The best way to invest $100k

It’s not all trading stocks and buying houses. Get your financial bearings in place before you start investing.



Elissa Suh

Elissa Suh

Senior Editor & Disability Insurance Expert

Elissa Suh is a disability insurance expert and a former senior editor at Policygenius, where she also covered wills, trusts, and advance planning. Her work has appeared in MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

Updated|8 min read

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Key takeaways

  • Pay down your debt and open a savings account

  • Max out your retirement plans

  • Don’t put all your eggs in one basket (i.e. individual stocks)

  • Diversify your portfolio with high- and low-risk investments

What would you do with $100,000? Most people don’t come across this sort of money, but if you do experience a windfall — an inheritance, a payout from a legal settlement or life insurance policy, maybe even a winning lottery ticket — you might consider investing it. We’ll discuss investment options and strategies and other tips on how to grow your money.

Before investing $100k

While it might be enticing to throw all your money into the stock market or a promising new business venture, there are two important things to do before you start investing.

Pay down your debt

If you have any debt, you should consider paying it down before you start investing. This is especially encouraged if it’s tied to a high-interest credit card or loan, since the rate at which your debt grows might be greater than the rate at which your investments grow.

For example, the average credit card APR (16.46%) is a bit higher than the annual stock market return (around 10% annually) and much higher than the return on steadier investments like bonds.

You might also consider prepaying your mortgage, which means making extra payments to shorten the length of your loan. You could even recast it, to free up some more cash.

If you have high debt, you could try the snowball method, by tackling the smaller debts first, or the avalanche method of prioritizing high interest debt first. No matter which way you choose, it’s financially wise to pay off your creditors. It will help relieve the mental burden of debt, too.

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Build savings

Before you start investing, make sure you have enough to cover your daily expenses. It doesn’t make sense to squirrel away all your money for the future if you’re struggling at present to pay your bills. You can start by putting money in a high-yield savings account, which not only easily lets you withdraw funds if you have a cash flow problem but also earns you some money.

Experts suggest building an emergency fund that can cover three to six months of expenses. This may not have been feasible for many people, but with a $100,000 you can get pretty close.

Investing dos and don’ts

Before we start, here’s a run down of what to do and not to do.


  • Take your time

  • Prioritize your goals

  • Spread out your risk with different types of investments

  • Focus on low-fee investments


  • Tell everyone

  • Go on a spending spree

  • Forget to save

  • Bet everything on the stock market

Strategies for investing $100k

Before making any investments, you should consider the following:

  • Goals

  • Circumstances

  • Risk tolerance

Are you investing for early retirement or turning a quick profit? Are you in your 20s or 40s? How much risk are you willing to take on? These are all questions to consider so you can diversify portfolio through asset allocation, or holding a wide variety of asset types.

Asset allocation

$100,000 is not a small amount of money. If you already have regular steady income and healthy retirement plans, the way you invest might different than someone who is in between jobs. In either circumstance, you might want to consider asset allocation, or divvying up your portfolio between different types of investments.

The table below gives an example of the risks and returns for a few different investments. Keep in mind that these are general ranges — you can usually check your investment brokerage’s website for more detailed rates of return and performance measures for specific funds and asset types.

Investment assetAvg. ReturnVolatility (risk)
High-yield savings account0.05%None
Money market mutual funds2%Low
Government bonds3%Low
High-yield bonds8%Medium
ETFs (stocks)7% - 12%High
Specialty sector funds3% to 18%Very high

If you’re an older investor who plans to use the money soon, you might not want to invest in riskier assets if you have a brief investment timeline. But if you’re in your 20s and investing for retirement, or if you’re already a seasoned investor, you might be able to afford having a greater risk tolerance.

You can even invest in alternative assets, like livestock or private businesses (a startup, for example), which are volatile, but hold the potential for high returns, if your appetite and portfolio allow for it.

Personal involvement

Another thing to consider when it comes to investing is how involved you’d like to be. You can do it yourself or sit back. Both approaches can be accommodated, especially with a wide variety of online brokerages. Many even offer robo-advisers that automate your investments for you.

You can still go the traditional route and hire a financial adviser, but make sure to choose one that is fee-only. Investment advisers paid on commission might have more incentive to get you to invest in more expensive securities.

How to invest your money

Now that you have a strategy for investment and have acquainted yourself with risk and asset allocation, here are some suggestions for what to invest in.


With a retirement savings account, you can invest while planning for the future. If you have a 401(k) plan, you should consider maxing it out. You can do this by temporarily increasing the percentage of your paycheck that goes towards your 401(k), and then resetting it to zero if you’ve reached the max.

(In 2022, the max you can contribute to a 401(k) is $20,500, plus a $6,500 catch-up contribution if you're 50 years old. This is increased from $19,500 in 2021.)

Not only will it help you save for retirement, but you’ll be moving money into a tax-advantaged account. If you’re lucky enough to have employer match, then use it. Employer-matching funds are guaranteed free money and virtually risk-free.

Regardless of whether or not you have a work-sponsored plan, you can still open a separate retirement account on your own. Consider a Roth or traditional IRA. Each comes with its own tax advantages and offers more flexibility of investment options compared to a 401(k) plan. The 2022 IRA contribution limits aren’t too high, either — $6,000 if you’re under 50 years old and $7,000 if you’re over 50 — so you can easily max out the savings. (These limits are unchanged from 2021.)

Low-fee mutual funds

Mutual funds can take some of the mental burden away from picking the right stocks because they’re are actively overseen by a fund manager. You just need to pick the mutual fund group, and they’ll invest in stocks, bonds, and other securities for you.

There’s a price for this active-management style though — 1% to 3% of your money will go towards fees. In the world of investments, where the goal is to make money, this is not exactly a small amount since every dollar counts.

Instead you might consider the more versatile and convenient ETFs, which are like a bundle of stocks or other securities. They have lower fees because they are passively managed (the fees or expense-ratios are closer to 0.2%) and accompanied by lower investment minimums. You might be able to invest for as little as $1.

To go one step further, you could try to invest in an index fund, a broad category of passively managed funds that includes ETFs. Like the name suggests, an index fund makes investments based on an index, like the S&P 500 (the 500 largest companies with the largest market capitalization) or the Dow Jones Industrial Average (DJIA), which consists of 30 large-cap companies. The index funds will track the index and rebalance your investments as the market data changes.

Major stock indices in the U.S. include:

  • S&P 500

  • Dow Jones Industrial Average

  • Nasdaq Composite

  • Wilshire 5000

  • Russell 2000

The stocks in an index fund or ETF vary based on the index and the firm. Many people will choose a fund that tracks one of the popular indices listed above, but you can also decide to choose a fund based on an ideal or even a cause. For example, you might invest in sustainable companies or women-owned companies or even a specific industry. If you choose a specialty fund or sector, keep in mind that the rates of return may not be very high as those for large-cap companies.

Individual stocks

The stock market is what comes to most people’s minds when they think about investing. The historic annual return is somewhere between 7% and 12%, but you’ll need to hang on to your shares for a while to achieve this.

Picking individual stocks can be highly difficult and requires research — even professionals don’t always beat the market. If you go this route, set realistic expectations — don’t expect to become a millionaire — and make sure to diversify your portfolio with low-risk investments.

Real estate

The typical thought process when it comes to investing in real estate is to buy property to flip or rent. However buying physical real estate — and possibly renovating it as well — can be expensive.

You might end up spending the bulk of your windfall especially in more expensive coastal cities, which would be a poor asset allocation strategy if all your money is tied in this one particular investment.

Fortunately real estate investing extends beyond the traditional method of buying rental property. Investors can buy a share in an investment-producing property through a real estate investment trust (REIT). Like a mutual fund, the REIT invests in different properties, so your investments are automatically diversified. REITs, like individual stocks, will give you a good rate of return in the long run if you buy and hold for some time.

You could also buy a house for your personal use. $100,000 will go a long way towards a down payment and will add to your overall wealth. Because the house is considered a personal-use asset, it’s hard to calculate an exact rate of return. But this is one case where the impact on your personal life might outweigh the dollar value.

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