Where to invest $100,000 right now

There’s plenty of circumstances that could warrant a large sum investment. Maybe you’re looking to diversify and optimize your current portfolio. Perhaps you’ve inherited a large sum of money or recently sold your home and want to be smart about how you manage and grow those funds. Or maybe you’re just wondering which investments have the best ratio of risk versus return for your needs right now. Whatever the circumstances, if you find yourself with $100k to invest and are wondering about your best potential options for that money, there are a few things to consider.

Investing is a big decision and no two individual investors are alike. Where one person might prefer value investing, another might invest with tax implications in mind. Some investors are interested in active strategies, while others prefer a passive approach where they let their money work for them in the background.

Regardless of one’s level of involvement, every investor should make their investment decisions from an informed place and, if they’re unsure, they should consult an investment professional to weigh those options.

Everyone’s risk tolerance is different. What’s more, risk tolerance, goals, and time horizons can be closely related.

For example, if someone is 30 years old and looking to invest for the first time, they may have more time to rebound from potential investment mistakes and market corrections. Because of this, they may be more comfortable with riskier investments.

If someone is investing to maintain their money in retirement, however, they might be better off seeking out places to keep their money where the risk level is very low. Savings vehicles such as high-yield savings accounts and CDs could be a good option in that scenario.

From investing in the equity market to investing in the bond market, there are a variety of types of investment options available, each with its own unique pros and cons. Before deciding on a type of investment, it is important to be aware of the benefits and risks.

Consider a situation where an investor has a sizable amount of money already invested and is looking to move $100,000 around. They might be inclined to add that $100,000 to that existing investment, but this could concentrate risk. They might decide instead to spread it around to potentially mitigate that risk.

Remember: diversification is a key consideration.

Here are a few different types of investment vehicles that someone could consider utilizing when investing $100,000. While there are obviously more ways to invest, we chose these to highlight typical risks and considerations for many investors.

High-yield savings accounts generally offer much higher interest rates than traditional savings accounts.

While some seasoned investors may not consider putting money into such an account as an investment, the fact is that they do earn interest.

While high-yield savings rates are typically variable, CDs allow investors to earn a fixed interest rate, with the caveat that money cannot be accessed for a predetermined period of time.

May be best for: Individuals who need to retain access to their money, who have very little to no risk tolerance, and who are okay with earning lower returns in exchange for reducing the risk of loss.

Buying shares of a given company that are bought and sold on a stock exchange is what most people think of when they refer to investing. Investing in the stock market can be a strategic decision for those with longer time horizons or higher risk tolerances.

May be best for: Investors who have time to grow their money and are open to more risk.

When opening a traditional brokerage account and investing in the equities market, it is possible to invest with as little as one common share. An investor may want to invest in a mix of stocks, implementing strategies like dollar cost averaging and holding, however not everyone has this level of investing knowledge. For beginner investors, therefore, index funds, mutual funds, and ETFs can be more attractive. Here’s why…

What each may be best for:

• Mutual funds: A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. These types of investments offer professional management, diversification, affordability, and liquidity as advantages.
• Exchange traded funds: ETFs are Securities and Exchange Commission-registered investment companies that offer investors a way to pool their money in a fund that invests in stocks, bonds, or other assets. They are not the same as mutual funds, but they offer many of the same benefits. Some are passively managed. Others are actively managed. A major benefit of ETFs versus mutual funds is that most ETFs must disclose their holdings more frequently than mutual funds.

Real estate can be a risky investment. Some investors may use it to not only build equity, but also to generate rental income, benefit from tax advantages, and more.

May be best for: Renters who want to become homeowners and avoid annual rent increases. Investors with a primary residence who desire equity in an additional non-liquid asset with an added layer of income-generating potential.

Looking to earn competitive interest rates to your money? Consider adding a range of savings accounts and CDs offered on the Raisin platform by our partner banks and credit unions as the potentially perfect solution for your needs.

Ready to save with purpose? Get started now.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Sources:

¹ Pew Research