How To Invest 100k in Australia – Easy Ways To Invest in 2020

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Contents

How To Invest 100k

What is the Best Way to Invest 100k in Australia

A lot of people view investing money as gambling. While there is a certain risk involved with such a venture, not all is left to chance. The key is to do your research and be able to differentiate safe investments from unsafe ones.

Take the stock market. A lot of amateur investors try to jump in on upward-trending stocks and make a quick profit. They do this without researching important factors such as company assets/liabilities, profit margins, commodity reliance and more, all of which ultimately affects the future value of the stock.

That’s why you should think carefully before you invest a large amount like $100,000.

How Should You Invest $100,000?

Here are a few of the best investments options available currently:

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1. Stocks

A lot of people make money on the stock market. This includes billionaire Warren Buffet, the ‘Oracle of Omaha’. It’s quite simple in theory. You buy stocks that you anticipate will rise in value and then sell them off when they do. The hard part is figuring out which stock to invest in.

As mentioned above, doing thorough research can help. Before Warren Buffet buys up any company’s stock, he really gets into the nitty-gritty. In particular, he looks at factors like these:

  • Overall company performance – He doesn’t just look at recent times. Instead, Buffet goes back several years, or even decades if he can.
  • Debt/Equity Ratio – The higher the debt, the more volatile a company’s future looks. This is because of the large interest expenses that await the business.
  • Profit margin – What Buffet is concerned about is increasing profit margins. This shows signs of efficient management and company growth.
  • Competitive advantage – Buffet tends to shy away from companies that don’t stand out from the competitors. Such businesses tend to not to last very long.

If you do your homework well enough, you could definitely make more than a 10% return on investment easily. You can start with companies you know and love, for example Apple or Amazon.

2. Gold

Gold is generally considered a safe investment as its value tends to remain quite stable during times of economic instability. This is because it isn’t affected by nearly as many factors as the stock market. Gold is also a great instrument for diversifying your investment portfolio.

There are three main ways for Australians to invest in gold:

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  • Owning the physical asset – You can buy gold in the form of bars, coins, jewelry and so on. However, you must make sure that it is stored in a safe place. Ideally, you would use a secure deposit box in the vault of a bank.
  • Gold-backed exchange-traded funds (ETF) – In this scenario, a fund owns physical gold and you own shares of the fund. This way, you can avoid storage fees.
  • Investing in gold-mining companies – This is perhaps the riskiest method as it can either mean huge gains or huge losses for you. We recommend caution when looking at companies in the exploration phase. Most of them do not actually end up finding gold.

Gold is definitely a long-term investment with very little gross annual returns. However, it’s the perfect instrument for those who seek stability, above all else.

3. Cryptocurrencies

The Cryptocurrency investment market is relatively new compared to others on this list. Bitcoin is, of course, the most popular cryptocurrency and is currently valued at over AUD 14,000! At the time of writing, the value of Bitcoin is on the rise following a significant dip last year.

While its price fluctuations might make it seem like a volatile investment, we can see it stabilizing in the future. Cryptocurrencies are slowly being accepted around the world. In fact, certain governments, including the UAE, are gearing to make a shift to completely blockchain-backed systems. Cryptocurrencies appear to be the future and it might be a good idea to invest in them during a slump.

4. Real Estate

Real estate is one of the best non-stock investments you can make.

According to the ASX/Russell Investments Long-term Investing Report, investing in Australia’s residential property market can be quite rewarding. As per the report, residential property investments averaged an attractive 8% in annual gross returns. This value is definitely credible, having been based on real estate transactions spanning over a decade, from 2007 to 2020.

Consider Your Current Financial Situation

Risk isn’t something you can completely factor out.

Even if you’re well-prepared with your research, there’s always the tiniest possibility of losing out. Some unforeseen condition could suddenly come into play and spiral the entire economy into a downturn.

They say the flap of a butterfly’s wings can bring about a hurricane. What’s to say a couple of misguided financial decisions by important people won’t suddenly bring whole industries down?

Consider how tight money is for you right now. Do you foresee yourself having to dig into $100,000 in the near future? In that case, you’ll have to be extra careful.

Not only will you have to find a safe investment venture, but you also need to make sure it isn’t inaccessible for too long. In other words, ease of liquidity is something you need to be concerned about.

Cash investments such as term deposits are the most liquid but they also yield very low returns. As of last year, Australians can expect average yearly gross returns of 3.6%.

Slay Your Fear Of Investing

If you’re already financially secure to a point, then you may consider long-term investments.

Since you’ll be able to handle some risk, why not scope out a few high return investments? For instance, real estate is something that a lot of Australians get into for the long run.

They may buy property for cheap in the hopes of selling it in the future when values increase.

You should also consider your life goals before you invest.

For instance, if you want to start a family, then high-risk investments may not be the best option. In that case, you may want to look into fixed-income assets like government bonds.

You basically lend money to the government, which is paid back to you with interest.

According to an investment report by ASX, average returns of around 6.2% per year can be expected with government bonds.

That’s $6200 per $100,000 per year, which you can put aside for a college fund for your kids.

On the other hand, if your kids are all grown-up and independent, then perhaps you could afford to be a bit more frivolous.

Investing $100,000 isn’t something to be taken lightly. There are many things to be taken into consideration when choosing your investment instrument. First and foremost, your current financial situation will dictate how much risk you can handle. Your future goals should be factored in as well.

How to Invest $100,000 – 15 Best Ways in 2020

Do you currently have $100,000 in the bank that you would like to invest, but not too sure where to start? The key thing to remember is that leaving the money in the bank is going to earn you very little interest. In fact, with most major banks now paying less than 1% per year in interest, you’d actually be losing money if you take inflation in to account.

Alternatively, by making some really smart investments, you can grow your money a lot faster.

Here we present to you 15 smart ways to invest $100,000 in 2020. We’ll explain how each investment works, how much you’re likely to make, and how you can make an investment today.

If you’re instead looking to invest a bit less than $100,000, why not check out our guide on how to invest $10,000 ? If that’s too much for you, we’ve even covered how to invest $1,000 .

1. Real Estate – 5-15% per year (rental income and appreciation)

Real estate is potentially the smartest way to invest your $100,000. With the average U.S. property now costing in the region of $226,000, your $100,000 won’t quite be enough to buy a house outright. However, what you can do is use a crowdfunding platform. You essentially own the property at a percentage proportionate to the amount you want to invest. Even better, you can spread your $100,000 investment across multiple properties to mitigate the risk.

How to invest in real estate with $100,000?

One of the best real estate crowdfunding platforms is that of Property Partner. The platform sources all of the deals on your behalf, subsequently charging a 2% transaction fee for their efforts. You’ll receive your cut of the monthly rental payments (paid into your account every month), and when the property is eventually sold (usually a minimum of 5 years), you’ll receive your investment back at the current market rate. This means you’ll also make money as the value of the property increases.

Step 1: Register with Property Partner

Step 2: Confirm your identity (Upload a copy of your passport/driving license)

Step 3: Browse the many property investment opportunities

Step 4: Enter the amount that you want to invest

Step 5: Deposit funds (debit/credit card is best)

Step 6: Complete your purchase

Step 7: Your share of the monthly rental payments will be paid into your PropertyPartner account

Step 8: When the house is sold, you’ll receive your investment back at the current market value

Pros and cons of investing in real estate

Pros:

    Very safe long-term investment Earn monthly interest in the form of rental payments House prices usually increase every year Regardless of how the economy is performing, people will always need to rent homes Backed by a real-world asset

Cons:

    Not suitable for short term investments

2. U.S. Treasury Bonds – Around 1-2% per year

Much like in the case of real estate, U.S. Treasury bonds are a super-safe investment. In fact, unless the U.S. government ceased to exist, you would never lose your money. When you buy bonds from the U.S. government, you are essentially lending them money. You will receive interest payments for loaning the money out, which usually amounts to 1-2% per year. You can invest in U.S. Treasury bonds from 3 months, all the way up to 100 years. The longer the bond term, the higher the interest yield.

How to buy U.S. Treasury Bonds?

You can buy U.S. Treasury bonds directly from the website of the U.S. Treasury’s Office. The platform allows you to buy bonds from as little as $100. When you receive your annual interest payments, these will be paid directly into the account you create with the U.S. Treasury Office.

Step 1: Register on the U.S. Treasury Office website

Step 2: Verify your identity

Step 3: Choose the length of the bonds (maximum of 10 years is best)

Step 4: Pay for your bonds

Step 5: When the bonds expire, you’ll receive your original investment, plus interest payments. You can then withdraw the funds to your bank account

Pros and cons of investing in U.S. Treasury Bonds

Pros:

    Super safe investment Always get paid on time Choose how long you want to invest Easy to buy No fees or commissions

Cons:

    Interest payments are low If you try to sell the bonds on the secondary market, you could lose money

3. Peer-to-Peer Lending – 4-7% per year

Banks have been lending money to consumers and businesses for hundreds of years. However, if you’ve got $100,000 at your disposal, why not consider doing the same thing? You can now do exactly this through peer-to-peer lending platforms. In a nutshell, you lend money directly to third parties in return for higher-than-usual interest rates.

The peer-to-peer platform will perform the necessary credit checks on your behalf, meaning you can view the risk levels before making an investment. Although peer-to-peer lending carries more risk, you do have the options of diversifying across hundreds, if not thousands, of individual loans.

How to invest in peer-to-peer lending?

You’ll want to use a highly established peer-to-peer lending platform like Lending Club. In fact, the firm is recognized as the first regulated platform to offer such a service to U.S. residents. The platform has thousands of customers looking for financing, so you can easily spread your risk.

Step 1: Open an account with LendingClub

Step 2: Answer some questions to ensure you are eligible to lend-out money

Step 3: Verify your identity

Step 4: Browse the many different loans on offer. Each option will have a risk level attached to it and a fixed yield

Step 5: Once you’ve decided which loans you want to back, deposit some funds

Step 6: Complete your investment

Pros and cons of investing in peer-to-peer lending

Pros:

    High-interest yields of between 4-7% annually Minimum investment of just $25 per loan agreement Diversify across thousands of loans Platforms like Lending Club perform credit due diligence on your behalf

Cons:

    Higher risk levels, which are reflected in the higher interest rates on offer

4. Help Fund Property Developers – 8-12% per year

If you like the sounds of earning interest by lending money out, but have a slightly higher appetite for risk, then you might want to consider loaning capital to property developers. Such developers require financing to build a new property project and in return, pay very high interest. You can do this via a crowdfunding platform that performs the due diligence on your behalf. With annual interest payments averaging 8-12% per year, the loans are medium-to-high risk.

How to invest in property developers?

You’ll need to use a crowdfunding platform that specializes in the financing of property developers. The likes of the Property Crowd does just this, and they perform the required due diligence on the companies that require capital, before being accepted on to the platform.

Step 1: Open an account with the Property Crowd

Step 2: Deposit funds using a debit or credit card

Step 3: Spend some time looking at the different projects that need funding

Step 4: Choose how much you want to invest in your chosen project

Step 5: At the end of the term, withdraw your original investment (and interest payments) back to your bank account

Pros and cons of investing in property developers

Pros:

    High-interest payments of between 8-12% per year Minimize risk by backing multiple loans A good way of investing in the real estate space on a short-term basis

Cons:

    If the real estate market takes a slump, the developer could default on the loan

5. Mutual Funds – Aim for 10%+

If you want to get some exposure to the financial markets, then the safest way to do this is via a mutual fund. By investing your $100,000 into a fund, the institution will manage your investment on your behalf. This means that they’ll perform the required research, and buy and sell the investments as and when they see fit. The best mutual fund managers will aim to make surplus of 10% per year.

How to invest in mutual funds?

Investing your $100,000 into a mutual fund is very straightforward. In fact, you can do this via a reputable stock broker like Hargreaves Lansdown. Even better, by going through a broker, you can diversify your $100,000 across multiple funds. You’ll need to pay an annual maintenance fee of around 0.45%, however, this is good value when you consider that the fund manager will do all of the investing on your behalf.

Step 1: Open an account with Hargreaves Lansdown

Step 2: Deposit funds using a debit or credit card

Step 3: Head over to the funds section and decide which mutual fund you want to invest in

Step 4: Enter the amount you want to buy, and complete the trade

Step 5: You will receive dividends directly into your Hargreaves Lansdown account

Step 6: You can cash out your $100,000 investment at any time

Pros and cons of investing in mutual funds

Pros:

    Allow an experienced investor to invest on your behalf Mutual funds will diversify across multiple assets/companies Fees are low Cashout your investment at any time You still receive dividends, if applicable

Cons:

    Unable to choose your own investments

6. Low-Risk Savings Bonds – 1-3% per year

If you want to put your money somewhere safe, but still earn more than traditional high street banks will pay, then you might want to consider savings bonds. These operate in a similar way to a savings account, however, the interest on offer is higher. You’ll receive monthly or annual interest payments, and then your original investment back at the end of the term.

How to invest in Savings Bonds?

You’ll need to purchase savings bonds directly from a bank or building society. If you want to buy savings bonds from a UK institution, then it’s likely that you’ll be protected by the UK’s FSCS scheme. This means the first £85,000 (about $107,00) invested is protected by the UK government in the event that the institution collapsed. This effectively makes it risk-free.

An example of a good-value savings bond currently available in the UK is that of QIB UK. For just a 1 year term, you’ll get an annual interest yield of 2.05%, which is fully protected by the FSCS protection scheme.

Step 1: Open an account with QIB (UK)

Step 2: As QUB (UK) is a financial institution, you’ll need to verify your identity

Step 3: Decide how many bonds you want to buy, and then transfer the funds across via bank transfer

Step 4: At the end of the 1-year term, you can withdraw your investment (plus interest payments) back to your bank account

Pros and cons of investing in savings bonds

Pros:

    Super safe investment Usually protected by government savings protection schemes (like the FSCS in the UK) Earn monthly or annual interest Bonds usually range from 1 to 5 years

Cons:

    Interest yields are low, which is reflected by the low levels of risk

7. Foreign Term Savings Deposits – 8-10% per year

If you like the sounds of savings bonds, but you’re after a higher rate of interest, then it might be worth looking at what foreign banks can offer. Institutions usually label this as ‘term deposits’, however, they operate in exactly the same way as savings bonds.

For example, banks in Georgia will pay you a handsome 9-10% per year if you keep your investment in the country’s domestic currency. Some banks even allow you to take the interest upfront. Terms are usually in the region of 6-24 months. Take note, not only do you have the risk of the financial institution defaulting, but you also need to factor in currency fluctuations.

How to invest in Savings Bonds?

If you want to invest in foreign term deposits, you need to open an account directly with the institution. Some banks allow you to do this remotely without visiting the country. Here’s an overview of how the process works.

Step 1: Go to the institution’s website and open an account

Step 2: You will need to verify your identity, much like you would with a traditional bank

Step 3: Wait approximately 1-2 weeks for your account to be verified

Step 4: Decide which currency you want to hold with the institution (local currency pays the highest rates)

Step 5: Transfer funds to the institution via bank transfer

Step 6: Choose whether you want to receive interest yield upfront (if available)

Step 7: When the bonds mature, transfer the funds back to your nominated bank account

Pros and cons of investing in foreign term savings deposits

Pros:

    Really high-interest payments of around 8-10% per year Some institutions allow you to take interest yield upfront Investment terms usually between 6-24 months

Cons:

    Risk of default and currency fluctuations Need to hold savings in local currency to get the highest rates

8. Robo-advisors – Low-risk strategies aim for 5% per year

Robo-advisors are like virtual financial advisors that cost a fraction of what you would pay with a real-world advisor. The technology is based on machine learning and artificial intelligence, which allows you to make investments without needing to pick the stocks yourself. The risks are much higher than using a mutual fund, as you need to trust the technology. On the other hand, some robo-advisor platforms do not charge any fees.

How to invest in Robo-advisors?

You’ll need to find an established brokerage platform that offers robo-advisor services. One such example is M1 Finance. The platform allows you to build a portfolio of stocks, bonds, and funds, all of which are selected by the robo-advisor – free of charge. You can adjust the settings of the robo-advisor to meet your appetite for risk.

Step 1: Register an account with M1 Finance by providing a range of personal information

Step 2: Answer some questions regarding your financial circumstances (net worth, risk tolerance, etc.)

Step 3: Choose which account type you want (individual, joint brokerage, retirement or trust account)

Step 4: Deposit some funds

Step 5: Set-up your robo-advisor parameters (risk levels, auto-invest, etc)

Step 6: If you like the strategies that the robo-advisor suggests, then choose how much you want to invest

Pros and cons of investing in robo-advisors

Pros:

    Cutting-edge technology utilizes machine learning and artificial intelligence to make smart investments Adjust the settings to determine your risk Diversify across hundreds of assets Much cheaper than mutual funds or financial advisors Invest in the financial markets without having any experience

Cons:

    Returns are not guaranteed

9. Index Funds – Up to 10% per year – expect slumps along the way

If you don’t have the confidence or experience in trading individual stocks and shares, why you don’t you consider trading in in the stock markets? Known as index funds, you can now trade the performance of specific stock markets. For example, if you want to trade in the U.S. stock market, you can start by buying into an index fund that tracks the S&P 500. This represents the largest 500 companies listed on the U.S. stock markets.

How to trade index funds?

Buying into an index fund is just as easy as buying traditional stocks and shares. You’ll need to use an online stock broker platform such as eToro. Not only is the platform heavily regulated, but you can easily buy or sell the 13 different stock market indexes. This will allow you to diversify your $100,000 trade. Here is how to go about it:

Step 1: Open an account with eToro

Step 2: Quickly verify your identity by uploading a copy of some ID

Step 3: Deposit some funds (minimum$50) using your debit/credit card, e-wallet or bank account

Step 4: Head over to the indices section

Step 5: Choose which stock markets you want to buy/sell and place your trade

Pros and cons of trading stock market indexes

Pros:

    Gain exposure to an entire stock market Diversify your risk by trading hundreds of companies in a single trade Minimize risk by trading multiple stock markets Fees are really low – no commissions

Cons:

    Some index funds don’t pay dividends

Disclaimer: Transacting in virtual currencies is subject to various risks, such as price volatility, and is therefore not suitable for everyone. Your capital is at risk. eToro offers only Crypto (real crypto no CFD) so only buy with no leverage, later on this year eToro will also offer real stocks for trading.

10. Stocks and Shares – Up to 10% per year

If you have a firm understanding of how stock markets work, and you’re keen to make your own a few shares, then you might want to consider buying and selling stocks and shares. While on the one hand, the risks might be higher than using a mutual fund, however, if you’re a shrewd trader that knows that you’re doing, then you’ll be in full control of what companies to back.

How to buy stocks and shares?

You’ll need to use an online stock broker if you want to buy in stocks and shares on your own. Fees will however vary depending on the broker you use – though eToro remains one of the mst affordable brokers in the market today. Moreover, the platform has thousands of different stocks listed, meaning that you can diversify with ease.

Step 1: Open an account with eToro

Step 2: Quickly verify your identity by uploading a copy of some ID

Step 3: Deposit funds (minimum $50) using your debit/credit card, e-wallet or bank account

Step 4: Head over to the stocks section

Step 5: Choose which stocks you want to buy and place your trade

Pros and cons of trading stocks and shares

Pros:

    No need to pay a mutual fund manager annual fees Most stocks pay dividends (quarterly or yearly) Allow your stocks to grow long-term Opportunity to diversify by buying shares from hundreds of different companies Access stocks from multiple countries

Cons:

    You need to know what you are doing Expect to go through market slumps

Disclaimer: Transacting in virtual currencies is subject to various risks, such as price volatility, and is therefore not suitable for everyone. Your capital is at risk. eToro offers only Crypto (real crypto no CFD) so only buy with no leverage, later on this year eToro will also offer real stocks for trading.

11. Bond Funds – Aim for 3-5% per year

Did you know that financial institutions trade bonds on the secondary marketplace? They buy a full range of government and corporate bonds, and then sell them before they mature with the view of selling them at a premium. This is a highly skilled area of finance, however, you can now join the club by investing in a bond fund. They operate in a similar way to traditional mutual funds, however, instead of investing in stocks and shares, the fund will specialize purely in bonds.

How to invest in mutual funds?

The process of investing in bond funds is the same as a mutual fund. As such, you’ll need to go through a broker like Hargreaves Lansdown, which will allow you to choose the bond funds you want to invest your $100,000 in. You’ll also pay an annual maintenance fee in the region of 0.45%.

Step 1: Open an account with Hargreaves Lansdown

Step 2: Deposit funds using a debit or credit card

Step 3: Head over to the funds section then select bond funds

Step 4: Choose which bond funds you want to invest in

Step 5: Enter the amount you want to buy, and complete the trade

Step 6: The value of your investment will go up or down depending on how the bond fund performs

Step 7: You can cash out your investment whenever you like (early redemption fees could apply)

Pros and cons of investing in bond funds

Pros:

    Get exposure to the multi-trillion dollar bond trading space No experience needed as the bond fund manager will do everything on your behalf Access bond markets that would otherwise be difficult to reach Typically a low-risk investment

Cons:

    Bond funds rarely hold onto bonds until their maturity date, so you likely won’t receive interest

12. Finance a New Business Startup – Up to 15%

Although we’ve already covered peer-to-peer lending to individuals and real estate developers, the phenomenon also allows you to invest in new business startups. You essentially loan money to new and exciting companies that you believe will make it big. As these startups don’t have much in the form of trading history, the risks are much higher. However, to match the risk, you should expect to charge up to 15% for parting with your money.

How to invest in a new business startup?

You’ll need to use an established crowdfunding platform that specializes in new business startups. One such example is Crowd2Fund, who allows you to invest in newly established UK companies that require financing. You should do some research on the who the company is and what market they are looking to target before making an investment.

Step 1: Open an account with Crowd2Fund

Step 2: Deposit some funds by using a debit/credit card

Step 3: Take some time to scroll through the many different small businesses that require help with funding

Step 4: Choose how much you want to invest (minimum is £1000, so USD equivalent)

Step 5: Confirm the investment

Pros and cons of investing in small business startups

Pros:

    High annual returns of up to 15% Spread the risk across multiple companies Finance a company that you believe will make it big

Cons:

    You’ll need to pay some of your profits back to Crowd2Fund as a fee for using the platform

13. Buy a Franchise – Aim for 5–10% per year

If you’re currently sitting on $100,000, then you might want to consider buying a franchise. A franchise is where you open a branch of a successful business that is already established. For example, you could buy a Subway franchise in your local town. Although the fees associated with successful franchises can be hefty, you need to remember that you are investing in a brand that is already established. As such, there is no need to build up a loyal customer base. You’ll also receive support directly from the franchise provider, which is an added bonus.

How to invest in a franchise?

There are literally tens of thousands of business franchises available in the U.S. The fees could range from a few thousand dollars, all the way up to $100,000 plus for an established brand like McDonald’s or KFC. The best option is to browse the many franchise offerings at Franchise Direct.

Step 1: Head over to the Franchise Direct website

Step 2: Browse the hundreds of franchise deals available

Step 3: Once you’ve found a franchise you’re interested in, head over to the official website of the franchise company

Step 4: Meet with the franchise manager in your local area

Pros and cons of buying a franchise

Pros:

    Run your own business Buy a brand that is already established Good investment for a secure future Get assistance from the franchise provider when needed

Cons:

    You’ll need to dedicate 100% of your time to running the business

13. Forex Trading – Up to 10% per year

If you have a good understanding of how forex trading works, then you might want to consider trading full-time. A $100,000 starting balance would allow you to nip ultra-small profits, while still minimizing your risk. However, you need to remember that forex trading can be very risky if you don’t have any experience.

How to trade forex?

You’ll need to use an online forex platform if you want to trade currencies. eToro list dozens of pairs, and the fees are really low.

Step 1: Open an account with eToro

Step 2: Quickly verify your identity by uploading a copy of some ID

Step 3: Deposit funds (minimum $50) using your debit/credit card, e-wallet or bank account

Step 4: Head over to the forex section

Step 5: Choose which forex pairs you want to trade

Step 6: Decide whether you think the price of the pair will go up or down, and place your trade

Pros and cons of forex trading

Pros:

    High returns on offer if you know what you’re doing Dozens of currency pairs available to trade Major markets like USD/EUR/GBP have lower volatility Cash out at any time

Cons:

    High risk if you don’t know what you are doing

Disclaimer: Transacting in virtual currencies is subject to various risks, such as price volatility, and is therefore not suitable for everyone. Your capital is at risk. eToro currently offers only Crypto (real crypto no CFD) so only buy with no leverage, and later on this year we will also offer real stocks for trading.

14. Pension – 20% tax relief

If you want to invest your $100,000 into your future, then it might be worth playing it safe and placing the cash into a pension pot. If you’re from the UK, the government will give you 20% tax relief on what you put in.

How to invest in a pension?

The easiest way to invest in a pension is to use a third party broker. You can do this easily with Hargreaves Lansdown, and you’ll still get your 20% tax relief. You won’t be able to touch your pension pot until you’re 55, so make sure that you won’t need to cash before this.

Step 1: Open an account with Hargreaves Lansdown

Step 2: Head over to the pension section

Step 3: Decide how much you want to invest (lump sum or regular payments)

Step 4: Leave the money to rest until you retire

Pros and cons of investing in a pension

Pros:

    A smart way to ensure you are financially secure when you retire Prevent yourself from spending the money elsewhere Get tax relief from the government No risk of losing the money in adverse investments

Cons:

    You won’t be able to touch the money until you retire

15. Gold – Volatile, but long-term prospects of 5-10% per year

If you’re the type of person that doesn’t trust the global monetary system, or you fear that another financial crisis is imminent, then you might want to consider buying and selling Gold. If history has taught us one thing, it’s that in times of market turbulence, securit traders flock to Gold. The key thing to remember is that Gold will always have value, not least because it has a finite supply.

How to trade Gold?

You dont need to buy physical gold given the high risk and expensive storage costs it brings along. Instead, consider buying gold CFDs (Contract-for-Difference). This is where you can speculate on the price of Gold either increasing or falling without needing to own the physical bullion. even when CFD trading, however, you’ll want to use a heavily regulated and highly transparent trading platform like eToro. Here is how to go about it:

Step 1: Open an account with eToro

Step 2: Quickly verify your identity by uploading a copy of some ID

Step 3: Deposit funds (minimum $50) using your debit/credit card, e-wallet or bank account

Step 4: Head over to the commodities section and click on Gold

Step 5: Decide how much you want to buy/sell

Step 6: Place your trade

Step 7: You can cash out your Gold at any time

Pros and cons of buying Gold

Pros:

    Protect your cash from the threats to hard currencies like inflation Gold has a finite supply Gold has been used as a store of value for over a thousand years Easy to trade through CFDs

Cons:

    Gold can be volatile at times, so you’re best off thinking long-term

Disclaimer: Transacting in virtual currencies is subject to various risks, such as price volatility, and is therefore not suitable for everyone. Your capital is at risk. eToro currently offers only Crypto (real crypto no CFD) so only buy with no leverage, and later on this year we will also offer real stocks for trading.

5 things to remember before investing your $100,000

$100,000 is a significant amount of money. While we appreciate that you want to increase your money by making smart investments, you still need to understand the underlying risks. Before you part with your $100,000, make sure that you take note of the following.

1. How long can you afford to keep your $100,000 tied-up?

When you have your money tied-up in an investment, you won’t be able to touch it. As such, you need to ask yourself how long you are willing to wait before you start seeing growth. If you want to invest long-term, then consider assets such as real estate or bonds. Alternatively, if you only want to invest for a short amount of time, then you’re probably best suited for peer-to-peer lending or forex trading.

2. What is your appetite for risk?

Regardless of what investment you decide to choose, there will always be an element of risk involved. In a nutshell, the higher the expected returns, the higher the underlying risk. If you want to minimize your risk as much as possible, stick with low-risk investments like U.S. Treasuries or property. If you want to add some higher-risk assets to your portfolio, then consider peer-to-peer lending.

3. How much money would you be happy to walk away with?

It is important that you make some short and long term targets before you invest your $100,000. Are you looking to make a bit of money on the side, or are you looking for annual gains of at least 10%? You need to set some realistic goals along the way, so that you can cash out your investment at the right time.

4. How much experience and knowledge do you have in investing?

$100,000 is a huge amount to invest, so you don’t want to be investing in assets or markets that you don’t understand. If you’re a highly experienced investor – then great. However, if you have virtually no knowledge of the investment space, then you’re best off allowing somebody else to manage your money for you. If this is the case, think about investing in bond funds or mutual funds.

5. Do you understand that markets are cyclical?

You need to understand that most markets are cyclical. This means that every now and then, the markets will go through a slump and lose value. This is especially true in the stocks and shares space. Certain real estate markets are also prone to frequent drips. Before you invest your $100,000, make sure that you are emotionally ready for the highs and lows of the investment sphere.

How to Invest $100,000

So you’ve got $100,000, and you’re ready to invest it. Maybe a relative has passed away and left you money in a will. Maybe you’ve been building up savings in a retirement account and you’re finally ready to get serious about investing it. Regardless of where you got the money, $100,000 is enough that you have a lot of investing options.

You could play things safe by putting it in a high-interest deposit account. You could try to maximize profits by investing in the market. And yet another option is to get into real estate by purchasing a rental property. Here’s a breakdown of your numerous options for investing your $100,000.

Before You Invest…

Before investing any of your money in the stock market, you should strongly consider taking care of two other financial priorities: Paying down debt and creating an emergency fund.

Pay down your (high-interest) debt.

If you have debt with a high interest rate, your best bet is to pay this down before putting anything in the market. That includes credit card debt and debt from other loans, such as payday loans. The average credit card interest rate is 16%, which is significantly higher than the average annual stock market return. This means that wiping out high-interest debt is a better use of your money than investing in the market… even a bull market.

If you have debt on multiple credit cards, consider a balance transfer credit card. This allows you to consolidate your debt and tackle it all at once. It might even have an introductory 0% APR, allowing you to put interest on pause while you pay it down.

Create an emergency fund.

Another thing you should prioritize is an emergency fund. An emergency fund is simply money that you set aside for yourself to use when something comes up. As an example, what would you do if you unexpectedly lost your job? Would you have enough savings to bridge the gap until you found another job? What if your car suddenly needed a big repair or if you got sick and had to pay some medical bills?

With an emergency fund, you have money set aside to help you through these challenges. If you already have an emergency fund, great! Look it over again to make sure it’s still well funded. For most people, a strong emergency fund covers six months’ worth of living expenses.

How much you put in your emergency fund, and where you keep it, is a matter of risk tolerance. The safe route is to go the full six months and keep it in a deposit account where there’s no risk of losing principal (like a savings or money market account). Others might keep as little as three months’ worth of expenses. They might also choose to invest the money in their fund, willing to risk their principal a bit if it means seeing a higher return. However you approach it, though, make sure you have a liquid emergency fund that can last you at least a few months.

Decide What Kind of Investor You Are

There’s another thing you need to do before investing your money: Take a few minutes to think honestly about what kind of investor you are. This also dictates the kinds of investments you make and which services or companies you use.

If you’re interested in doing your own research, creating your own asset allocation and handling trades on your own, then you’re more of a do-it-yourself investor. You probably want to open a brokerage account that offers you access to a variety of financial products.

If you don’t have a lot of investing experience or just don’t particularly want to worry about the nitty-gritty of finding investments, you may want to use a robo-advisor. This is a service that builds and manages a preset investment plan, based on your situation and goals. Robo-advisors usually charge (relatively) low fees and cover the basics of investing. Here are our top 10 robo-advisors.

If you want more in-depth financial guidance, consider working with a (human) financial advisor. An advisor can help you create a comprehensive financial plan and manage investments on your behalf. This option is the most expensive than robo-advisors, but it also provides the most personalized help. If you’re on the fence, check out this guide to whether or not you need a financial advisor.

The final piece of the puzzle in your investing style is your risk tolerance. If you have high risk tolerance, more of your portfolio will be invested in equities (stocks). You might also be more will to invest in smaller companies, which means both a greater opportunity for growth and a greater risk of loss.

A robo-advisor or financial advisor can both use questionnaires to gauge your risk tolerance. You can also use our asset allocation calculator to measure your risk tolerance and choose investments accordingly.

Top Priority: Invest for Retirement

Saving for retirement should be a major goal for everyone. If you haven’t saved much for retirement yet, putting $100,000 toward your retirement accounts can make a big difference. How exactly you save will depend on your individual situation.

If your employer offers access to a tax-deferred account, consider making a maximum contribution. Common examples are 401(k), 403(b) and 457(b) plans. The maximum for all of these is $18,500 for 2020 and $19,000 for 2020. At the very least, make sure you contribute enough to max out any matching that your employer offers.

These accounts are useful for retirement savings because you don’t have to pay taxes when you contribute, or as your accounts grow. You only pay tax when you withdraw the money in retirement. Contributing the maximum means smaller paychecks, but if you have $100,000 to spare, then you can likely afford the dent to your monthly income.

After you contribute to your employer’s retirement plan (or if your employer doesn’t offer one), consider maxing out an individual retirement account (IRA). A traditional IRA provides the same benefits as a 401(k). You pay tax on your funds when you withdraw them, but the money that goes in is pre-tax; since it’s not a paycheck deduction like a 401(k), this means you get to deduct the money you contribute on your taxes. Another options is a Roth IRA, which allows you to contribute after-tax money. There’s no deduction – this is money you’ve already paid income taxes on. The benefit is that your investments grow tax-free and you won’t pay any taxes when you withdraw the money.

A Roth IRA is probably preferable if you’re early in your career. Because you probably have a lower income than you will have later in your career, you can save money by paying the income taxes now instead of later. With IRAs, you have a combined limit of $6,000 in 2020 (up from $5,500 in 2020), so make sure to think about where you want to contribute to a traditional IRA or R0th IRA.

Best Investments for Your $100,000

Whether you’re investing for retirement or some other goal, the big question is: What investments should you actually buy? Below is a rundown of four popular options for you to consider.

1. Index Funds, Mutual Funds and ETFs

If you’re looking to invest, there are a lot of options. Mutual funds and exchange-traded funds (ETFs) are all good ways to create a diversified portfolio of investments.

Mutual funds are effectively baskets of investments. They might be all stocks, all bonds, or a combination thereof. Mutual funds have a manager – a person who is choosing what to include within the fund. This could provide a nice in-between for people who want to invest in individual funds but don’t have the time or know-how to research every stock. So instead, you just research a mutual fund and/or mutual fund company. Then you leave the specific investing decisions in the hands of the fund. The big trade-off is that some mutual funds, especially actively-managed funds, can have high management costs.

ETFs are similar to mutual funds, but they trade like stocks. They often, but not always, have lower costs than mutual funds. You can invest in just certain types of companies (e.g. large corporations), specific sectors of the economy (like technology or healthcare) or in other types of investments, like bonds and real estate. There are also ETFs that center on an idea, such as supporting renewable energy.

Within the world of mutual funds and ETFs, one popular option is index funds. Rather than having a manager who actively picks stocks and make trades, index funds attempt to track the performance of a single market index. For instance, an index fund might track the S&P 500 index (the 500 largest publicly traded American companies). The result is that you can easily (and often cheaply) invest in a wide range of companies. This provides you with some protection in case certain companies or sectors of the economy struggle. Index funds tend to outperform actively managed funds over the long term.

2. Trading Individual Stocks

When many people think of investing, they imagine picking that one stock that’s going to take off as the next Apple or Amazon. The truth is that trading individual stocks is time-consuming and risky. You need to do thorough research on companies, and ideally you’ll be well-versed in methods of equity analysis like technical analysis and fundamental analysis. While there is potential for big gains, there is also potential for big losses. There’s nothing wrong with using your money to invest in this way, but it does require a fair amount of time and knowledge.

3. Real Estate

If you want to invest in real estate but don’t know where to start, consider investment funds. REITs are particularly popular and allow you to invest in real estate without buying any property yourself. There are also ETFs that include multiple ETFs, allowing you to track the real estate market as a whole.

For people you want to purchase property, $100,000 is enough, in many places, to make a sizable down payment. If you live in a very expensive area like New York or Los Angeles, consider purchasing a property outside of your city or even out of state. Living in one state and owning property in different states could complicate your taxes, but don’t let that discourage you if you want to buy property. Just make sure to first speak with an expert, like a financial advisor, for advice on how to best set up and manage your finances.

4. Safer Savings Options

If you already have investments or if you just aren’t quite sure yet how you want to invest your money, there are some safe places you can store your money. The simplest way to save your money is in a savings account. Most big banks offer very low interest rates on their savings accounts (think 0.05% or less). Instead, look for a high-interest savings account. Companies like Ally, Synchrony and CIT Bank all offer rates above 2%. A money market account (MMA) is a similar option, and interest rates for MMAs are typically higher than for savings accounts.

Another safe place to park your money is in a certificate of deposit (CD). A CD has a set term, ranging from a month to up to 10 years; you cannot touch your money until the term has elapsed. The trade-off for this reduced liquidity is higher interest, and longer terms generally have higher rates (around 3%, as of early 2020). You might also get a higher rate with a jumbo CD, which are specifically for balances of $100,000 or more.

CDs require you to give up access to your money for a while, but they offer a guaranteed payout. And so long as the bank is FDIC-insured, your money is safe.

Should You Invest Your Money All at Once?

Even if you have a plan for the perfect asset allocation, it’s a good idea not to invest all of your money at once. Instead, consider spacing out your investments over time through a strategy such as dollar-cost averaging. Dollar-cost averaging is a simple investing strategy where you invest a fixed amount of money at regular intervals. For example, let’s say you want to invest $6,000 in one ETF. With dollar-cost averaging, you might invest $1,000 a month over the course of 6 months instead of investing it all at once.

The advantage of spacing out your investments is that you face less risk of spending all your money on an asset while it has a high price. While markets go up over time, corrections and even crashes do happen. If you have the bad luck to invest your entire $100,000 right before such a downturn, you’ll lose big. By spacing out your investments, you mitigate this risk.

As you might imagine, dollar-cost averaging is most useful for assets that see regular fluctuations in price. It’s not necessary if you’re putting your money in, say, a CD, where there’s little or no risk of loss.

The Bottom Line

With $100,000 to invest, you have options. You can park it somewhere safe, like a CD or high-interest savings account, or you can take a little risk and invest in the stock market. If you go the investing route, you can choose how much risk you want to assume. The right index fund gives you a diversified portfolio for a low price, while trading individual stocks may produce big gains. There are also investing options outside of the stock market, such as real estate.

No matter how you choose to invest, start by paying down your debt and making sure your emergency fund is properly funded. Then consider putting as much as possible in tax-advantaged retirement accounts. Finally, make sure you consider your risk tolerance and create a strong financial plan before you start making investment decisions.

Next Steps

Intimidated by all the investment options at your disposal? Or just worried you might make a mistake investing your $100,000? We don’t blame you! Indeed, you may have noticed that we’ve recommended that you speak to a financial expert. Financial advisors specialize in building financial plans and investing assets on their clients’ behalf. To find a qualified advisor in your area, we recommend this free financial advisor matching tool. It considers your financial situation and goals, then identifies up to the three local advisors who can help you achieve those goals.

Photo credit: ©iStock/Tinpixels, ©iStock/PeopleImages, ©iStock/mapodile

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