Top 10 Best Ways to Invest 100K in 2024
Where to invest 100k in 2024:
Cryptocurrencies - the most profitable and most risky asset.
Stocks, stock indices, ETFs - relatively easily predictable, profitable assets.
Real estate - a long-term, conservative investment.
Social trading - copying transactions of successful traders in any markets.
What would be the best way to invest 100K in 2023? Whether the sum is from a windfall such as insurance payout or gradual savings over the years, there are ways you can use to make the money work for you.
This article will focus on the top ten ideas on investing 100K to make $1 million someday in the future.
Start investing in stocks right now with Interactive Brokers!What Investors Should Consider in 2024
As you invest your $100K, it's important to consider what trends will shape the market in 2023. This way, you can adjust your portfolio accordingly. Here's what experts say you should consider in 2023:
1. High Interest Rates by the Fed
The Federal Reserve has been raising interest rates in recent years and will likely continue to do so in 2023. As a result, investors should be cautious about investing in higher-yielding debt instruments like bonds.
2. Increased Regulations
Investors should also expect an increase in financial regulations throughout 2023 as the federal government strives to protect the public from financial fraud and abuse. As a result, investors should be aware of any changes and be prepared to adjust their investments accordingly.
3. Uncertainty in the Economy
The global economy has been facing an unprecedented level of uncertainty since the COVID-19 pandemic. In 2023, investors should look for investments that are resilient to this uncertainty and can remain profitable during times of economic hardship.
4. New Technological Cycle
The emergence of new technologies such as artificial intelligence (AI) and machine learning will have a major impact on the investment model in 2023. AI-driven models are becoming increasingly popular among investors as they offer greater accuracy and efficiency than traditional methods. Investors should consider incorporating these technologies into their portfolios to take advantage of these opportunities.
5. A Strong Labor Market
2023 is predicted to bring a strong labor market and rising wages. This could be beneficial for investors who are looking to invest in companies that rely heavily on the labor force. Investing in these companies may provide better returns as wages grow.
6. Alternative Investments
Alternative investments such as private equity, venture capital, real estate, hedge funds, and cryptocurrencies are becoming increasingly popular among investors looking for diversification or higher returns than traditional asset classes can provide. Investors should do their research before investing in alternative assets and understand how they fit into their overall portfolio strategy before making any decisions.
How to Invest $100K- General Ideas
The stocks and bonds market is often the perfect gateway to personal investing. These assets that follow the 60/40 investment plan-60% stocks, 40% bonds- is revered as a trusted guideline for a moderate risk investor. And for a good reason.
According to Goldman Sachs, the classic 60/40 portfolio generated an impressive 11.1% annual return over the last decade (2011-2023.) However, the net yield for the bonds market is currently negative, with stocks leading for a long time.
As you search for the best way to invest 100K, you need to give preference to stocks. Besides, you can look into other promising investment types such as REITs, copy trading, cryptocurrencies, and starting your own business.
Diversification is Key
According to Billionaire Investor Ray Dalio, the “Holy Grail to modern-day investing” is the diversification of your portfolio in a way that minimizes your risk without impacting returns.
Dalio suggests selecting a handful of assets with little to no correlation to hedge against unforeseen market turbulence. Diversification can reduce your risk exposure while maintaining your expected returns.
Top 7 Financial Options to Invest $100,000
You can pick the type of investment vehicle that relies heavily on your goals, current circumstances, and risk tolerance. Here are our top seven picks on investing 100K in 2023.
1. Stock Index ETFs
The Exchange Traded Fund (ETF) is a type of investment security that keeps track of a particular sector, commodity, index, or asset. For example, stock Index ETFs contain a basket of stocks that track a single sector.
You can enjoy a diversified exposure to a single industry such as the automotive sector by monitoring their stocks.
Warren Buffet, the founder of Berkshire Hathaway, is an ardent fan of stock index ETFs. On average, indices grow in value by nearly 10% annually over the years. It is difficult for a rookie investor to beat such returns.
SPDR Financial Select Sector ETF
The SPDR is an example of a stock index ETF that tracks the performance of the S&P Financial Select Sector Index. The index includes a broad range of stocks from the financial services sector, including banks, insurance companies, and REITs.
The fund offers a dividend yield of 1.93% with an annualized return of 5.12% as of mid-2020.
👍 Pros:
• Considered low-risk investments through diversification.
• Takes the guesswork out of your investment plan by matching market performance over time.
• Stock ETFs are more liquid than mutual funds.
• You can enjoy lower brokerage fees.
👎 Cons:
• Since ETFs contain a basket of stocks, the potential returns may be significantly lower than buying individual stocks.
• ETFs typically hold cash, and tracking errors are pretty common. As a result, investors may need to dip into their pockets to pay administrative expenses and management fees.
2. Treasuries
Treasury bonds are debt obligations issued by the U.S. government and backed by the full faith and credit of the United States. They are considered to be one of the safest investments available, as they are backed by the government and have low default risk. As of February 2023, short-term treasury bills had an interest rate of 4.74 percent. 10-year treasuries have a rate of 3.92 percent.
Benefits of Investing in Treasuries
Investing in treasuries is a great idea for many reasons. Here are some of them.
Low Default Risk
Because treasury bonds are guaranteed by the U.S. government, they have a very low default risk compared to other types of investments. For investors, this means they are a safe and reliable investment option.
Tax Advantages
Treasuries also offer tax advantages to investors, as some of the interest earned on them is exempt from state and local taxes. This can help investors reduce their overall tax burden. In addition, capital gains from treasuries are also taxed at a lower rate than other types of investments.
Liquidity
Treasuries are highly liquid investments, meaning they can easily be converted into cash without any significant loss in value or time delay in doing so. This makes them attractive to investors who may need access to their funds quickly or unexpectedly.
Cons of Investing in Treasuries
One downside to investing in Treasury bonds is that you're going to get a lower rate of return compared to other investments, such as stocks or mutual funds, which offer higher potential returns but also come with more risk involved than Treasuries do.
3. Pay Off Your Debts
You may be in a dilemma after your 100K windfall: to pay off your existing debts or place the money in investment vehicles that will grow in the future. Left unpaid, your debts will also accumulate interest and penalties that may weigh you down financially.
Investing may only make sense if you can earn more from the investments than your debts cost you on interest. Paying off high-interest loans provides a better return for money than any investment class.
Pay off Your Debt
Paying off debt is one of the best investments you can make with your $100K windfall. This is especially true if you're dealing with high-interest debt like credit cards, which can spiral out of control and become unmanageable if not paid off. Besides, it makes little sense to invest in other assets when you are still carrying debt that accrues interest.
For instance, the current credit card interest rates of over 20 percent can be multiple times higher than the return on the best-performing asset classes, such as stocks or bonds. By clearing your debt, you can save thousands of dollars in interest payments and become better equipped to move forward with your financial plan.
👍 Pros of Debt Payments
• Eliminates high-interest rates that can stagnate your financial journey to financial independence.
• Peace of mind as you don’t have to worry about debtors contacting anymore.
• Repayment of higher-interest debts may provide better returns than most investment vehicles.
👎 Cons of Debt Payments
• Less money left behind to invest and safeguard your financial future.
4. Industry ETFs
These are pooled investment funds that focus on tracking stocks and securities of a particular sector. For instance, you can invest in sector ETFs that track a basket of technology or energy stocks.
Your investment asset is passively managed through an underlying index of the said sector. The Global Industry Classification Standard(GICS) is the primary standard used to classify the different sectors.
GISC’s hierarchy starts with 11 sectors classified into 24 industrial groups, 68 industries, and 157 sub-industries.
You can create a diversified portfolio by investing in a mix of small, medium, and large-cap stocks. In addition, you can fine-tune your investments to match your risk tolerance by placing close attention to growth and value stocks.
Industrial Select Sector SPDR EFT
The SPDR industrial select sector fund tracks the yield performance of publicly traded equity securities of companies under the Industrial Select Sector Index. The EFT falls under the industrial sector (XLI).
👍 Pros of Sector ETFs
• Increased diversification with the ability to trade different industries, commodities, or assets across the globe
• Enjoy low brokerage fees
• Trading flexibility, with increased liquidity of the asset
👎 Cons of Sector ETFs
• Hidden risks that arise when trying to blend different global indexes
• Lower dividend yield depending on the market sector you choose to trade-in
5. Stock Portfolio
The stock market is often the first thing most individuals think of when you mention investing. The historical annual returns of between 7% to 12% make owning a stock portfolio one of the best ways to invest 100K in 2023.
Stock trading involves buying and selling of shares of listed companies. Picking individual stocks to invest in can be difficult for new market entrants, requiring tons of research. Yet even professional traders lose out on the market sometimes.
The volatility in the market is pretty high, allowing for day and intraday trading. If you are uncomfortable with the highly volatile market, consider diversifying your portfolio with lower-risk investments.
NFLX: Netflix Stock
Netflix stock price forecast 2024, 2025, 2030From its humble beginnings as a DVD renting service in 1997, Netflix has risen to become a behemoth within the streaming industry. The company had the best returns over the last decade, with its stock price growing over 189%.
It’s essential to note that past performance doesn’t translate to better returns in the future. However, the NFLX example paints a picture of wonderful returns in the volatile stock market.
👍 Pros of Stock Investing
• Grow your portfolio with the economy
• Stay ahead of inflation with better returns
• Easy to buy
• Low minimum balance required to start investing
👎 Cons of Stock Investing
• You risk losing it all through volatility trading
• It takes time to identify and research companies you are willing to invest in
• You pay taxes on profitable stock sales
6. Roth IRA
Roth IRAs are individual retirement accounts where you pay taxes on money going in, and all future withdrawals are tax-free. These retirement savings accounts allow you to plan for your future, enjoying tax-free growth on your investments.
How does a Roth IRA work?
You contribute and pay taxes on your investment upfront, let your money compound, and withdraw in retirement tax-free. In addition, you can enjoy a variety of investment options within a Roth IRA, such as mutual funds, stocks, bonds, ETFs, and index funds. The maximum amount you can deposit in your Roth IRA in 2023 is $6000.
Opening a Roth IRA
You need to research institutions that have approval from the IRS to offer IRAs. These may include banks, brokerage firms, credit unions, and loans and savings associations.
The institution you pick may have a significant bearing on the list of investment options available. If you plan to become an active investor, find a provider with low management fees.
👍 Pros of Roth IRA
• Tax-free growth on your investment
• Can double up as your retirement plan
• No required minimum distributions
👎 Cons of Roth IRA
• You cannot withdraw account earnings within the first five years from the initial contribution.
• The five-year rule makes the Roth IRA less appealing to individuals in their late middle ages.
7. Cryptocurrencies
Cryptos are a hot topic now, gradually becoming a common answer to where to invest 100K in 2023. These digital coins operate on a decentralized blockchain platform without any control from any singular institution.
Cryptocurrency is an excellent alternative investment for individuals willing to accept the high-risk volatility of the market. However, whether investing in bitcoin or other altcoins, you need to conduct proper research before purchasing or trading the asset.
Searching for stable crypto coins can become a way to diversify your investments. Bitcoin is part of portfolios for top investors, including Ray Dalio and Bill Miller.
Besides, an increasing number of institutional and retail investors seek Bitcoin as a perfect hedge against inflation. As a decentralized blockchain network, Bitcoin’s value isn’t tied to any one economy or currency.
Moreover, the crypto has a finite number of coins at 21 million. Nearly 19 million of the bitcoins have been mined. A fixed supply means fewer coins join the circulation, minimizing inflation risk.
Bitcoin: $0 to $69000
Bitcoin had a price of $0 at its launch. The most significant jump then was to $.09 in July 2010. Fast forward to Nov 2023, the price of one Bitcoin was equivalent to $69,000, an all-time high. As of 1st January 2023, the price was approximately $43,000.
The volatile nature of the crypto market makes it a high-risk investment, with the potential to wipe clean your entire portfolio. Consider a frequent re-evaluation and rebalancing of your crypto holdings to hedge against the volatility.
👍 Pros of Cryptocurrency Investment
• Independence from a central authority
• Higher return potential
• An ideal hedging investment against inflation
👎 Cons of Cryptocurrencies Investments
• Highly volatile markets that can wipe out investment accounts
• Researching different coins and their offerings may take a lot of time and effort
• Increased risk of falling for crypto scams and losing your investment
How to Invest $100,000- Top 3 alternative Ideas
If you are still wondering what to do with 100K, alternative ideas bear a higher risk profile. However, you have the potential to enjoy a potentially faster and higher return.
1. Business
Most people tout entrepreneurship as the most fulfilling investment decision they have ever made. You can use the 100K as capital for your startup or existing business. Self-funding allows you as a founder to retain equity without burdening your enterprise with debt payment during its initial stages.
👍 Pros of Investing in Your Business
• Self-financing gives you better control over your investment decisions.
• You retain full ownership of the shareholding within the business
• Better and higher returns if you succeed
👎 Cons of Investing in Your Business
• High-risk investment, with all the money staked on the startup's success
• Active participation in the running of your investment
2. Real Estate
Real estate investing is another excellent alternative to invest 100K in 2023. The typical investment model often involves buying property then flipping or renting it out. However, purchasing physical real estate and renovating it can be prohibitively expensive.
Fortunately, real estate investing goes beyond the conventional buy-flip-rent model. Instead, you can invest in a real estate investment trust (REIT). REITs function similarly to mutual funds, investing in different properties with a higher rate of return. Besides, your investment is automatically diversified over a range of projects.
👍 Pros of Real Estate Investing
• Real estate appreciates over time, providing better returns on investment
• Unique tax benefits such as depreciation and tax-deductibles
• REITs can diversify your portfolio over several properties
👎 Cons of Real Estate Investing
• Prohibitively expensive, resulting in poor asset allocation
• Unique risks such as purchasing the wrong property at the wrong time can damage your portfolio
3. Copy Trading
As a rookie investor wondering what to do with 100K, the risk of making poor investment choices that blow your money is significantly high. Copytrading allows investors in the financial markets to automatically open and close positions from more-skilled investors.
You can eliminate the constant guesswork on money markets by following an experienced trader’s investment decisions. The first step involves creating a trading account with a reliable broker and linking it to a professional’s main account for money management.
👍 Pros Of Copy Trading
• A great way for rookie investors to gain entry into the financial investment world.
• Network with experienced investors to gain more knowledge.
• Gradually make money with profitable trades taken by the skilled investor
👎 Cons Of Copy Trading
• Determining a legitimate, professional trader to follow can be difficult
• Finding a suitable copy platform is also challenging
• You need to closely monitor losses to avoid blowing all your money on a bad trade
4 Tips on Investing $100k
While it can be enticing to throw your windfall into your new business or the stock market, you need to take time and think about your investment opportunities. Here are four tips to keep in mind.
Diversify your portfolio. Create a mix of high and low-risk investments
Build on your saving. Have enough money to cover your daily expenses
Prioritize your goals. Take time to research the different investment options available
Focus on low-fee investments. keeping administrative, management, and trading fees low can lead to higher margin returns.
How to Invest $100,000 Right Now?
1. Define your goals
Before investing any money, you need to develop a target goal. A compelling goal holds the rudder, determining the direction in which your investment ship will sail. For example, you can propose goals such as a rich pension, financial independence, living on interest, quick profits, and much more.
2. Determine the amount for investment
While there isn't a defined amount of the 100K you should invest every month, you need to create criteria for picking your investments. Also, take note of advisory fees that can cost you 10-30%.
3. Open an Investment Account
The next step involves opening an investment account. You need to research the different brokerage firms, commissions charged, minimum investment balance, and investment options provided.
| Broker | Best For | Minimum Investment Amount | Investment Assets | IRA Account | Robo Advisory | |
|---|---|---|---|---|---|---|
Copy Trading, Free Stocks Investing |
$0 |
US Stocks, ETFs, Cryptocurrencies, Forex |
No |
No |
||
Robo Advisor, IRA account |
$0 |
Stocks, Options, Bonds, Cryptocurrencies, Forex |
Yes |
Yes |
||
Options Trading |
$500 |
Stocks, Options |
Yes |
No |
||
Cryptocurrencies |
$10 |
Cryptocurrencies |
No |
No |
Summary
Deciding how to invest 100K can be equally exciting and overwhelming. With the right investment choices, you can turn the lump sum of 100K to long-term wealth within no time. You need to diversify your investments, keeping your risk-reward ratio on the low.
FAQs
What should I invest $100k in right now?
There are plenty of options to choose from, depending on your goals and risk tolerance. Stock Index ETFs are particularly attractive, with their value growing by almost 10 percent over the last decade.
What is the smartest way to invest $100k?
For those with debt, it's often wise to pay it off first before investing. After that, you can consider a diversified portfolio of stocks and Roth IRAs, and crypto.
How can I make money with $100k?
The best way to make money with $100k is to invest it in assets that can generate returns for you.
How much interest can I earn on $100k?
That depends on the type of investments you choose and the current market conditions. For example, Treasury bonds are considered to be one of the safest investments available and have an interest rate of 4.74 percent as of February 2024.
When Should You Start to Invest?
It's never too early or late to start building long-term wealth. First, begin eliminating high-interest debts and create an emergency fund account, then kick start your investment journey.
How Do You Know When to Sell?
It can become confusing in the trading world of “buy low sell high” to know when to liquidate your assets. You need to assess your financial health and portfolio balance before getting out of your positions.
What Are the Major Investing Red Flags?
If the deal is too good to be true, then it probably is. Additionally, no investment is ever 100% risk-free. If the investment product is too complex to understand, stay away from it.
How Much Income Do I Need to Save to Reach $100,000?
Saving ought to be a lifelong habit. Start by saving at least a quarter of your gross salary and gradually increase the percentage as you age.
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Team that worked on the article
Mikhail Vnuchkov joined Traders Union as an author in 2020. He began his professional career as a journalist-observer at a small online financial publication, where he covered global economic events and discussed their impact on the segment of financial investment, including investor income. With five years of experience in finance, Mikhail joined Traders Union team, where he is in charge of forming the pool of latest news for traders, who trade stocks, cryptocurrencies, Forex instruments and fixed income.
The area of responsibility of Mikhail includes covering the news of currency and stock markets, fact checking, updating and editing the content published on the Traders Union website. He successfully analyzes complex financial issues and explains their meaning in simple and understandable language for ordinary people. Mikhail generates content that provides full contact with the readers.
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Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.
Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.
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Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.