Top 7 Strategies for Investing $100,000

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{If you listen to everything said about the financial prospects of most Americans, you might think reaching your retirement goals is nearly impossible. Many find the idea of investing $1,000 intimidating, let alone $100,000. We’ve been constantly told that young people are swamped by student loans and that a large number of Americans can’t cover a $400 emergency expense. On top of that, we’re all painfully aware that average retirement savings are quite low. For instance, average 401(k) balances in 2022 for workers aged 25 to 34 were $24,728, $68,935 for those 35 to 44, $129,935 for ages 45 to 54, and $190,505 for those aged 55 to 64. Savings rates did go up during the pandemic, yet a study in 2023 by Northwestern Mutual shows average personal savings at $65,100, up nearly 5% from the previous year’s $62,000. However, this increase doesn’t keep pace with the 6.5% inflation rate of 2022. Despite the gloomy economic news, some people are making great strides in building long-term wealth. If you’re one of the lucky few with $100,000 to invest, here are some ways to grow that wealth even further.

Before you invest, here are three things you should do:

1. Pay Off Your Debt
   Debt can seriously hamper your ability to build wealth. It’s important to pay off your debt before you start investing. This will help you avoid high-interest payments and allow you to save for your investment goals. Create a budget to manage and eliminate your debt, or consider a debt consolidation loan to simplify payments. Once your debt is cleared, you can start investing in your future!

2. Increase Your Emergency Fund
   An emergency fund is vital for maintaining financial stability during unexpected expenses. Having money set aside for emergencies means you won’t need to use high-interest credit cards or loans. Start by saving a small amount each month until you have enough to cover your expenses. Redirect any extra savings, like money saved from not eating out, towards building this fund quickly.

3. Track Your Portfolio
   It’s common to have multiple investment accounts, such as a 401(k) at your current job, Roth IRAs, college savings plans, old 401(k)s, and more. With so many accounts, it’s hard to keep track of everything. Use investment apps or websites, like Personal Capital, to see all your finances in one place, track your net worth, budget, and investment portfolio.

How to Invest $100,000 Today

1. Invest in Stocks
   Suggested: 40-50% of your portfolio (for long-term growth)
   The stock market averages a return of 7-10% per year. For instance, the Dow Jones had an 18.65% return in 2021. Tools like M1 Finance let you build your investment portfolio with no trading fees for stocks and ETFs.

2. Invest in Real Estate
   Suggested: 10-15% of your portfolio (for growth and diversification)
   You can invest in real estate without buying physical property through REITs. Platforms like Fundrise offer diversified real estate investments with a minimum investment of $10.

3. Buy a Business
   Owning a business can be one of the best ways to build long-term wealth. For a quick start, consider buying an existing website through Flippa.com, which can earn money through affiliate marketing and ads.

4. Invest in Gold
   Suggested: 10-15% of your portfolio (for diversification)
   Gold often rises in value during inflation. Vendors like Orion Metal Exchange and Goldco offer ways to invest in physical gold or within an IRA.

5. Alternative Investments
   These can include private equity, hedge funds, and natural resources. Platforms like Yieldstreet connect you with peer-to-peer lending opportunities in vetted small businesses and real estate.

6. Open a Solo 401(k)
   If you own a business, a Solo 401(k) allows for significant retirement savings and tax advantages. Contribution limits are higher than traditional retirement accounts, potentially enabling earlier and wealthier retirement.

7. Set Up a Trust or Give Tax-Free Money Now
   Setting up a trust lets you determine how your assets will be distributed to your heirs. You can give a certain amount of money to your heirs each year without tax consequences.

Your Investment Style
Keep 10-15% of your portfolio in cash, stored in a high-yield savings account. Think about your risk tolerance, investment timeline, and whether you prefer to manage your investments independently or with help from a platform like Betterment or Fundrise.

The Bottom Line
Investing $100,000 wisely can lead to substantial long-term growth. Diversify your investments to minimize risks and don’t let fear keep you on the sidelines. $100,000 is a significant amount, but investing it now can potentially yield much greater returns in the future.

FAQs on Investing $100,000
For the best diversification, spread your money across various income-generating assets like stocks, bonds, real estate, and cash. Always consult with a financial advisor before making major investment decisions. Remember, the return on investment in stocks or bonds will vary based on several factors including the specific assets and market performance.