You’ve got $100k and want to invest it strategically so you make money while you sleep. This is a dream scenario for many people. Congratulations on having $100k in the bank! Whether the money came from an inheritance, selling a home, or simply saving your hard-earned money, you have some exciting investment opportunities ahead. If you are wondering how to invest $100k to make $1 million, I have some answers for you.

Before we dive into the nuts and bolts of your investment options, let’s start with the assumption that you are in good financial standing. What I mean by this is you already have a few key things taken care of, like:

• An emergency fund with at least three to six months of savings for expenses.
• No high-interest credit card debt.
• A retirement account that you have been and will continue to consistently contribute to, preferably maxing out your contributions.

If any of the things listed above have not been taken care of, start there. Once you’ve checked off those boxes, you are ready to examine your investment options. Because there are so many different ways to invest, especially with such a large chunk of money, your next step is to evaluate your financial goals.

How to Evaluate Your Financial Goals

1. WHAT ARE YOUR FINANCIAL GOALS?

It’s best to build an investment plan based on your financial goals. Only you know what those are. Here are some questions to get you going.

• Do you want to grow your retirement accounts?
• Are you looking to set up a college fund for your kid?
• Are you trying to get out of your apartment and into a home?
• Do you want to generate monthly income from your investments?

Sit down and write down your financial goals. Think about where you are currently and where you hope to be in five, ten, twenty, and thirty years. Once your goals are clearly defined, deciding how to invest $100k to make $1 million will be much easier.

2. WHAT IS YOUR TIMEFRAME?

Your timeframe is how long you plan on holding an investment. If you know you’ll need access to your investments sooner rather than later, it’s a good idea to choose a less aggressive investing strategy.

For example, putting a bunch of money into equities (aka stocks) may not be the best short-term investment strategy because the stock market will fluctuate. What if you needed to pull your money out of stocks sooner than expected and the market happens to be down? You’ll likely lose money.

How long you can afford to invest plays a huge part in deciding where to invest. If you’re investing for something long-term, like retirement, you’ll have a good idea of how long you plan to hold your investments, depending on your age.

3. WHAT ARE YOUR INDIVIDUAL CIRCUMSTANCES?

Taking stock of your circumstances is also essential.

• What is your age?
• How is your overall health?
• What are your yearly earnings?
• What is your family status? Do you have children at home? Are you taking care of ailing parents? Do you have alimony payments?
• When do you plan to retire?
• Do you expect to receive an inheritance down the road?

If you are confident you have enough money to be comfortable if your investments dip for a period of time, consider a more aggressive strategy.

4. WHAT IS YOUR RISK TOLERANCE?

Use the answers to the above questions to determine your overall risk tolerance and how to invest $100k to make $1 million. You have a low-risk tolerance if you can’t afford to lose your investment. If you are relatively unaffected by the loss of your investment, your risk tolerance is very high.

5. ARE YOUR EMOTIONS IN CHECK?

We may consider ourselves very logical most of the time. But when it comes to something like money, very rational people can make very emotional decisions. Money is emotional, and the emotions that come with a considerable loss can cloud anyone’s vision.

This leads us to our next subject: what type of investor are you?

What Type of Investor Are You?

1. DIY INVESTOR

Do-it-yourself investors like to take the hands-on approach. It’s not only the cheapest option; it’s now easier than ever to create and manage your portfolio. Managing your portfolio means you pick and choose exactly where you want to put your money (i.e., stocks, bonds, mutual funds, ETFs, etc.) and how much to invest. This is where emotion can sometimes overpower logic. If you consider yourself a DIY investor, make sure you feel confident in keeping your cool during potential market lulls.

Before deciding which assets you’d like to invest your money in, consider the trading style that best fits you and your life. Are you an active trader, day trader, or interested in passive investing? Depending on how much time you want to spend and how involved you plan to be will help decide your trading style.

2. AUTOMATE WITH ROBO ADVISORS

Several companies offer robo-advisors that automate and manage your investments. If you are unsure how to invest $100k to make $1 million or want help from AI investing, this may be the best route. Robo advisors are a low-cost/low-hassle solution to investing. If you have questions or want a more customized portfolio, investment advisors are available to help.

3. FULL-SERVICE GUIDANCE WITH FINANCIAL ADVISOR

The benefit of hiring a financial advisor is that you have a professional handling all of your investments. They can make recommendations, manage your portfolio based on market trends and offer overall financial planning for the future. While this is the most expensive option, it may be just what you’re looking for, especially if you’re about to invest $100k. Here are some tips for choosing a financial advisor.

How to Invest $100K to Make $1 Million

Deciding where to invest your $100k depends on your goals. These investing strategies usually fall into three camps: growth, income and guaranteed investing. If you are not quite sure where you fall, here are some additional questions to ask yourself.

• Are you looking to grow your money over the long term?
• Do you want to produce monthly income from your investments?
• Is your risk tolerance low?
• Are you more comfortable with a safer investment strategy?

1. GROWTH INVESTING

Stocks are shares in public companies traded on the stock exchange or through brokers. A stock’s worth is based on investors’ perceived value and future earning potential. It’s well-known that stocks can experience large and small fluctuations in value. However, you can minimize that risk by diversifying your portfolio by investing in a number of stocks across different industries.  

Commodities are assets like silver, gold, agricultural products, and oil. Commodity investments are more volatile than stocks, produce no ongoing earnings, and are completely determined by future sale value, aka an educated guess.

2. INCOME INVESTING

US Government Bonds are safer investments, as they are insured by the government. Investors will receive income via interest. However, as the government secures them, returns are usually limited, yielding around 3 percent.

Other Bonds, issued by corporations, municipalities, and foreign countries, have the potential to produce higher returns. While the yields may be higher, the risk also increases with these types of bonds.

Personal Loans Investing or Peer-to-Peer (P2P) Lending can offer many advantages, including strong returns, passive income, and helping borrowers who need a loan. P2P lending is a newer type of investing that has become accessible and easy to invest in through online platforms.

You can even invest as little as $25 just to try it out. I’d suggest investing between $2,500 and $5,000, especially if you’re starting out and go from there. As P2Ps gain more popularity, investors are using this type of lending to diversify their portfolio.

How to Invest $100K Safely

3. GUARANTEED INVESTING

Savings and Money Market Accounts provide guaranteed safety up to $250,000 at each bank or institution. You also have full access to your money at any time. These FDIC-insured accounts yield low returns, usually around 1 percent, but are your safest bet to keep your cash secure and accessible.

Certificates of Deposit, or CDs, are also protected by the FDIC and can earn higher returns if you are willing to leave your investment in one for a few months or years. Many institutions offer 5-year CDs with returns of around 3 percent.

For more ideas on how to invest $100k to make $1 million, read, “6 Best Placed to Invest Money Right Now.”

If you’re interested in investing for a difference,  check out this article about social impact investing.

How to Invest $100K in Real Estate

There are three primary ways to invest in real estate: traditional real estate, REITs, and crowdfunding real estate. Each has its own set of risks, demands, challenges and passive income potential.

1. TRADITIONAL REAL ESTATE

We’ve all seen shows on TV about people buying real estate, fixing it up and selling it for profit. This is only one strategy to invest in real estate. While it may look easy-ish and have massive profit potential, they don’t show when a flip turns into a flop. While there is potential to generate a return on flipping a house, there’s also a lot of hard work and potential to lose a lot of money. If you want to go this route, we recommend diligently running the numbers to ensure they add up and produce a positive return on investment (ROI). Stick to those numbers as if your money depends on it because it does!

Another way on how to invest $100k to make $1 million to invest in real estate is to build a portfolio of cash flow and appreciating rental properties. With this strategy, there are multiple ways to go about it. You could buy a single-family home, condo, or apartment to live in and then a couple of years later when you are ready to buy another property, turn that property into a rental. If you do this every couple of years, you can easily build up a real estate portfolio. You could buy a duplex, triplex or fourplex, giving yourself instant multiple doors. You could choose to rent out all of the units, or get an owner-occupied mortgage loan to capitalize on the lower downpayment.

Another is to buy investment properties with property management in place. At RealWealth, we help our members do just that by connecting them with turnkey property teams selling single family and multi-family properties that meet REAL Income Property™ standards in top-performing markets nationwide. To learn more, join RealWealth. Membership is 100% free and includes a strategy session with a RealWealth investment counselor who can help you choose the best markets for your financial goals.

Not matter what strategy you choose, if you’ve purchased in the right market, renting out your property can generate passive income, cover your mortgage and then some.

In her book “Retire Rich with Rentals,” our very own Kathy Fettke, Founder and co-CEO of RealWealth, shares her tips and insights on investing in real estate.

Fettke states, “There’s a big difference between cash flow and quality. You may find a house that seems like a great deal. It may be priced well below market value; and when you run the numbers, it looks like it can produce a good cash flow. But, just because a property has cash flow on paper, doesn’t mean it’s a quality investment.”

Fettke goes on to say, “A high quality home may not look like it has as much cash flow on paper, but you need to run a few more numbers. Once you consider the increased chance of appreciation and the lower cost of maintenance on a house in a good area with quality tenants, you can actually make much more sense than that “bargain property”.”

An important question to ask yourself is whether you want to take on the responsibilities of being a landlord or hire a property management company. Whatever you decide, run those numbers to ensure you’re earning income instead of losing it. Holding onto your quality investment property for the long term is your best bet for building equity and producing passive income through real estate.

2. REAL ESTATE INVESTMENT TRUSTS (REITS)

Real estate investment trusts (REITs) are companies that sell shares in their various real estate investments. Instead of buying an apartment or home to generate passive income, investors can now invest in bigger real estate projects through REITs.

EXCHANGE-TRADED FUNDS (ETFS)

ETFs allow investors to buy into multiple stocks instead of stocks in just one company. As different markets fluctuate, you’ll take advantage of growing markets in one sector that may offset losses in other underperforming sectors. Investing in ETFs will diversify your portfolio and can minimize risk, especially if you put your money into a variety of industries.

You also can diversify or spread your risk across multiple REITs via REITs ETFs of your choosing. So, instead of putting all of your money into one investment property, investors can buy into numerous real estate projects using ETFs.

If the concept of ETFs is confusing, there is always the automated investing option. Several online investment platforms offer a risk survey to help you build a portfolio unique to your goals.

Investor Tip: REITs can be an excellent option for those looking to get their feet wet in real estate investing. But, you will have little control over where your money is going, so it’s essential to do your due diligence on the REIT managing your investments.

3. CROWDFUNDING REAL ESTATE

Crowdfunding is a somewhat new real estate investment opportunity in which individuals pool their money together to participate in bigger real estate deals. The money pooled from multiple investors is used to fund the project.

Investors can be rewarded or receive a return through a set dollar amount, much like a loan, or given a cut when the project is completed and generating income. The idea is to give investors the opportunity to take part in big real estate deals that they would otherwise miss out on due to the huge amount of capital required.

Investor Tip: Crowdfunding has the potential to make investors a lot of money. Our advice is to educate yourself in real estate and make sure the crowdfunding platform you choose to invest in knows their stuff and is building or investing in the right markets.

TIPS FROM A REAL ESTATE INVESTMENT EXPERT ON HOW TO INVEST $100K TO MAKE $1 MILLION

Brandon Turner, real estate investor, author, entrepreneur, and former host of BiggerPockets podcast, shares how to invest $100k to make $1 million withreal estate:

“$100,000 could do a few things for you in the real estate realm, depending on your risk level. You could buy a nice house in the suburbs for around $100,000 and collect the cash flow on that home without needing to pay a bank. Or, if you wanted to use some leverage on your money (thus increasing both risk and potential profit,) you could put that $100,000 and buy more than $100,000 worth of real estate. For example, you could buy a $500,000 apartment complex and put your $100,000 as a 20% down payment. Or you could buy five $100,000 houses and put a 20% down payment on each. Personally, I’d go for the apartment complex, but that’s my bread and butter. This is a great thing about real estate investing – there are so many great options to fit different personality types, locations, and income levels!”

Investing $100K in a Business

Investing in a great business idea could double, triple, or even quadruple your investment, that is, if all goes well. If it doesn’t, and according to statistics, 50% of new businesses fail within the first five years, you could risk losing your entire investment. This makes investing in a new business venture the riskiest type of investment. The reward is high, but so is the risk.

The risk is why banks make it extremely difficult to get a loan for a business venture. If there’s no collateral, the investment must be treated like venture capital, with the assumption that there’s a 50% chance you’ll get your money back.

Getting a loan for something like an investment property is much easier to do because the bank looks at your finances, showing that you can afford the monthly loan payments and haven’t taken on debt you can’t afford. If you cannot pay the mortgage on the property, the bank can use the property as collateral and get their money back, thus minimizing risk compared to a business investment.

On the other hand, if you are interested in the success of a business that is a couple of years old but has strong growth projections, you can buy shares in the company. You’ll have a stake in the company but will lower your risk of losing your entire $100k investment.

Many investors choose to buy shares in “Blue Chip Stocks,” which are individual stocks in companies that have a proven history of performing well. These are companies that most consumers are familiar with and have been around forever.

Best Ways to Invest $100K

The best advice I can give you is to invest in ways that will balance risk while still allowing your money to grow. A good balance between risk and reward. Examples of diversifying your portfolio to reduce risk is to invest in a few of the following:

• Real Estate
• Rental Property
• Raw Land
• Crowdfunding
• Businesses
• Index Funds
• Blue Chip Stocks

Educate Yourself

Because there are so many different investment strategies and options, it’s vitally important to educate yourself. Take advantage of all the free information and resources available online. Talk to experts and professionals in each investment sector and learn from their successes and failures.

If investing in the stock market piques your interest, start your learning there. If real estate sounds more appealing and fits your lifestyle and goals, start exploring all the different options. Be sure to run the numbers and keep your emotions in check before jumping into anything.

RealWealth offers incredible amounts of free information and resources for any type of real estate investor. From easy-to-understand articles on complex topics, to research on the best real estate markets to weekly webinars, our goal is to provide you with all the information and tools to be a successful real estate investor. If you are ready to start your real estate investing journey, join RealWealth today.

Final Thoughts

Deciding how to invest $100k to make $1 million may seem like an overwhelming task. The good news is, you’re looking for ways to make your money work for you, instead of just letting it sit in a low-interest savings account. Having $100k to invest is a great problem to have.

No matter how or where you decide to invest your money, minimize risk by spreading your money across various industries or markets and keep your finger on the pulse of these investments (or hire an expert). You’ll quickly learn which type of investing you prefer and how you could potentially turn your $100k investment into $1 million.