If you're looking to invest $100,000, you've certainly got no shortage of options — but which is best? Our votes: buying stocks and ETFs, investing in real estate, maxing out your retirement accounts, and trying peer-to-peer lending. Here's why.

So, you have $100,000 to invest? Lucky you!

But that’s a big chunk of change. And you want to make sure you’re investing it appropriately, so you don’t lose it all.

If you’ve already paid off any high-interest debts (like credit card debt) and have established an emergency fund, then you’re golden. That $100,000 can go straight into investments. If you haven’t, go do those things first before you turn to my investing recommendations below.

Debt-free and emergency fund filled? Good. Let’s dig into how to invest $100k the right way, so that you won’t just keep it, but grow it.

1. Invest in stocks

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The stock market is where I highly recommend you place the majority of your investment. 

That’s because stocks offer some of the best diversification for your portfolio. Not only can you get exposure to nearly every industry in the world, but stocks have historically been proven to provide one of the best returns on investment.

While the markets have been… not great in 2022, the average annualized return on the S&P 500 since the early ’70s has been close to 12% per year, and has historically rebounded with even better years after economic downturns. Here are the annual average returns on the S&P 500 over the last decade:

  • 2012 – 15.89%
  • 2013 – 32.15%
  • 2014 – 13.52%
  • 2015 – 1.38%
  • 2016 – 11.77%

  • 2017 – 21.64%
  • 2018 – (-) 4.23%
  • 2019 – 31.21%
  • 2020 – 18.02%
  • 2021 – 28.47%

You can find all of the annual returns since 1928 on this sheet that a student from NYU so graciously put together.

If you’re going to invest in individual stocks, start by reading our guide on value investing. It’s my favorite approach to picking individual stocks and can significantly reduce your risk while also providing you some recurring revenue (since you’re going after dividend-paying stocks.)

Read more: Beginner’s guide to the stock market

Alternately, you could go with a robo-advisor, which is ideal for a first-time investor (and actually, I’ve been investing for over a decade and still choose to use a robo-advisor).

A robo-advisor is a digital broker that uses a computer algorithm to compose, monitor, and rebalance your stock portfolio. You merely invest the money and tell the algorithm what your goals and risk levels are, and they’ll do the rest.

Read more: Best robo-advisors

2. Buy ETFs or mutual funds

If investing in individual stocks is too risky or labor-intensive for you, mutual funds and ETFs (exchange-traded funds) are an ideal alternative for investing your $100,000. 

The problem with picking stocks is that unless you’re investing in thousands of individual stocks, which most people don’t, your level of diversification will be low.

Mutual funds and ETFs, on the other hand, are basically baskets of stocks, pre-bundled for you, so you can make a single investment and get instant diversification. The difference between the two is how they’re put together, managed, and sold.

ETFs

An ETF acts exactly like a stock and is usually not actively managed. It typically follows an index — for example, the S&P 500.

You can go as broad or narrow as you want with ETFs, and you can focus on industries that are important to you. For instance, if you want to invest in socially responsible companies, you can buy an ETF that does that for you.

Read more: The 20 best commission-free ETFs

You can also use a robo-advisor for investing in ETFs, rather than hand-picking your own bundles.

Wealthfront, for example, offers a DIY approach or the ability to have them create a portfolio of ETFs for you (you can edit this portfolio at any time). Wealthfront offers investments in specific categories like socially responsible investing, tech ETFs, healthcare ETFs, and many more.

Mutual funds

Mutual funds, on the other hand, are actively managed by a person or group of people. There are some exceptions where they may not be (like with Vanguard, which has index funds), but in most cases, mutual funds have someone picking the stocks that are in the fund.

Mutual funds still act like an ETF in that you can get instant diversification, but it’s more meticulously monitored, and the strategy for picking stocks might be based on the fund manager’s personal investment preferences and biases.

The cost is also higher due to this. You’ll pay a premium for investing in a mutual fund — but the argument is that someone is managing the fund for you.

Read more: How to invest in mutual funds

3. Capitalize on the real estate market

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While $100,000 isn’t a small chunk of change, it’s not really enough to get into traditional real estate. However, you could consider REITs and real estate crowdfunding.

REITs

A real estate investment trust (REIT) is much like an ETF, only the focus is on real estate investments.

You can buy into a REIT at a relatively low cost and get instant diversification in real estate in a variety of areas and with a variety of property types.

The downside here is that you have little control over where your money is going. You are at the mercy of whoever is managing the REIT to decide where the investments are placed. Now, you could always sell your stake in the REIT, but to me, that negates the idea of a buy-and-hold strategy, which is ideal for real estate.

Buying into a REIT is now easier than ever, thanks to our good friend, technology. Streitwise, for example, is an app that lets you invest in private real estate for less than $5,000.

With Streitwise, they track down the properties for you, and, on average, they’ve generated dividends between 8%-10% over the last few years (the platform is run by experienced investors). One thing that makes Streitwise unique is that you can fund your investments using Bitcoin or Ethereum. If you have cryptocurrency, this could be a great way to make the most of it.

Traditionally, though, you’d invest in REITs by opening a brokerage account. Through this method, you choose investments just as you would stocks. 

Read more: Investing in REITs: Everything you need to know

Crowdfunding

Crowdfunding for real estate is a relatively new avenue for investing in commercial real estate projects. The concept is simple: a large-scale real estate project comes up for investment and multiple investors (the “crowd”) pitch in money to fund the project.

Those investors then become stakeholders in the project and are rewarded based on a variety of factors — maybe a set dollar amount they’re paid back as part of a loan, or perhaps they’re given a cut of the project when it’s completed and successful. Regardless, this is an excellent way for anyone looking to invest in massive real estate deals to have the opportunity to do so.

There are several platforms available for crowdfunding in real estate. Some of our favorites are:

  • DiversyFund lets you invest in multi-family commercial real estate, starting with as little as $500. There are also no management fees and tons of educational resources.
  • Fundrise features flexible minimum amounts ranging from $1,000 for their Basic plan to $5,000+ for their Core plan and $10,000+ for their Advanced plan.
  • CrowdStreet‘s REITs have relatively low minimum investment thresholds between $1,000 and $5,000.

Read more: Real estate crowdfunding: Should you invest?

4. Stash some money in a retirement account

One of the smartest things you can do with $100,000 is to invest it in retirement accounts. After all, if you want to retire comfortably, considering today’s cost of living and estimating the future cost of living, you’ll need a significant chunk of change.

There are two options here for investing your $100,000: a 401(k) or an IRA.

401(k)

The first retirement plan that I’d recommend is your company-sponsored 401(k), if you have access to one.

While your 401(k) deposits are pre-tax money, there’s a trick you can use to “deposit” money when you come into a lump sum (like $100,000).

Now, bear with me because this isn’t an exact science, but it works (both mathematically and psychologically).

Basically, what I do is temporarily increase my contributions to the max, until I am able to deposit the full amount I’m intending, then I put my contributions back to normal.

I then take the cash out of my lump sum investment pile, “subtract” the taxes I’d pay (and put this into a savings account), then deposit the rest into my checking, spread out over the time period I’m ramping up my contributions.

Sound confusing? It isn’t — let me show you what I mean:

Let’s say you have $100,000 to invest. And you’re currently depositing $200 per paycheck into your 401(k) and have $1,500 in the account.

The max you can contribute to a 401(k) this year is $20,500.

What I would do is crank the contribution percentage up to 75% (the max), which, depending on your salary, would significantly increase your contributions.

Say you make $60,000 per year — that’s over $1,700 per paycheck if you’re being paid bi-weekly.

Since you already have $1,500 in the account, you’ll need another $19,000 before you hit the max for the year. 

That means you can max it out in 11 paychecks (11 x $1,700 = $18,700).

Now, take your $19,000 in cash (from the $100,000 lump that you have) and deduct any taxes you’d expect — this way you’re not over-inflating your “paycheck.”

So, let’s say I assume I will pay about 25% in taxes. That means I’d shave off $4,750 (0.25 x $19,000 = $4,750).

That leaves me with $14,250 to deposit into my checking account and make up for the loss in income I’d have by ramping up my 401(k) contributions.

Spread this out over the 11 weeks you’re bumping up your 401(k).

Now, take the $4,750 you subtracted for taxes and throw it into a savings account.

Once you’ve maxed out, reset your contributions to 0 (since you’ve hit the limit) and enjoy the feeling of maxing out a 401(k).

Read more: How much should you contribute to your 401(k)?

IRAs

After you’ve maxed out your 401(k), you should max out an IRA.

Most people prefer a Roth IRA due to the retirement tax benefits (your withdrawals in retirement are tax-free, but you contribute taxed income now).

Read more: Best Roth IRA investment accounts

But I personally like a traditional IRA (you can get a tax credit on your contributions now, but you’ll be taxed in retirement.) I do this because I assume to be making much less in retirement than I am now.

Regardless of what you choose, you should max out one of the two — and the current cap is $6,000 per year.

Read more: Roth IRA or traditional IRA: Which should you choose?

If you don’t already have an IRA, open one now. If you’re open to the robo-advisor route (like I mentioned above) then I recommend going for itI personally have my traditional IRA with one and I love it. It’s completely hands-off and my returns have been great. 

5. Reach out with peer-to-peer lending

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Another great way to invest your $100,000 is with peer-to-peer (P2P) lending.

P2P lending is basically when you loan your own money to someone else who needs it.

There are a number of reasons you may want to consider P2P lending instead of something like stocks or real estate:

  1. Strong returns — Depending on where you invest your money, you can get returns of anywhere from 5% to 12% with P2P lending.
  2. Passive income — With most P2P lending platforms, you invest money by loaning it to someone else and you get monthly or quarterly deposits as they pay that money back. This creates a great stream of passive income, especially if you do it at scale.
  3. Helps others — P2P lending is a great way to lend money to others who need it for things like medical bills, paying off debt, or building their first business.

Read more: Best peer-to-peer lending sites for borrowers and investors

The bottom line

Having $100,000 to invest is not pocket change. It’s a significant amount of money and you want to make sure you’re investing it correctly so you don’t lose that money.

If you’re unsure, this could be a good time to hire a financial advisor. Whether it’s a lack of time, interest, or just knowledge, a professional can guide you and manage this bucket of money on your behalf.

Read more: Should I get a financial advisor?

Or, if you’re already feeling pretty confident on your own, then any of the above suggestions are good places to invest your $100,000. The most important thing is to do your research before you dive into any investment, to avoid any financial woes.

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About the author

Chris Muller picture
Total Articles: 280
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter.