July 24, 2018

How to Invest $100k

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Are you investing large sums of money in your savings account or even a standard CD? If so, you could be throwing money right out the window. If you have a lump sum, such as $100K sitting around, it's time to learn how to invest it.

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Don't worry, even if you aren't an experienced investor, there are ways to invest it without taking big risks.

Before you can start investing your $100K, you need a plan. For simplicity's sake, we'll assume you already have an emergency fund established and fully funded. This means having between 3 and 6 months' of your monthly expenses put aside. If you don't have a fully funded emergency fund, start there.

Once you have the emergency fund established, ask yourself if you have any debt you need to eliminate. Don't leave that debt hanging over your head. Chances are the interest charges you pay on those debts far outweigh the return on investment you'd make by investing the money rather than getting rid of debt.

Finally, you need to figure out your threshold for risk. In other words, what type of investor are you? Do you need someone holding your hand through the process or do you want to take the reins yourself? If you want to take control, do you want the process automated or will you oversee the accounts on a daily basis?

Knowing these answers, you can move forward with one of the following methods to invest your $100K.

Where to Invest $100K

Your threshold for risk will help determine where you should invest your $100K. Are you trying to keep it safe? You may want to consider CDs, treasury bonds, money market funds, or ETFs. While you won't "get rich quick" with any of these investments, they generally carry a lower risk of loss than other investment options.

If you have an average risk tolerance, you can branch out from the standard high-yield savings, CDs, and money market accounts. A couple of popular ways to invest your $100K with medium risk include blue chip stocks and peer-to-peer lending.

If you are willing to take a higher risk (a better option for young investors), you can try riskier investments, such as real estate investments, penny stocks, options, futures, and crowdfunding.

Best Way to Safely Invest $100K

If you would rather not risk your $100K or you need it in an account you can liquidate quickly, an online bank may be a good option. You may be able to snag higher interest rates by investing in online banks rather than your local bank thanks to the lack of overhead online banks have. A few popular options include:

  • Barclays Bank: Offering CDs with terms of 1 or 3 years, Barclays Bank sometimes offers higher interest rates than your local bank offers. Barclays doesn't require a minimum deposit and they don't charge monthly fees.

  • Synchrony Bank: Offering CDs and money market accounts, Synchrony offers higher interest rates for "large deposits." Synchrony offers taxable CDs and money market accounts, as well as IRA CDs and money market accounts.

  • Ally Bank: Offering high-yield CDs, money market accounts, and IRA online savings accounts, Ally is an online only bank. This allows them to offer slightly higher interest rates than your traditional bank may offer.

Watch Your CD Maturity Dates
If you choose to invest some or all of your money in CDs, make sure you pay close attention to the maturity date. You agree to tie up your money for a specific period with this savings vehicle. While you may be able to end the CD prematurely, it could cost you as much as 90 days of interest as a penalty.

Best Way to Invest in Stocks with $100K

If you don't mind the riskiness of investing in individual stocks rather than ETFs or index funds, the stock market may be calling your name. In order to invest in stocks, you'll need a brokerage account. We recommend trying discount brokers (online brokers) to minimize your fees and maximize your returns. A few good places to start include:

  • Firstrade: At just $2.95 per trade, Firstrade makes it affordable to invest in stocks. With both an online dashboard and an app at your disposal, you can make trades anywhere you have Wi-Fi. As an added benefit, if you invest your entire $100K (or at least $50K) with FIrstrade, you get access to a dedicated financial advisor.

  • Lightspeed: If you are a day trader or aspire to be one, the Lightspeed platform may be just what you need. Lightspeed's commissions are on a tier basis; the more you trade, the lower your commission fees. Lightspeed specializes in low latency trades, which means fast trades, which is just what the day trader needs.

  • TD Ameritrade: If you prefer a robust platform, in-depth charts, and many investment options, TD Ameritrade may be just what you want. While their fees are higher, they offer 24/7 customer service and many opportunities for research to help with your investment decisions.

Difference Between Discount Brokers and Full-Service Brokers
Discount brokers charge less, as you probably assumed. But you handle most of the trades and transactions in your account. In other words, you need to be a DIY investor to use a discount broker. A full-service broker does everything or mostly everything for you. Of course, they only conduct transactions with your approval, but all that lies on your shoulders is the decision making - they handle the rest.

Best Way to Invest $100K for Income

If you prefer to invest your $100K to make income rather than mediocre interest, you'll have to choose more aggressive investment options. Real estate is a popular way to invest for income, especially if you purchase rental properties and keep them properly maintained and rented.

Whether you purchase a home worth $100K and reap all of the profits yourself or you make a decent down payment on a multi-unit property and manage the mortgage payments with the rental income, you may gain income. Real estate can appreciate in addition to any income you make from renting the property out, giving you the possibility of decent cash flow. If push came to shove, you could sell the property and accept the equity as your profits.

If managing real estate isn't your thing, consider crowdfunding in the real estate industry. A few popular options include:

  • Rich Uncles: You can invest in commercial real estate without investing all of your money in one investment. Rich Uncles is a crowdfunding platform for commercial real estate. This crowdfunding platform gives investors access to regular income from rental payments and gives companies the money they need to buy the building/land that they need.

  • Fundrise: Along with many other investors, you can invest with Fundrise and help them purchase and renovate commercial properties. After Fundrise sells the property, the profits are divvied up between the investors according to the amount they invested. Fundrise tries to provide quarterly dividend payments until the property is sold and your investment paid off.

  • Realty Mogul: At Realty Mogul, investors can invest in equity or debt investments. Debt investments pay interest regularly (in many cases). Equity investments must wait until maturity of the investment to receive payment.

How to Invest $100K to Make $1 Million

If you tend to dream a lot bigger than your current $100K, you aren't alone. Luckily, there are ways to turn that $100K into $1 million - you just have to go about it the slow and steady way. One of the best ways is to watch your fees. If you aren't careful, brokerages can eat up your profits with their fees. Even if you pay a 1% fee, you might think it's minimal. If you look at it over the next 30 years, though, the compounded interest you can lose on that "measly" 1% fee really adds up and takes away your chances of that $1 million.

If you have your eye set on that $1 million target, stick to robo-advisors or discount brokers, both of which tend to have lower fees than your traditional broker. You should also keep your investments in the more traditional options, such as blue chip stocks, ETFs, and treasury bonds.

Most importantly, you need a plan and you have to stick to it. You'll have to remove the emotion from investing and stick to your goal. In other words, you'll need to ride it out. If you diversify your portfolio enough, one downturn may be offset by another successful investment, leading you to that $1 million target in a slow and steady fashion.

Other Ways to Invest $100K

If you want to break out of the traditional mold, there are a few other ways you can put your $100K to good use:

  • Robo-advisors: Are you not a DIY investor? Would you prefer that someone took over for you but without charging an arm and a leg? Robo-advisors, such as Wealthfront and Betterment offer automated trading services based on your risk level. You answer a few questions and fund your account and they handle the rest.

  • Peer-to-peer lending: If funding commercial real estate transactions doesn't peak your interest, you may like peer-to-peer lending. With this option, you invest in loans for individuals. Prosper and Lending Club are two of the more popular choices.

  • Options: If you're comfortable with trading stocks, you can complicate things by trading options. Buying and selling puts or calls can leave you with a higher return on your investment than stocks. But be careful - the loss can be equally as large.

  • Cash-value life insurance: Term life insurance is only good for the chosen term. Whole life or universal life insurance provides you with the same term insurance along with a cash value investment that you can use as you age.

  • Start a business: If you prefer to keep your money out of the market and you have a business idea, the $100K can get you started. If you don't have the wherewithal to handle your own company, you can also invest as a silent partner in someone else's business/idea.

  • Invest in yourself: Don't overlook the need to invest in yourself. Whether you go back to college, pay for additional training, or take an unpaid internship while living off the $100,000, there's something to be said about bettering yourself.

Bottom Line

Every investor will have a different way that investing $100K makes sense. Before you invest, do some soul searching. What type of investor are you? What type of risk can you take? Can you stand to lose it all or do you need to be a bit more conservative? Once you have these answers, you can make investment choices that are right for you.

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

More from CreditDonkey:

How to Invest Money

How to Invest Money


How to Save $100,000


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