A cool $100,000 hits your checking account. Good day.
Before you go bananas and buy a Tesla with automatic lane-changing capabilities, please take a deep breath – for my sake. The last thing I want to see you do is blow all your money on sports cars or bad investments.
Ways to invest $100,000 with confidence:
That article is more about what to do with a large sum of money (like paying off debt and building an emergency fund) – this one will help you learn about a number of investments, investment methods, and investment tools that will lower your risk. So grab your $100K and invest with confidence!
Consider yourself handy? Do-it-yourself investing might be the best option for you, and you’ll probably be pleasantly surprised on how easy it is!
1. Peer-to-Peer Lending
While both platforms did admirably Lending Club has become my go to sources for investing in P2P loans. You can even invest as little as $25 in a single loan so if you want to get your feet wet, Lending Club recommends starting out with an Investment of $2,500 so you can buy into 100 different loans and really spread out any risk. With $100k to spread around I would start a beginner of with an investment of $5k and the ramp it up from there. You can use P2P lending to diversify your portfolio away from stocks and other investments.
If you’re looking to invest directly into the lives of others, investing with LendingClub is a great way to do so.
Do you consider yourself high-tech? Do you drool over simplicity? Do you like low fees? Betterment might be your answer.
Betterment grew from zero to $500 million in under four years, and for good reason. Their software is so easy to use, it’s almost hard not to try it out. About 50% of their staff focus on the technology behind Betterment, and that’s clearly evident on their website. I started out by only investing $1,000 to see how the platform works and get a feel for it, still a little skeptical, invest $100 and set your mind at ease. After a few questions it was completely hands off and made 6.2% with fairly conservative settings.
One of the coolest things about Betterment is that you can quickly adjust how much money you have invested in ETFs versus a basket of Treasury bonds. Want to lower your volatility? Invest more in bonds.
If you are wondering how Betterment works check out our review which shows how it is a fantastic option for those looking for a quick way to invest.
3. Motif – Invest with an Expert (but not at expert prices)
Motif is changing the way the people look at stock investing. Instead of using a financial advisor to painstakingly research all of the best options to diversify your portfolio, Motif allows you to have a more hands-on approach without being an investing expert.
What’s so different about Motif? With Motif, you don’t pick individual stocks to invest in, you pick motifs (hence where they got the name). A motif is made up of 30 different stocks that all circulate around one idea, like industrial solutions or medical applications. Not only will this make it easy to invest in, but it also automatically gives your portfolio some diversification.
There are 150 motifs that are built from investment professionals that you can choose from. But if none of the 150 suits your fancy, you can pick from one of the 180,000 motifs that were designed by other Motif users. If none of those 180,000 motifs are what you’re looking for, don’t worry, you can build your own.
Another nice advantage to Motif is the lower trading commission fees for trading those bundles. Instead of paying a ridiculous fee for every stock traded, you’ll pay $9.95 for all 30 stocks, which translates to $0.33 per stock, you aren’t going to beat that anywhere. You can learn the details of their system in our Motif Investing review.
4. Buy Like Buffett
Warren Buffett has some super simple advice you can implement yourself:
“Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”Wow. This is so simple, it’s surprising.
Julie Rains from Investing to Thrive offers a similar suggestion on how she would invest $100k:
If I had an extra $100,000 to invest, I would invest most of the money in the market, some of the money in myself, and keep a cash reserve. Here’s my breakdown and reasoning:
- $50,000 in index funds, invested on my own or by purchasing a managed portfolio or engaging services of an automated adviser at a firm such as Vanguard, Schwab, TradeKing, Betterment, or TD Ameritrade;
- $20,000 invested in some sort of cash account, primarily so I could have access to funds to purchase stocks on a downturn without having to sell current holdings;
- $20,000 in individual stock selections just because I think investing in companies is interesting and fun, and can be profitable;
- $10,000 invested in myself or a personal project; for example, I might spend money to improve my business, such as a website redesign, or make some home or car repairs that might allow me to generate income via Airbnb or Uber.
Fortunately, I don’t have mortgage debt or other debt to pay off, so I’d focus on growing my money mainly through outside investments. Interested in opening an E*Trade account? Learn more in our review of E*Trade.
The Boring Stuff
There are some investments that are just, well, boring. By that, I mean that they don’t really produce great returns – but at least they’re better than burying a suitcase of cash in the backyard. Take a look . . . .
5. High-Yield Savings Accounts or CD’s
The best thing about high-yield savings accounts are their guaranteed payouts. But don’t let the term “high-yield” fool you – these accounts don’t provide great returns on your money.
Really, the reason they are called “high-yield” savings accounts is because they result in higher returns than most savings accounts.
I have personally been using a Capital One 360 savings account for years to make sure I get better returns than the average bricks and mortar bank account.
If you have $100,000 and aren’t sure where to put your money yet, a high-yield savings account is great for short-term investing.
6. Money Market Accounts
But let me warn you: they’re boring. I mean, really boring.
Don’t expect huge returns. Many times, you can get more out of a money market account than a CD (certificate of deposit), but I promise you that money isn’t going to pour out of your faucet – even if you invest your whole $100,000.
Investing With a Guarantee – No Worries
Did you know you can invest and get a guaranteed return? Amazing, right? Here are a few investments that will absolutely pay:
Annuities, like every other investment, are fantastic in some situations and horrible in others.
But if you’re wanting guaranteed returns, fixed annuities are a beautiful thing. You can have confidence that part – or all – of your $100,000 will be safe in a fixed annuity. But like money market accounts, they’re pretty boring when it comes to the returns.
One year I had a client who really didn’t want anything to do with the stock market volatility, and because CDs were paying pretty much nothing, I found him a five-year fixed annuity paying 3%. That’s barely making inflation, folks. But hey, at least it was a guaranteed return.
Another form of annuities that offer guarantees are fixed index annuities (FIA’s and also referred to as equity indexed annuities). These annuities are similar to fixed annuities in they offer principal protection. How they are distinctively different is how you make money. FIA’s use a combination of tracking various market indexes and interest caps to calculate your overall return. They can get very confusing and trying to understand this is why I don’t like them.
What I do like about them is the “pension like” benefit that can pay and income stream for the rest of you and your spouse’s life. This contractual guarantee that the insurance company offers can reduce the stress that comes with investing in the stock market.
Annuities are also helpful when you can’t get life insurance or you want some long-term care benefits but don’t have the money to pay for it out of pocket.
Remember that annuities have pros and cons. Think through your options before signing up!
8. Cash-Value Life Insurance
If you talk to an insurance agent about investing, there’s a 99.9% chance they’ll ask you if you’d like to purchase some sort of cash-value life insurance. This could be a whole life policy, universal life policy, or even an indexed universal life policy.
You’ll hear them say things like:
- “You’ll have the investment your entire life!”
- “You’ll have some life insurance to protect you and your heirs in the case something happens to you!”
Hey, they might even offer some principal protection!
And while this looks like a good deal because of the nice dividends, the cost of insurance will eat away at it from the beginning.
It’s kind of like paying off a mortgage – you pay a lot toward interest at first and very little toward the principal. The same is true of whole life or some universal policies.
In most instances, I’m not a big fan of cash-value life insurance as a pure investment play. It definitely could make sense for some estate-planning purposes but that only applies to a minority of the population.
However, there is one case I can think of where a universal life policy makes sense. Say you put in $100,000 and your principal is protected. The insurance company may pay a 3% dividend which is pretty attractive compared to the interest rates that are currently available at your local bank or even in CDs online – but don’t forget about that insurance cost! After being paid the 3% dividend you have to subtract the cost of insurance which ends up being approximately 1.2% netting you a total of 1.8%.
While that might not sound very attractive, it’s probably better than what you could get from a CD.
The kicker is that you’ll never make less than 1.8% – but there is an index tied to the policy much like an equity index annuity where if the underlying index goes up you could make more.
That’s right, more!
Let’s say the current cap on this policy is 13%. If the market is up 13% you could make that, but past that you couldn’t make any more. If the market then lost 12%, you’d be back to your 1.8%.
This type of investment might make sense for you if you have an extra amount of money sitting in a bank CD. But keep in mind that this is life insurance, so you do have to go through an underwriting process. And you aren’t doing this for the death benefit, so you won’t be looking at any million dollar life insurance policies for passing on an extra inheritance.
(note: These type policies do exist but can change quickly with the interest rates.)
9. Super-Size Your Charitable Gifts
For individuals who are no longer in accumulation mode, but planning for how to maximize their estate for their children and/or organizations they support, consider the “investment” of a life insurance policy.
Let’s say a 69 year old widowed woman has named her church in her will, to receive a $100,000 charitable bequest.
As this money is earmarked for the church, and to ensure the funds are not at risk, she has set $100,000 aside investing it in CD’s paying 2%.
But what if she purchased a single-premium life insurance policy with that money instead, and named the church as beneficiary?
Here’s how it pencils out…
As a non-smoker in good health, she could purchase a $300,000 policy, paid up for life, for a single premium of $99,879.
The Social Security actuarial tables estimate she’ll live to 86 years old.
During her 17 year life expectancy, her $100,000 investment in CD’s will grow to approximately $140,000. By purchasing life insurance instead, she’ll create an additional $160,000 gift for her church.
In fact, she would have to earn 6.7% annually (after-tax) for the rest of her expected life to save $300,000 in an alternate investment, in order to match the internal ROI of the life insurance policy.
Donating gifts of life insurance to charity has many other benefits:
- Life insurance proceeds are paid to the charity without probate delays
- The charity receives substantially more money, which can help them to fund larger projects
- Publicity from large gifts may help attract other donors
- Life insurance gifts are private; a bequest in a will is public record
- The estate receives a tax deduction for the donation, reducing the amount of the estate subject to federal estate tax.
It’s an absolute slam dunk!
Stock Market Alternatives
If you’re scared out of your mind when it comes to investing in the stock market, there are alternatives.
10. Real Estate
One great alternative is real estate. I recently sat down with a real estate investor who shared some of his tips for getting started.
I have another buddy, Brandon Turner, who is a real estate investor and VP of Growth at BiggerPockets.com. Here’s what he says you can do with $100,000 in real estate:
“$100,000 could do a few things for you in the real estate realm, depending on your risk level. You could buy a nice house in the suburbs for around $100,000 and just collect the cash flow on that home without needing to pay a bank. Or, if you wanted to use some of leverage on your money (thus increasing both risk and potential profit,) you could put that $100,000 and buy more than $100,000 worth of real estate. For example, you could buy a $500,000 apartment complex and put your $100,000 as a 20% down payment. Or you could buy five $100,000 houses and put a 20% down payment on each. Personally, I’d go for the apartment complex, but that’s my bread and butter. This is great thing about real estate investing – there are so many great options that fit different personality types, locations, and income levels!”
Great advice Brandon! As you can see, there are so many things you can do with real estate – I highly recommend you consider his advice.
11. Your Education
Another great alternative is investing in you. You heard me right: you!
Whether it’s learning a new skill, attending college, or being an intern, investing in yourself can pay huge dividends. Glen Craig from FreeFromBroke.com has a great article showing how your education can hedge against inflation. So, consider taking some of that $100K and investing in yourself – you’ll be glad you did.
Sometimes, you need a little help. That’s okay! In fact, it might even help you get better returns. If you don’t have the time or the will to study the stock market, leave it to the experts . . . .
12. Investment Advisors
Investment advisors, like yours truly, can help you navigate the complexities of investing so that you are more likely to get a great return and keep more of it, too.
Listen, if you’re close to retirement, you have some big decisions ahead still. Timing plays a huge role in retirement. An investment advisor can help you with that.
There are many types of investment advisors. I’m a CERTIFIED FINANCIAL PLANNER™ practitioner, which means I have a fiduciary responsibility to do what’s in your best interest – and you know I would do so anyway!
AssetLock™ is a tool designed to help you and your investment advisor determine if you need to sell funds due to a drop in market performance.
Here’s how AssetLock describes it:
AssetLock™ is proprietary software that monitors portfolios and has a pre-determined downside that can adjust on the days the stock market is trading, so you’re always aware of how your portfolio stands.
This isn’t a stop-loss strategy.
Stop-loss strategies are where buying and selling targets are predetermined and automatically happen. Instead, AssetLock™ can alert you to various adverse market conditions, triggering your advisor to contact you to have a conversation about your portfolio.
AssetLock™ uses what they call an AssetLock™ Value which is a predet