How to Invest $100,000: The Best 11 Ways to Put Your Money To Work

Thanks to low inflation rates in the past few years, $100,000 still represents a commanding amount of money in American society. However given some views that inflation may rise in the coming decade, leaving your $100,000 in a savings account might not be the best idea. In some cities, $100,000 is enough to purchase real estate outright, a piece of land, or a small business. The aforementioned investments are just a few of the options available to investors ready to commit a large amount of capital to a single investment. 

When deciding how to invest a large sum of money investors should be prudent and ensure they understand the risk and possible returns they can generate from investments. There may even be some things that you’ll have to take care of first, so it may be a good idea to split that money up for multiple purposes instead of plunging it into a single investment. Whatever you think is the best solution, we lay out the best ways to invest $100,000 along with the estimated risk level and approximate qualitative returns down below.

Idea #1: Pay Down Existing Debt

Risk level: Minimal

Good for: Anyone with any type of debt outstanding (including high interest mortgages)

Return: Low to high (depending on the debt)

Most Americans have some sort of debt, whether it’s a mortgage, student loans, credit card debt, or personal loans. Before investing $100,000, consider paying off some of your outstanding debt, particularly if the interest rate of the debt is particularly high. As a rule of thumb, if the interest rate on your debt exceeds the rate of return you’re likely to get from investing the $100,000, you’re likely better off paying off your debt. 

However, in some instances, such as when the interest rate you pay on your debt is lower than the return you expect to make on an investment, it may actually benefit you to invest instead of paying off your debt early. It’s important for investors to keep in mind that it’s entirely possible for any investment to underperform. Underperformance, in this scenario, would mean that you would have been better off opting to pay down debt. Underperformance is a possibility and investors should make their decision within the context of the situation.

Idea #2: Max Out Tax Advantaged Accounts

Risk level: Minimal

Good for: Anyone saving for retirement

Return: Low to high (depending on securities purchased) 

Before purchasing securities in a taxable investment account or parking your money in an asset, which might draw a huge tax bill, consider maxing out all of your tax advantaged accounts. As the name implies tax advantaged accounts allow you to maximize the amount of money you’ll save on taxes while still growing your net worth through the purchase of financial securities.

There are several accounts with tax benefits you should consider contributing to, including a 401k, Roth or Traditional IRA and an HSA (if available to you). Keep in mind that each of these investment accounts has its own contribution limits, so you might not necessarily be able to invest the entire $100,000 in one go. Below, we list relevant contribution limits for each of the accounts listed above. 

  • 401K contribution limit: $19,500
  • Roth IRA contribution limit(s): $6,000 for people under 50 and $7,000 for people over 50
  • Traditional IRA contribution limit(s): $6,000 for people under 50 and $7,000 for people over 50
  • HSA contribution limit: $3,600 for self-coverage and $7,200 for family coverage

Keep in mind that the contribution limit for IRAs is cumulative, meaning the limit is the maximum you can contribute across both accounts: traditional and Roth. 401Ks are subject to separate limitations from IRAs. Depending on your income level, certain IRA benefits may be curtailed or eliminated.

What if I’ve already maxed out my tax-advantaged accounts?

In the event that you’ve already maxed out your tax-advantaged accounts, consider investing your remaining funds in a taxable brokerage account. Keep in mind that capital gains taxes on securities are only assessed when you sell a security, so your tax liability will be mitigated as long as you hold on to the investment. 

Assuming you end up selling your investment(s) at a profit, your investment(s) will be subject to long-term or short-term capital gains tax, depending on how long you held the investment(s), with the higher tax rate being assessed to short-term capital gains. Watch out for stocks which pay dividends or bonds that pay out interest, since both interest and dividend payouts are subject to taxation. 

Idea #3: Find a Financial Advisor

Risk level: Low

Good for: Anyone with a unique set of circumstances or highly specific investment goals

Return: Low to high (depending on securities purchased) 

Actively managing your investments may be attractive to some people, but some may prefer the assistance of a professional. A financial advisor can help you navigate investment opportunities and provide a long-term plan that is tailored to your specific situation. Keep in mind that financial advisors can be hired on a temporary basis – so it’s possible to hire one to help you figure out what the best strategy for your $100,000 might be and then execute trades on investments on your own.

It’s worth noting that financial advisors come at a cost, which will ultimately depend on which one you hire. Some advisors charge on an hourly basis while others might only work on long-term assignments. Just like any human being, financial advisors might also be biased towards different investments, so be sure to carefully evaluate any investment advice you receive even if it’s coming from an advisor.

Pro Tip: Do Your Research
Hiring an investment advisor is a process within itself. Spend just as much time as possible researching your options. Don’t rely on simple matchmaking websites to choose the driver of your financial future.  

Idea #4: Start a Tangible Service Based Business

Risk level: High

Good for: Someone who is social and has an entrepreneurial spirit

Return: Low to high (your business will ultimately determine this)  

$100,000 is more than enough money to start a service based business without taking on a loan. Generally, service based businesses require some type of machinery or equipment to get a job done, but we recommend renting any necessary tools until you’ve established that your business can be profitable. The key to any successful non-tech based business is to create revenue and reinvest said revenue into the business. Below, are a few examples of a service based business:

  • Local landscaping company
  • Handyman services
  • Power washing business 
  • Car detailing business
  • Flower delivery service
  • Mobile dog grooming salon
  • Home theater installation company

Keep in mind that with $100,000, you’ll likely want to maintain a lean operation, meaning you’re likely going to have to be the person executing the service. Due to this, we only recommend this option to people who are naturally social since it’s hard to be an effective salesperson for your business if you don’t like speaking with people. 

If you’re having a hard time pounding the pavement and getting the word out about your business, consider digital advertisement. Just be sure to think about search parameters, such as location, to ensure you’re physically able to complete a job a customer inquires about.

Idea #5: Start a Business with a Storefront

Risk level: High

Good for: Someone who is passionate and has a high risk tolerance

Return: Low to high (your business will ultimately determine this)  

As the world turns to digital businesses in the wake of the Covid-19 pandemic, it’s important to remember that businesses with a physical presence with brick-and-mortar locations still exist and can be profitable. The key to starting a successful business with a storefront is to think about experiences which can’t be replicated by shopping online and that national retailers have a hard time replicating. For example, it’s unlikely you’ll order a piping hot Americano from Amazon.com at any point in the near future. Below, we list a few examples of business ideas, which can still succeed with a physical storefront:

  • Dry cleaning
  • Trendy coffee shop
  • Luxury flower shop
  • Tire shop/car mechanic
  • Barber shop
  • Bar offering craft beers
  • Ice cream store

Depending on where you live $100,000 likely isn’t going to cover all of your expenses even for one-year, but it could go a long way towards securing a commercial lease for your business. Remember that when starting a business it’s always a good idea to try to keep costs down, so to the extent that you can start accumulating customers prior to securing a physical location, you should do so. 

Idea #6: Start an Online Business

Risk level: Low

Good for: Someone seeking to start a business with a minimal investment

Return: Low to high (your business will ultimately determine this)

The best thing about starting an online business is that it doesn’t require a large capital investment. In fact, you can get a website up and running for less than $50. The main costs associated with starting a vanilla online business are the marketing expenses associated with driving users to your site since hosting costs are minimal. Even then, online banner advertisements can be bought for mere pennies. Below are a few ideas for profitable online business niches:

  • SAT/GMAT tutoring
  • Web designer
  • Technical writing
  • Dropshipping
  • Antique store
  • Virtual assistant
  • Audio editing services

Since you have $100,000 at your disposal, consider using some of that money to make your website look and feel professional. If you don’t feel comfortable designing your business’ website, there are many reputable freelancers on Fivver and Upwork.

Pro Tip: Advertise Effectively
Don’t spend all of your money on one marketing campaign. Launch several small campaigns to figure out what works and what doesn’t. Tweak and adjust your campaigns as you see fit to get you the most bang for your buck.  

Idea #7: Invest in Real Estate

Risk level: Medium

Good for: Someone who is handy and wants a real asset

Return: Low to Medium

$100,000 likely won’t be enough money to buy a single-family home in most cities, but if you’re lucky enough to live in a city where it’s possible, then you should consider taking the plunge. Even if the home’s price tag ends up being north of $100,000, your initial investment will greatly reduce your mortgage payment. 

Savvy investors wanting to utilize leverage may want to consider simply using a portion of the $100,000 for a down payment and using the rent from the property to cover the mortgage. Of course, this won’t be feasible for every single property and investors will have to consider things like HOA fees, insurance and maintenance costs when making this decision.

If you like the idea of investing in real estate, but hesitate at the thought of taking on a mortgage, consider real estate investment platforms, like Fundrise and EquityMultiple. These platforms allow investors to pool their money together to purchase commercial and residential properties. These platforms can be a great way to get exposure to real estate, particularly if you want to diversify away from stocks and bonds. 

Idea #8: Consider a Professional Degree or Technical Training Program

Risk level: Medium

Good for: Someone who wants to expand their earning potential 

Return: Low to Medium

According to the U.S. Bureau of Labor Statistics, the median annual earnings for a person with a Master’s degree are $77,844 compared to $64,896 for a person with a bachelor’s degree. This means over the course of a year, a person with a Master’s degree makes around $13,000 more. You can quickly see how through an adult’s working years a professional degree might be worth it, considering most adults work for more than 40 years.

It’s important to keep in mind that professional degrees are not necessary in all career paths. For example, you don’t need a professional degree to advance your career in software engineering or as an IT admin. On the other hand, fields such as law and medicine, can at times require certain degrees in order to increase your earning power. Be sure to speak to senior professionals in your network before partaking in a professional degree.

Similarly, technical training programs aren’t always necessary. In some instances, you may be better served working under a plumber or a contractor for a few months rather than partaking in a technical training program. Seek advice from professionals in your network to determine what makes sense for you given your specific interests. 

Idea #9: Start a College Fund for your Child

Risk level: Low

Good for: Someone who wants to attend college in the future or someone with children who will likely attend college

Return: Low

Given the high cost of college tuition, it’s helpful to get started saving for a child’s education as early as possible. A 529 plan is an excellent tax-advantaged option which allows you to invest after-tax dollars into an investment account. The money you place into this account will grow tax-deferred and can be used for college education (or K-12) as well as other qualifying expenses. 

It might help to think of a 529 plan like a Roth IRA, but for college rather than retirement. Unlike a Roth IRA, 529 plans technically don’t have a contribution limit. However, there are some nuances regarding taxes you’ll want to be aware of before investing. 

529 plans are set up by participating states, however, most 529 plans allow you to invest in the plan even if you’re an out-of-state resident. Therefore, when shopping around for a 529 plan, consider more than just your resident state’s plan. When comparing 529 plans – the main thing you want to pay attention to are the investment choices within each plan since they will differ. You’ll want to make sure the plan you end up choosing supports the security investments you’d like to make. 

Idea #10: Fund a Scholarship

Risk level: Low to Medium

Good for: Someone who wants their investment to reap returns for someone other than themselves

Return: Low to Medium

While funding a scholarship is not a traditional investment option, it’s feasible to accomplish for $100,000. Each undergraduate institution differs, but a significant number will launch an endowed scholarship in your name for just $25,000. Effectively, you write a check to the university of your choice and they provide you with documents outlining how your scholarship funds will be distributed. For example, the university may pay out $1,000 to a single student every year in your endowment’s name.

The university likely won’t be distributing a part of your $25,000 (or $100,000) gift. Instead they invest your money in securities, like stocks and bonds, and pay out the earnings every year, meaning your $25,000 (or $100,000) gift can actually go a long way towards helping people afford higher education.  

Idea #11: Start a Trust

Risk level: Low 

Good for: Those seeking to transfer their wealth.

A trust, more commonly referred to as a trust fund, is a contract between three parties: the grantor, the trustee and the beneficiaries.

  • Grantor – The person who establishes the trust, donates the assets to be managed and decides how the trust is to be managed.
  • Trustee – The person who ensures the trust is managed in accordance with the grantor’s wishes. Typically, the trustee receives a small management fee for their services.
  • Beneficiaries – The person(s) who will benefit from the establishment of the trust.

Trusts are created to establish guidelines as to how the assets of a grantor are to be managed, making them useful tools for wealth transfers. 

Example

Establishing a Trust

You have $100,000 you want to leave behind to your grandson, Charlie. Charlie is currently 18 years old and you worry that giving him $100,000 at such a young age could have negative repercussions. You establish a trust with a restrictive covenant stating that Charlie cannot withdraw the assets in the trust until he is 30 years old. 

FAQs Regarding Investing $100k

We cover the most common questions investors have when it comes to investing $100,000 below:

If you’re interested in learning more before dipping your toes into investing, read our strategic guide on investing for beginners.