How to Invest 100K

Daniel Penzing
Written by
Last update:

Looking to invest $100,000? Read on to find out your best options.

Best Ways to Invest $100k

Investing doesn’t have to be hard. There are a few simple steps to follow to make sure that you can get the best results possible when you invest.

Step 1: Pay Off Debt & Create an Emergency Fund

The first step to achieving financial stability is to eliminate the stress that can come from financial debt.

For many people, the first step involves paying off high-interest credit card debt. This debt could be from credit cards, a car loan, mortgage, or student loans.

Once you have a handle on high-interest debt, you may want to consider starting an emergency fund. An emergency fund is cash that is saved for unexpected situations where money is needed. This money can come in handy for hospital bills, home repairs, and other unexpected expenses.

An emergency fund should be saved in an account that has a fair amount of interest. It is a good idea to separate the emergency fund from other savings accounts in case there is a financial emergency.

While it may be tempting to just start with investing without taking care of the financial debt, it can be tempting to give in to the temptation of spending the money on something other than bills. To avoid this, many people find it helpful to get assistance with paying off debt.

Some of the options available are Debt Consolidation, Payday Loans, Debtor Educators, etc.

This service may be able to negotiate debt payments for you. Sometimes they can negotiate with creditors to lower your monthly payments and interest rates.

Step 2: Understand Which Kind of Investor You Are

Perhaps you are a little older than twenty seven and have a money management plan in place already. If that is the case, you can skip to the next step.

The younger you are, the more important it is for you to understand how your wealth will grow, and how best to manage it. You will benefit greatly from knowing which kind of investor you are, no matter your age.

It may sound silly, but knowing what type of investor you are can help you make some of the largest decisions in your life.

Experienced vs. beginner investors

If you are an experienced investor, then money is something that, most likely, you don’t worry about too much. You know all the basics, including dealing with taxes. Unfortunately, taxes are a hidden killer of returns and one of the biggest reasons why people lose money during an investment. Apart from taxes, choosing the right investment is another important factor.

Most times when we choose to invest in the stock market, we have no idea what we are doing. A lot of times investors are looking for a short-term gain and are getting involved with things that they don’t know (a bad sign!). Not only that, but they invest in whatever is popular in the media.

While some of these investments might prove to be successful, they are not safe. Of course, you can turn things around, as long as you follow the tips we listed in this guide.

If you lack experience, then we highly suggest that you read some guides on investment and determine the best way to utilize this investment. When you go to buy stocks, you need to have a clear plan of action and understand why that business is something worth investing in. Otherwise, you might end up getting burned and losing your hard-earned money because of your lack of investment knowledge.

DIY or passive investing

Large lump sums are typically allocated to a passive portfolio that tracks broad market indices. This typically requires minimal management from the DIY investor, but there’s also a second option that many DIY investors use: low-cost exchange-traded funds (ETFs).

Index fund pioneer John Bogle (inventor of the index fund) suggests you invest with a long-term buy-and-hold strategy that focuses on these seven guiding principles.

{1}. Keep the portfolio diversified.
{2}. Keep trading costs to a minimum (through frequent buying and selling, you impede the performance of the portfolio in the long term).
{3}. Keep the ratio of operating expenses to assets low.
{4}. Keep the turnover of securities held in your portfolio low.
{5}. Keep the portfolio tax-efficient.
{6}. Keep your investment policy statement up-to-date.
{7}. Keep it simple (a complex portfolio will only attract unnecessary risk).

Independent investing vs. using an advisor

When you first start to invest, you might be wondering what the best approach is. Investing is a tricky thing because you want to have the best chances to make the most money, but you don’t want to lose it all. The first thing that you’re going to need to do is find an investing style that works for you. Some investors like to do everything themselves, and others might prefer the help of a professional.

There are a few things that you need to consider before purchasing your first investment. You’ve got to make sure that you have money set aside to make it through a potential downturn in the economy and you’ve got to know what you’re investing in. Talk to a professional if you’re trying to invest your retirement funds because they’ll have a better understanding of how current markets work and how to manage your portfolio better.

There are two main categories of investing. The first is independent investing, where you do everything on your own. The second is investment counseling, which involves working with a financial advisor to diversify your portfolio and lower your risk.

Risk tolerance

Much of your chance of retiring early depends on your risk tolerance level. If you are willing to take big risks in the sense of not being afraid to lose a lot of money in the process of investing you can potentially make a lot of money. Similarly if you are not afraid of losing a little bit of money in the markets you can also make a little bit of money.

Investing a 100k will naturally carry a lot of risk if you are investing it for the very first time. If you cannot stand the losses and you start panicking and selling your stock holdings at the wrong time it is possible for you to lose a lot of money.

I suggest the best strategy is to invest your money in small portions or chunks, and spread it around on a lot of different companies. This way you will be more diversified and less prone to a crash from any single company.

You also need to keep in mind how much risk you are willing to take before you start investing your money. For example, it might be a good idea for a 20 year old to invest in Apple or some other tech stock, because if he loses all his money it does not really matter. On the other hand, it might not be a good idea for a 40 year old to invest in this stock because he has a mortgage, kids, and bills.

Step 3: Investing for Retirement Should be Your Top Priority

The most important thing to do when you are investing is to save for your retirement. Most people are unable to save for retirement and pay their bills. The main reason that people can’t save money for retirement is that they spend too much money.

You should definitely avoid spending money on expensive items that you don’t have the money for. Additionally, you should avoid borrowing money to invest in your retirement.

The last thing that you want the most when you are in retirement is debt. You should avoid getting a loan or taking out a credit card to invest. The worst thing that you can do is to stop saving because you have other bills to pay. Many people believe that they need to make up for lost time and take risks.

Step 4: Choose Between Passive Investing and Active Investing

Deciding whether you want to invest in stocks or bonds is your first important decision for your retirement portfolio. Let's take a closer look at each and determine which one is better for retirement investing.

Many investors choose to invest in both stocks and bonds to make their money last over the course of their retirement.

This strategy uses the benefits of both active and passive investing to create an income that’s as safe as possible and as profitable as possible.

Passive Stock Investing With A Diversified Portfolio

There is no golden rule on how to invest 100k. Investing involves plenty of math to solve many issues that may arise. It takes an intelligent investor to understand the details of each investment and decide whether or not to put his money into it.

But on second thought, it is a must for every investor to understand a few important rules of investing to avoid financial loss. This is the reason why we are showing you 5 important tips on how to invest 100K. These tips will help you to invest intelligently. Investing intelligently is quite different than investing randomly. When you invest intelligently, you are more aware of the risks you are about to take. This gives you the ability to analyze each opportunity and solve the issues that arise during the invested period.

Stocks are very much important in the stock market. With a diversified portfolio, you will surely be able to generate plenty of money. The key to making a great return with your stocks is having an understanding of your investment. You need to understand what type of stock you are investing in. This is the only solution to know the best outcome in terms of stocks.

Also, another thing you need to do is to analyze the product thoroughly. Otherwise, you may make a loss and ruin the entire investment. You, yourself, should know your investment and if you can afford to lose your initial investment. So, follow these investments tips to know how to invest 100K.

Active Stock Investing- Trading Individual Stocks

Stocks are an investment in an actual company. You’re buying a small piece of the company. It’s like buying a house in some ways. You’re buying 100% of some place, so it’s yours. The reason that stocks are so popular is that they can be quite profitable.

Invest directly in an individual stock by purchasing it directly on the exchange where it is listed. You have to build a position over time to be able to affect the price.

The transaction that you’re going to make as a stockholder is to write calls on the stock. You are going to write calls on this stock. This is really a device that’s used by money managers to reduce their risk.

If you want to have an individual stock and trade it freely and actively, you have to be willing to take a lot of risk.

Real Estate Investing

Real estate is a great investment. Its inherent versatility can be molded to your specific objectives, whether they’re long term or short term and whether you want to simply invest in a condo, buy and fix up a house, or start a whole property management company. A lot of people think they don’t have a lot of money to invest, so they focus on short term endeavors. However, as we’ll discuss later, you don’t have to be Warren Buffett to invest in real estate and there are many down to earth and realistic ways to invest in the real estate market.

>The bottom line is that anyone can invest in real estate if they have the proper knowledge and tools. To help you shortcut to the parts of the journey that aren’t so fun, like searching for the right property and dealing with contractors, we’ve compiled a list of essential tips that will make real estate investing a lot easier.

Invest in Real Estate

Know your end goal. There are so many different ways to make money with real estate, which is both an exciting and intimidating fact. How do you know which kind of real estate investing is right for you? First, think about why you’re investing in the first place. Your goals are your end-game.

Peer-to-Peer Lending

Peer-to-peer lending, or specifically, personal lending is one of the safest ways of making money from investing. Lending Club, for example, is much safer than a traditional bank that you have an account with.

As the name suggests, peer-to-peer lending gives you the chance to invest in loans made by people you don’t know and therefore gives you a chance to make money from lending to individuals.

Simple and safe.

The downside is the return you might be getting, although it is not as bad as you might think. At the time of writing this, my bank was offering a rate of 1.7% to invest.

If you lend out money, you get returns that are generally higher than this.

That is, assuming you are using Lending Club or another provider.

Note that you will be responsible if the borrower is unable to repay the loan with returns that you might have to wait a few years to recover.

Another risk of investing in peer-to-peer lending is that you are lending to another individual. If the borrower has bad credit and has difficulties repaying the loans despite doing all they can to mobilise funds, it may be hard to recover your investment.

Treading the path successfully is, therefore, all about being responsible and following strict procedures.

For example, you must:

Savings

Many people look forward to unexpected windfalls, but the reality is that they’re few and far between. If you want to maximize the return on your savings, you’ve got to be ready for the hard work that it takes to turn that pile of cash into a set of retirement goals.

Although not everyone takes the same path or reaches the same milestone, there are five basic steps that you should take to successfully invest a significant amount of money.

Step One: Setting Goals

Although it sounds simple, having a specific goal makes all the difference in the world. It doesn’t matter how much money you have, if you don’t have a goal in mind and a strategy to reach it, you will never make it. The first and most important step is to set a specific goal. Creating a long-term goal that’s measurable, concrete, time-bound, and unambiguous helps you monitor progress. That’s why investing even a small sum of money requires a written goal.

Step 5: Take It Slow & Let Your Money Grow

Picking stocks isn’t an overnight kind of thing, so don’t get too upset if you aren’t immediately successful. It takes most people anywhere from a couple of years to a decade to get really good at investing and start seeing a net profit on a regular basis.

To make sure you don’t get discouraged, make sure you have an investment plan that’s built around long-term goals. If you don’t have a specific plan for your money and for how long you’ll need it for, it’s tempting to just go out and spend it … and even harder to resist spending money that comes into your account that you don’t know how you’ll spend.

The general rule of thumb for long-term investing is that you should invest for the long term (at least five years and preferably more like ten or more), rather than trying to make quick, short-term gains. You won’t get as many gains in the short term, but you’re more likely to see consistent gains over a long period of time … and those gains will keep growing into bigger and bigger numbers as the market grows and grows.