How to Invest $100,000 Smartly: Top 6 Strategies Revealed

If you're planning to put down $100,000 as an investment, you're well-positioned for success. When combined with patience over time, this sum has the potential to secure your financial future significantly. Actually, with enough time, that capital might grow to one or even two million dollars, regardless of whether you possess extraordinary investment skills. It’s crucial to thoughtfully evaluate your approach to investments; choosing the right stocks or funds isn’t all there is to it.

If the idea of investing $100,000 seems daunting, you don’t have to tackle it by yourself. Speaking with a financial advisor is a smart move anytime you experience a substantial bump in income. An advisor can help you create an investment plan to preserve and grow your wealth, one customized to your specific financial goals, age and risk tolerance.

How to Invest $100,000: 6 Key Tips

Consider these six intelligent factors when you're putting $100,000 into investments and keep an eye on potential pitfalls throughout the process.

1. Start today

It’s hard to overstate how important time is to your returns. Compounding can work miracles on your money, and that’s why it’s vital to start investing today, even if you don’t have $100,000. For example, look at the power of time when using some typical investment returns:

Starting amount	Annual return	After 10 years	After 20 years	After 30 years	After 35 years	After 40 years
$100,000	8%	$215,893	$466,096	$1.01 million	$1.48 million	$2.17 million
$100,000	10%	$259,374	$672,750	$1.74 million	$2.81 million	$4.53 million

Starting with $100,000 and adding no more money, you could roll up more than $1 million with returns of 8 percent annually over 30 years. But if you can give yourself another five years, you can have nearly 50 percent more, while another decade gets you more than $2 million. Of course, the numbers get much better with 10 percent annual returns and more time.

If an 8 percent annual return seems high, you should know that it’s below the average rate of return of 10 percent for an investment available to everyone, regardless of their knowledge or income. (More on that exact investment in a moment.) So it’s important to start investing today.

Need an advisor?

Need expert guidance when it comes to managing your investments or planning for retirement?

Nation Daily News’s AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals.

2. Determine what you want to invest for

You’ll need to understand what you’re investing for and why, since you may be able to take advantage of extra bonuses that could help your money compound even faster:

• General wealth: If you’re looking to build long-term wealth from your money, then you can use a standard brokerage account available at all online brokers . You’ll have to pay taxes on any dividends and realized capital gains, though any investment that you don’t sell can compound with no immediate tax liability. If you want to use your money before retirement age — say, if you’re a FIRE investor — This choice could be ideal for you.
• Retirement wealth: If you're aiming to utilize your funds for retirement, consider employer-offered savings plans like a 401(k). 401(k) , along with an IRA. These accounts enable you to postpone or evade taxes on your investment earnings, allowing your funds to grow more rapidly through compounding. Workplace plans might also provide additional benefits for you. a matching contribution , helping you grow your wealth even faster. However, they’re harder or costly to access before you hit retirement age, normally defined as 59 ½.
• Specific goal: If your objective is to invest with a particular aim—such as purchasing a home—you should meticulously tailor your investments according to when you require the funds. The longer your timeframe, the greater the risk you can afford to undertake and consequently, the higher the possible returns. You will need a brokerage account to achieve the highest returns instead of using a bank account.

Your objective will assist you in deciding what type of account to establish and subsequently guide your investment strategies.

3. Determine your investment strategy

Now, consider precisely how you would allocate $100,000, as you face three major choices ahead.

• Manage it yourself: When you're handling your finances personally, be it in a taxable account or a retirement account, you have complete control over every decision, which can lead to positive outcomes as well as negative ones. So you’ll want to know what you’re doing. The good news is that even new investors can beat most investors, even the pros, with a few simple investment funds.
• Go with a robo-advisor: If you’d rather not manage your money, you can turn to one of the top robo-advisors . A robo-advisor can create a portfolio based on your time horizon (when you need the money) and how much risk you’re willing to take. Then you can simply add your money to the account and the robo-advisor does the investing. One key advantage of robo-advisors is that their management fees are relatively inexpensive, often about 0.25 percent of your assets annually, or $25 for every $10,000 invested.
• Hire a financial advisor: Another option is hiring a financial advisor to provide a comprehensive investment strategy and help you plan for the future. An advisor might charge a flat fee or one based on your assets, and with the latter you could expect to pay 1 percent of assets per year. You’ll need to find an advisor to work with you and who fits your needs, requiring some legwork upfront. National Daily News’s financial adviser pairing resource Can assist you in locating someone nearby within minutes.

Every method comes with its advantages and disadvantages, hence you should consider the amount of time and effort you wish to dedicate to your investments.

4. Make your investments

Investing might not be as complex as many believe, particularly when using a robo-advisor or consulting with a human advisor. However, managing an investment of $100,000 can still be straightforward even without professional assistance.

• If you’re managing your money: Whether you’re managing a retirement account such as a 401(k) or IRA, you’ll need to choose the investments. A great pick for investors is an index fund based on the S&P 500 index , which includes hundreds of America’s top companies. Over time, it’s averaged about a 10 percent annual return, and any investor of any skill level can buy the fund, hold on and end up beating the vast majority of investors — even the pros. New investors managing their own accounts should look for a mutual fund or exchange-traded fund with a great long-term track record .
• If a robo-advisor is managing your money: Once you’ve set up your investing plan, you deposit money into the account and the robo-advisor does the rest. Many robo-advisors allow you to track your progress toward key goals, and you can check your account at any time of day.
• If a human financial advisor is managing your money: One of the key advantages of working with a financial advisor is that the advisor does it all. So you can let the advisor manage your portfolio, but it’s a good idea to make sure you’re working with a financial advisor aligned with your needs. Here are the leading queries to pose to a financial advisor .

No matter which path you choose, it’s important to grasp how your funds are being allocated.

If you’re investing for the long term — more than five years out — you can afford to take on more risk. In practice, that means you can have a portfolio that is heavily weighted to stocks or stock funds. A broadly diversified portfolio of stocks tends to deliver the best returns over time, but you’ll have to ride out stocks’ notorious short-term volatility To relish those enticing profits.

If you require the funds at an earlier date, increasing exposure to safer assets tends to be more effective. Even though you might still hold stocks, experts typically suggest diversifying by blending them with safer investments. bonds or bond funds Bonds generally experience smaller fluctuations and provide consistent income, which helps stabilize a portfolio’s performance.

5. Use dollar-cost averaging and add more money to your account

If you have a big lump sum of money such as $100,000 and you’re ready to invest, it’s a good idea to invest that money regularly over time — for example, over a year. Putting all your money in the market at once exposes you to “timing risk” — the risk that you buy too high and lose a lot of money quickly as the stock market goes down. You have a couple ways to fight timing risk:

• Use dollar-cost averaging: Dollar-cost averaging involves adding money to your investments over time and thereby reducing the risk that you buy at a relatively high point. You’ll get an average purchase price over time, ensuring you don’t buy too high.
• Make additional investments: While you may start by investing $100,000, it’s important to add additional money to your account over time beyond your initial investment. You’ll continue to even out your purchase price with each new contribution.

Besides the value of reducing timing risk, adding money gradually allows you to keep growing your nest egg. Instead of relying solely on that initial $100,000 investment, you’ll amass more money faster if you keep investing more money in the market on a regular basis, and that’s where real wealth is built. Every incremental investment can compound further and further.

6. Re-invest those dividends

Finally, whichever route you take, make sure you’re re-investing any cash dividends you receive along the way. Reinvesting your dividends is like another form of dollar-cost averaging, but the practice also helps you compound your money faster. If you spend your dividends rather than re-investing them, you’ll be cutting out a huge chunk of your ability to compound your money.

Bottom line

Investing $100,000 can be a great springboard to wealth and financial security, but you’ll want to think about your goals for the money and then think long term. However you decide to invest your money, adhere to widely accepted investment principles that have generated millions for other people.

Editorial Disclaimer: It is recommended that all investors perform their own thorough research into investment strategies prior to making an investment choice. Furthermore, investors should be aware that previous performance of investment products does not ensure increased value in the future.