invest a 100K is to make an impact in the lives of the less fortunate through charitable giving. Investors who are into impact investing also get tax deductions.
11. Invest in an emergency fund.
One wise thing to do once you have your 100k in hand is to set up an emergency fund or fund it if you already have one. It will shield you from life’s unpleasant surprises.
As you may have guessed, there are so many ways to invest your $100,000 with confidence. You might choose one particular method, or you might choose to diversify. Just make sure to invest somehow so you can offset inflation and your wallet will thank you for it!
12. Short-term government bonds.
These are bonds with maturities of less than five years. They don’t yield much but they have lower risk and preserve capital.
13. Peer to peer lending.
This is a way to make a direct impact on the lives of people. This is how it works: you sign up on a platform like LendingClub or Prosper and start giving loans to peers registered on the platform. You can buy into a thousand different loans to spread out risks and earn a profit in the form of interest.
For you: What ways have you found to invest or which best way to invest 100k safely did you like best?