How to invest $100,000 the smart way


Having $100,000 at your disposal can present a variety of investment opportunities. Depending on your financial needs and goals, the money can be put to work to generate passive income, enhance your retirement readiness and even launch a new business that can provide greater prosperity in the years to come.

How to invest $100,000 

The first step when you have any amount of money to invest, whether it’s $100,000 or some other sum, is to consider your short- and long-term financial plans and objectives. It’s also important to think about when you might need to access the money and assess your level of  risk tolerance.

“While certainly more dollars give you potentially more freedom to divide the assets and use them for multiple purposes, thoughtful decision-making should remain constant,” says  Heather Winston, certified financial planner, CWS, and director of product, advice, and planning at Principal Financial Group.

As you’re sorting through these considerations, bear in mind that diversification is always a good approach, both within and across asset types, to minimize volatility. 

You can invest in the stock market

There are a number of ways to invest in the stock market including using a traditional brokerage account to buy stocks in growth industries that can help your money grow even more or by purchasing dividend-paying stocks and bonds that can generate steady, ongoing, passive income. Bonds are another valuable option, says Jason Escamilla, CFA, founder, and chief investment officer for the wealth management firm Impact Advisor

“Bond yields haven’t been this high in over a decade. This means you get a decent return with low-risk, especially short-term, government bonds right now, even for long-term retirement savings,” says Escamilla.

Exchange traded funds (ETFs), which are typically a mix of stocks and bonds can also add diversification to your portfolio.

Or save for retirement

Putting money into a tax-advantaged individual retirement account (IRA) is another wise choice if you have $100,000 to invest. Taking this step can offer the advantage of decreasing your annual income and thus your tax burden.

“Work with your financial advisor and tax professional to determine which type of retirement account—such as a traditional IRA or a Roth IRA —might make the most sense based on your current and anticipated tax bracket,” says Scott Thoma, certified financial planner with Principal.

You can build your emergency fund and pay off debt, too

Having six months of living expenses in an emergency fund is also an important rule of thumb. With $100,000 at your disposal, setting aside some money to enhance your rainy day reserves is a good choice. And in the current high-interest rate environment, paying down debt is another savvy move.

“It’s important to focus on financial stability and security, and that may start with ensuring you have a stable debt position including addressing high-interest, non-deductible debt first and working toward building or replenishing an emergency fund,” says Thoma.

Invest in real estate 

With $100,000 at your disposal, you may also want to consider bigger-picture thinking in terms of your investments and include real estate options.

Real estate investment trusts or REITS are an investment vehicle that includes income-producing properties such as office buildings, malls, apartment buildings, and more.

“REITs offer pass-through income to individual investors. They can be useful for those looking to gain access without having the know-how or time to manage a large number of properties,” says Sameer Samana, CFA and senior global Market strategist for Wells Fargo Investment Institute.  

Owning property directly, such as buying your first home or an investment property such as a single family home or apartments to rent out and generate passive income, is another way to grow your money over the long term. 

Not only does real estate typically appreciate over time but it also comes with some tax advantages. The expenses associated with owning a rental property can be deducted including property taxes, mortgage interest and even management fees if you use a property manager.

Consider peer-to-peer lending 

Peer-to-peer (P2P) lending offers a variety of benefits including strong historic returns and the ability to generate an ongoing source of passive income. This type of investing typically involves lending money to people through an online platform such as Prosper, Upstart, Kiva,  or similar companies. The money you lend is then repaid with interest.

“P2P lending works best for small investors who also like to roll up their sleeves and do more work and who enjoy being part of P2P lending either from an impact or social betterment perspective,” says Escamilla. 

There are some downsides to keep in mind however. When participating in P2P lending, your money is not accessible should you need it quickly or for any unexpected reasons. There may also be risks when lending this way.

“P2P lending lacks liquidity or ‘resale value’ if you need your money back sooner,” continues Escamilla. There may also be credit risks associated with the borrowers or potential risks tied to the lending platform itself should it fail or go out of business unexpectedly. The bottom line is due diligence is very important before investing.

Start a side hustle or business

Starting a side hustle or small business can be a great way to establish an additional source of income to supplement your salary or even test whether a business idea has the potential to grow. But here too, there are risks, including that the business will not succeed. 

With this in mind, it’s a good idea to consult professionals before investing too much and limit the amount of money you devote to such a plan.

“If the side-gig [or business] is too far outside your lane, think hard about pouring resources into it,” says Escamilla.