Say you have $100,000 sitting in cash, what would you do with it? Should you sit back and relax or should you make an investment with it?
Before you go crazy and splurge on cars and gadgets ,you must take a deep breath and think about the things that you can do with your money. So what should to do? How can you keep your hard-earned cash safe while still making sure that it grows? This article will help you learn how to invest your $100K.
Disclaimer: You must remember that all investments have a level of risk associated with them. Therefore, you must do your research and/or consult with a financial advisor when you have questions. Even though these strategies are relatively safer than randomly investing in stocks, they may not be suitable for you – so you must conduct your own due diligence.
- Invest in Real Estate
The first three ways to invest your $100k involve investment in real estate. Once you have the money to invest, real estate becomes a plausible choice– both for protecting and growing your wealth.
Once done intelligently, real estate is generally always a safe investment even when the market fluctuates. Provided that you do your research and avail insurance on the property, the downsides are substantially limited.
The four ways on investing in real estate are as follows:
- a.Buy a Rental Property in Your Home Country
With $100,000, you can buy a rental property in most parts of the United States. If you want something a bit pricier, cover the down payment and look for lenders to cover the balance.
Rental properties are considered as a great investment since a profitable rental will maintain its value regardless of what happens in the market.
Once the value of homes increase, then the worth of your property also increases. If the value of homes decline, then people will rent instead of buying thus, increasing the rental income of your investment. As long as you look for a property that has a great cash flow, you can be assured of a very steady growth in your wealth.
- Invest in International Real Estate
There was an investment group called Real Caribe that offered properties in the Dominican Republic for sale in a luxury sky rise – for only around $100,000 per unit. With a potential annual returns of 8-12% on a completely managed investment, it’s definitely worth taking a look at.
Even though acquiring properties in the United States generally takes lesser work, it’s becoming harder to look for great bargains.
Meanwhile, other countries across the globe are experiencing massive growth – and earning annual returns of 10-15% from your property investment is not unreasonable. With prices often lower than those in United States, your investment can go a lot further.
Since international investing can be risky for foreigners, if you do not know what you are doing, you should only invest if you have someone from the country to advocate for you and validate the investment.
To protect your investment, look for legitimate Americans that are already working in the area, an investment firm to work with, or a credible law firm. When you have partners looking out for your investment, it will be much easier to sleep at night.
International real estate gives you a tax break when you travel so you get to write off your travel as a business expense anytime you go to see your property.
- Invest in Raw Land
Another option that you have if you are interested in getting into the real estate rental market would be to purchase raw land – this could mean raw land that has the potential for development later or raw land that contains valuable resources such as trees.
No matter what type of real estate you purchase, real estate has a solid history of steady growth in value and increasing wealth for those who invest in it in the long-term.
- Invest in Real Estate with Equity Crowdfunding
If you want to invest in real estate without having to go to the complexities of managing the property yourself, then equity crowdfunding would be an excellent way for you to invest. With equity crowdfunding, you can lend money to real estate developers for a solid profit – earning annual returns ranging from 8 to 15 percent.
Since the loans are baked by the actual property and vetted by skilled investors, your investment is considered relatively safe. By investing in real estate that are crowdfunded, not only do you receive healthy returns, but you also have the ability to benefit from the small business owners managing and developing those properties.
Crowdfunded real estate investing enables you to help seasoned investors realize their growing real estate ownership dreams while you are reaping the investment returns with minimal work.
- Start or Invest in a Business
Mark Cuban once said that the best investment is the one that you make in your own business – and that placing your money in stocks means your money is going to grow the business of someone else and not your own.
Investing in businesses demands due diligence on what the potential is for the said business. So before you decide to lay down any cash, you must thoroughly educate yourself on the potential wins and losses that the business could experience, and doing a research if there is truly a need for the business idea.
There are a lot of components needed in starting and running a successful business.
You must take a cue from the experts in business investment and analyze the opportunities with a critical eye. Look out for your own monetary interest if you consider investing in a business. The business that has the most potential for profit and success is a business that has been proven a need and has established a solid business plan with hard-core facts to support it.
Since businesses have a high rate of failures, it is important to know the ins and outs of running a business before you invest in one or start one. The more knowledge you have on business ownership in general and on the specific kinds of business that you are considering, the higher will be your chances of success.
If investing $100,000 into a business does not cross your mind, there are a number of ways that will help you start a business inexpensively.
You can create a blog for $2/month and possibly turn it into a $1 million per year income stream. Meanwhile, you can create your own online store using shopping sites such as Shopify.
Even though placing all of your wealth in a startup is often not recommend, once you have the time to spare, establishing your own business can become very profitable.
- Invest $100,000 in the Stock Market
While real estate usually offers the most stable form of investing, stocks certainly should not stay unnoticed. Even though the market usually drops, there are ways on how you can combat these fluctuations:
- Diversify Your Portfolio with a Robo-advisor Service
The solution to stabilize your returns in the stock market is to diversify your portfolio across a number of international stocks, US stocks, and bonds. But while you can try to develop this diversified portfolio by yourself, it can quickly get expensive.
The better solution is to either purchase an ETF through a traditional stock broker such as TradeKing, or use a robo-advisor that has the ability to automate your investments based on your risk level.
Personal Capital is the most popular robo-advisor for high net worth investors (if you have more than $100,000 to invest). Not only does Personal Capital enable you to invest at only a fraction of the cost of many other investment services, but they also give free advice and consultation.
For those that have a lower net worth, Betterment is considered to be another fantastic robo-advisor service that enables you to inexpensively diversify your portfolio.
Once you are investing $100,000 or more, you do not want to invest everything in a single stock. Yes, it could potentially increase your wealth much faster, but it could get you bankrupt. You must remember that the key to successful investing is diversification.
- Buy Blue Chip Stocks and Write Covered Calls
Even though you want to diversify most of your portfolio, you should consider writing covered calls if there are specific companies that you want to own in the long-term.
A covered call is similar to placing a renter in your investment property – whether the value of the rental goes up or down, you will still have earnings. When you write a covered call, you are giving someone the choice to purchase your stock at a specific price on a specific date.
Once the stock goes way up, the the call option will then be activated and you will be required to sell your shares at a discounted rate (while still earning money). Meanwhile, if the stock decreases in value or stays flat, then you do not have to sell your shares and you will make anywhere from $0.50 to more than $5.00 per share for selling the option.
- Invest in Loans with Peer-to-Peer Lending
Sites such as Lending Club offer anyone the chance to invest in P2P (peer-to-peer) loans. When someone is in need of money to pay for a large purchase, to refinance credit card debt or to renovate their house, they turn to Lending Club. Investors will conduct research on the available potential loans and decide on the amount of money that they want to invest in a potential loan based on the information provided, such as the credit history, the reason for borrowing, and the debt-to-income ratio of the borrower.
Lending Club gives you the opportunity to invest as little as $25 into these notes – earning an around 9% of average annual return after defaults.
Lending Club have small minimum investment thresholds per note amounting to $25 which enables for maximum diversification with minimal risk. Investors can choose from different grades of notes, ranging from A through G, that represents different risk levels.
Higher grade notes such as those graded A and B have a lower rate of return but have a lower charge-off rate. On the other hand, lower grade notes such as those that are graded D through G historically have a higher rate of return, but have a higher charge-off rate (the chance of not being paid back).
Investors can diversify the money they invest in peer-to-peer lending between higher grade and lower grade notes as they want.
While it is not recommended to place all of your capital in Lending Club, it serves as a great alternative to traditional forms of investing that might be less risky as compared to the stock market.
The best way to invest your $100,000 will be to break it up and diversify it into various investment choices.
For example, you might want to place $25,000 into real estate as down payment for a small condominium. From there, you could place another $25,000 and invest it in the stock market. Consider taking another portion of the $100,000 and place it into peer-to-peer lending, and another portion into your own business venture.
By diversifying your investment, you will run less risk of losing money and gaining more experience in investing as you discover which types of investments will suit your own risk tolerance level and personal investment style– and which of these don’t.