So you’ve got $100,000, and you’re feeling excited about turning that money into more money. You want to know the best way to invest $100k, but you’re not sure what it is. It’s a lot of money, and you have a lot of choices about where to put it!
There are a lot of ways for how to invest $100k, so let’s explore a few options.
Real Estate Investing
You can manage it on your own and rent out the rooms and homes to generate income. Or you can have a service manage everything for you. People will always need a place to live, and real estate can make for a great buy-and-hold investment strategy.
A few things to consider: Real estate investing has a much higher entry point than other types of investing. When it comes to residential real estate properties, the general advice is to put down 20% of the total price. If you don’t do so, you’ll have to pay PMI (private mortgage insurance). That’s an additional fee each month that gets rolled into your mortgage payment.
Down payments can range dramatically, depending on where you buy your house. However, it’s a safe bet that it will be a few thousand dollars at the very least. The median down payment in the second quarter of 2018 was $19,900, according to a study by ATTOM Data Solutions.
Real estate can be a lot of work to manage, so keep that in mind. If something breaks and you’re the landlord, you need to fix it. You’ll also have to collect rent, find tenants, create leases and pay taxes on your property. Or as mentioned, you can pay a service to do all this for you.
You can also invest that $100,000 in real estate investment trusts, or REITs. With a REIT you invest in a company that invests in real estate, effectively making you a property owner without actually buying the property.
Passive Stock Investing
For those looking for a more hands-off way to invest, consider passive stock market investing. $100,000 put into a mutual fund or index fund is a great way to jumpstart any investment portfolio! You can do this through any brokerage like Fidelity or Vanguard or through a robo advisor like Betterment or Ellevest.
$100,000 could be put all into one account, such as a taxable brokerage account. Or you can divide it up between retirement accounts and a taxable account to take advantage of some of the tax perks that retirement accounts offer.
For example, in 2019 the 401(k) contribution limit is $19,000, and for 2020 it’s $19,500. You could put the limit into your 401(k). From there you could also max out a Roth or traditional IRA with $6,000.
Now you have $75,000 you can put into a taxable account. Look for low-cost index or mutual funds at a brokerage that you like. You can read about some robo advisors here and some online stock brokers here.
Putting your $100,000 into passive investment accounts is a great way to let your money grow over time. That $100,000 could turn into $500,000 over a decade, without your paying much attention.
Active Stock Investing
As is obvious from the name, active stock investing is much more hands-on than passive investing. This type of investing is best for people who are interested in following the stock market trends and reports and buying and selling within their portfolios to reflect market changes they think will bring them more money.
With active investing, there’s the chance that you can turn that $100,000 into much more money much faster than you can with passive investing. It will also take more work. And of course, there’s never a guarantee in the stock market!
You can put your money into individual stocks that you’ve researched and companies that you understand and believe in. Track performances to make sure that you’re hitting your goal, and buy and sell as needed.
Investing in Yourself
Some say there’s no better investment than yourself, and it’s hard to argue with that. Let’s look at a few examples of how you can invest in yourself.
Your $100,000 could mean a graduate degree debt-free, which you parlay into a raise at work. Say that you know getting an MBA means you could earn $25,000 more per year. Using your $100,000 to pay for some or all of your degree means you can increase your lifetime earnings by at least $25,000 a year for the rest of your life.
That $25,000 is also likely to rise as you gain more experience, meaning your initial investment of $100,000 could surpass $400,000 in additional earnings within 15 years.
Let’s consider that you want to work for yourself. You can split your $100,000 in half. Put half into starting your business and use the remainder to pay your bills while building your brand. This means all the profits you make can be reinvested in your business, growing it faster than if you were pulling money out. This $100,000 could be the investment that allows you to create a stable business that supports you and your family and has no income limit.
Finally, you could make the investment in debt payoff and building cash savings. Using this money to eliminate your debt means that you free up those former debt payments in your budget every month from here on out. If you were paying $1,500 in debt, now that $1,500 can go toward investments each month. That creates money for you over the long term. The upfront investment to stabilize your finances allows them to grow more freely over time.
The best way to invest $100k depends on your financial situation, but there’s no lack of options! Making the right choice with your $100,000 is up to you. The great thing is that you can use any of these options in combination with others. You can put $25,000 of your money down on the house and then invest $75,000 in passive index funds. You can pay off $50,000 in debt and use the remainder to buy two rental properties.
Sit down and do your research on each option as it relates to your life. Consider what the real estate market is like in your town or if you have a retirement account option available to you, or use a robo advisor such as Betterment to handle your money hassle-free. Understanding all your options will highlight the best way to invest $100k for you.
Written by Kara Perez.
View the original article at here.