If you’ve never dreamed of randomly coming into a sudden windfall, you’re either so rich already that it would be a drop in the ocean to you or you’ve mastered the art of being content with what you have.
Either way, good for you, but thinking about the best way to spend 100k is a useful exercise for most of us.
Whether you really have received an unexpected 100k or you’d just like to fantasize about it, it’s worth figuring out how to put such a large sum to good use.
Yet there’s not a single right answer. The right way to invest your money depends on a range of factors, like your risk tolerance, financial situation, and where you are in life.
What — or who — can we trust?
Asking a bunch of money bloggers and traders what financial advice they’d give to their younger selves went well last time, so I decided to consult the experts again.
Among these 20 gems, you’re sure to find something that applies to your life.
1. Rental properties
Since we’re on my blog, it only seemed proper to start with myself here. Fortunately, I’ve already thought a fair bit about the best ways to invest 100k.
First, I’d use a portion of it towards a downpayment on another condo (I already have a portfolio of rental properties).
Since I live in the UK, where the property market is quite strong right now and interest rates are low, it’s a good time to be a landlord.
I’d then split the remainder between a broad market tracker of Japanese equities, my cryptocurrency portfolio, and my swing trading account.
If you don’t like the sound of that, keep reading to find out 19 viable alternatives.
2. Open a brokerage account with a robo-advisor
Consulting investment professionals is a great way to manage your money the smart way, but technology has brought a more accessible alternative that involves less social interaction: robo-advisors.
Some people think of these automated money advisors as being a poor man’s asset manager, while others think they offer all the perks with none of the costs.
No prizes for guessing which side of the fence this blogger sits on:
“If I received $100k in 2021, I would probably invest it in a brokerage account with a new robo-advisor. Currently, I use Schwab for all of my personal investing, but I’ve been wanting to give Betterment or M1 Finance a try as well. I’ve heard great things about both, and think Betterment could add some additional value because of their automatic tax-loss harvesting.” Kevin, Just Start Investing
Kevin notes that he wouldn’t keep any money aside since he already has an emergency fund set up and no debt outside of his mortgage. If you’re not in such a fortunate position, that’s probably the best place for you to start.
3. Pay off debt or buy rental properties
As I’ve touched on already, where you are in life is a huge factor in determining how you should spend a sudden windfall.
The owner of Parent Portfolio illustrates this point with a breakdown of how he’d spend 100k in various scenarios:
“In general, how I would spend $100k would depend upon my current situation in life. My first priority would be to pay off any consumer and student loan debt. If I was early in my real estate career, I would use the money as down payments for two rental properties, such as a condo or townhouse. However, if I was done acquiring investment properties, then I would use the money to help off pay off the best performing one.” Jonathan Sanchez, Parent Portfolio
I’m also glad to see another proponent of real estate — it might not be right for everyone, but it’s certainly a profitable opportunity.
4. Invest in bonds and gold
The answer below is another perfect example of how our situation in life should impact our investing decisions:
“Since the current asset allocation in my portfolio is a bit more heavily weighted towards stocks than I’d like given my age and financial situation, I’d probably split it between gold and individual bonds I’d hold to maturity (maturity dates between 3 & 5 years from now, yields to maturity of at least 3% but still investment grade by one or both of S&P and Moody’s).” Susie Q, Financial IQ by Susie Q
Although bonds and gold offer lower returns than some of the other investments mentioned in this piece (e.g., real estate and ETFs), they’re far more stable — while still being more profitable than keeping your money in a bank account. Susie explains more about her investing strategy in this recent post.
You only need to look at the stock market’s reaction to the pandemic to see that it’s not the best place to keep your money if you’re nearing retirement age.
Different asset allocations make sense for different people.
5. Invest using dollar-cost averaging
I think most people interested in personal finance can agree that investing your 100k is a smart idea in most cases.
But there’s one common debate that crops up time and time again: should you invest your money as a lump sum or opt for dollar-cost averaging (investing in smaller chunks over time)?
Here’s what one financial freedom blogger has to say on the age-old question:
“The challenge with investing a large sum of money is the risk that a market crash could occur. It is also hard to time the market. Although mathematically lump-sum investing has produced the best results, I would dollar cost average using my favorite platform M1 Finance. It has zero fees, automated investment with automatic rebalancing, pre-built asset allocations, and fractional shares.” John, Financial Freedom Countdown (FFC)
So that’s another point for M1 Finance (also mentioned in #2). Definitely an app worth checking out if you haven’t already!
6. Pay off the mortgage and invest in index ETFs
Personal finance and lifestyle blogger Bella Wanana decided to keep things short and sweet with her advice:
“I’d take 50% to pay down the principals of my mortgage and invest the remaining 50%. I’d invest the majority into index ETFs, but I’d like to leave a small portion for individual stocks.” Bella Wanana (founder of website of the same name)
While index ETFs are almost impossible to beat as a low-risk way to invest over the long run, individual stocks can make huge returns if you get lucky (the Tesla stock grew by 616% in 2020).
If you got your hands on a sudden 100k and you’d already used the bulk of it to secure your future, why not be a little adventurous and use the rest for a high-risk-high-reward approach?
7. Buy an online business and invest in index funds
Most of us associate investment with financial assets and brokerage accounts, but it can also encompass entrepreneurial ventures.
As a digital marketer used to working on online website projects, this is something that Invested Wallet founder Todd understands better than most:
““First, I’d purchase an online business in the 30-40k range. The goal would be to have another stream of income for a period of time and improve it further to then sell for 3-5x what I paid for it. For the remainder of the money, I would invest in index funds in my Roth IRA and in some in my brokerage account.” Todd, Invested Wallet
We might not all have the confidence to spend a third of a huge windfall on an online business, but it’s worth considering if you have an area of expertise you could capitalize on through a business venture.
8. Throw it at debt
Like many other experts, Josh Hastings stresses the importance of paying off debt before you even think about using a cash cash windfall for anything fancy.
Here’s what debt pro has to say:
“I actually sold a rental property in 2018 that netted me $34,000, which I used to pay down one of my wife’s student loans. If someone isn’t debt-free, my first inclination is to take any type of windfall (tax refund, wedding gift, etc) and to throw it at debt.” Josh, Money Life Wax
But, now that Josh has paid his own debts off, how would he spend the money himself? After maxing out contributions to IRAs or 401Ks and creating a 12-month emergency fund, he recommends buying land.
With consistently great historical returns, it’s not hard to see why.
9. Make diversified long-term investments
Not everyone agrees that land is the way forward.
Investing experts could probably spend years arguing over whether it’s more profitable to invest your money in diversified financial products like index funds or real estate.
But given there’s a case for the profitability of both options, many people might prefer to go for diversified funds on the basis that they’re (generally) more accessible and easier than investing in real estate.
Here’s one take on the matter:
“I’d keep $5000 in cash for some near-term expenses (some a bit luxurious). But most of my bases are covered, so the other $95000 would go towards long-term investing, following my current “lazy portfolio” allocations. It’s a split between U.S stock index funds, a bond index fund, and an international stock index fund. It’s not exciting, but the results are tough to argue with.” Jesse, Bestinterest.blog
10. Use it for an emergency fund, debt, and index funds or ETFs
If you’re new to the world of investing, you might have heard the advice to invest in index funds or ETFs but wondered exactly which products are the best bet.
It’s your lucky day — this savvy money blogger is letting us in on all her little secrets:
“I would make sure my emergency fund was up to snuff. I’d pay down some debt, especially high-interest credit card debt. Hopefully, there is more than half of the money left to put in a low cost indexed S&P indexed fund, and some would go into the QQQ ETF for faster growth.” Linda, The Cents of Money
Linda also notes that, if she were older, she’d opt for more stable options like a dividend growth fund.
However, in the current low-interest environment, these products make little sense for anyone with enough time on their side to accept a little risk.
11. Use it for a downpayment or invest in mutual funds
So far, nobody on this list has mentioned home downpayments. Maybe that’s because they’re all financial ninjas who already have mortgages or own their properties; perhaps it’s because they object to homeownership.
Regardless, if you haven’t bought a home yet and know you want to, receiving a sudden windfall of 100k provides a great opportunity to bite the bullet.
These two money bloggers certainly think so:
“We would use it towards a home downpayment. We’re saving up 20% to avoid PMI when we move from our townhome into a single-family home in the next two years. If we weren’t looking for a home, we would debate putting the 100K into VTSAX or VTI. Mutuals funds are a low-cost and diversified option that go along with our investment philosophy.” John and Sam, How To Fire
12. Keep it in cash
Keeping an excessive amount of money (however you define that) in cash might arouse scorn in certain circles, but sometimes, it makes perfect sense.
Listen to this advice and tell me that the logic isn’t sound:
“With a $100,000 windfall based on January 2021 market conditions, I would keep it in cash for now to give me dry powder in anticipation of opportunities to invest at lower valuations. With daily headlines of Bitcoin, Tesla and many other areas of the market hitting new highs, I fear valuations are a bit frothy and I’d rather wait for an opportunity to buy lower than risk investing.” Brian Thorp, Wealthtender founder
Although it’s generally recommended to avoid timing the market, you’ve got to remember that 100k is a huge lump sum. Investing it all when most analysts are saying the market is overvalued is somewhat reckless.
But, if you just can’t wait, you could consider dollar-cost averaging (see #5).
13. Pay off debt and invest in mutual funds or ETFs
It might seem exciting to recommend investing in a trendy new cryptocurrency or asset, some warn against this way of thinking. The boring answer is often the most practical.
According to one blogger:
“The best way to manage money is actually the least glamorous way. First, I would pay off my student loans,or any other high-interest debt. Next, I would invest in mutual funds and ETFs, While these steps may not be that exciting, they offer stability and ensure growth, which pays off in a big way in the long run.” Sanjana, The Female Professional
Sanjana also points out that freeing yourself from your debt burden increases your future self’s ability to save and invest, so it should almost always be our top priority.
Once that’s tackled, we can think about investments — Sajana favors mutual funds and ETFs since they’re diversified and would expose her to less risk than individual stocks.
14. Pay off debt, build an emergency fund, and invest in an ETF
A few experts we’ve consulted so far have recommended prioritizing debt payments and emergency funds before thinking about anything else.
But at what point should you separate “good debt” from “bad debt”? And how big should an emergency fund be?
This next response answers those questions and more.
Rick also points out that “it doesn’t matter if you make $50,000 a year, or $150,000 a year; unless you spend less than you earn, you’ll never get ahead.”
“All high-interest debt, over 7%, would get paid off first. Then, I’d build an emergency fund that would equal 6 months of my needs expenses. Whatever remained, I would use to invest in a low-cost S&P500 Index ETF. Then, once the plan was put in place, I’d invest any available monthly surplus. Indeed, this is the recipe for How To Become Financially Independent.” Rick Orford, The Financially Independent Millennial.
100k might be a lot of money, but that doesn’t mean that it won’t disappear quickly if you don’t use it smartly.
15. Split it between a dividend-paying ETF and rental property
Many of our experts have opted to use their hypothetical windfall for real estate or a financial product — but why not do both?
When we asked this seasoned investor how he’d spend 100k, he opted for a considered and diversified approach:
“Most definitely put it in a split investment of a dividend ETF, i.e. SPHD or similar, and then start with a down payment on a multi-family rental unit. Maybe even build a monthly dividend ladder.” John, Shake the Money Tree.
Come to think of it, receiving dividend income and rental income every month does sound pretty nice.
16. A little bit of everything
If you like specifics, you’ll love this detailed breakdown:
“I’d max out my IRA and 403(b). Once that was done, I’d supplement my investments with DiversyFund, which is a relatively new REIT option. I’d probably throw in around 5k to my growth REIT.
That would leave me with about 70k to work with. I’d likely take about 15k to supplement my high yield savings account with Ally because it was depleted with home repairs this summer. Another 5k I would put toward a nice vacation fund for when we can travel again.
With the final 50k, I’d most likely look to invest in a rental property of some kind.” Tawnya, Money Saved is Money Earned.
That should give you plenty of products and ideas to go away and research.
I’d also like to use this opportunity to say that there’s no shame in treating yourself.
Why not allocate 5% — or even more than that — of the money into giving yourself the trip of a lifetime? We have to invest in ourselves and our relationships with loved ones too!
17. Invest it in real estate
If you’re a fellow real estate investment enthusiast, you should definitely take stock of what this pro has to say:
“While there are many ways to invest in real estate,we own several single-family rentals, and at this point in my life with a busy job and 2 young kids, I would probably invest in a few different private equity deals such as a limited partner in an apartment complex or in a fund that buys mobile home parks.” Andrew, Wealthy Nickel.
Real estate sometimes gets a reputation for being high maintenance, but there are ways to make it work with your lifestyle.
Why not become a partner or opt for a fund instead of taking on all the risk yourself?
18. Use it for property improvements
Most of our talk about property investment so far has centered on buying new real estate, but investing in your current property is an equally valid approach.
Here’s how one ambitious blogger would do it:
“If I had a windfall of 100k, I would invest it further in my property. Luckily it is paid off, but I have been wanting to make it bring in some money too! To achieve that we have been wanting to add a second electrical service and build a cabin that could be used for guests and as a vacation rental. Having power far away from the house is cost-prohibitive. I don’t want to cash out my current investments to do this or use my emergency fund.” Regina, That Frugal Pharmacist.
This increases your current quality of life, your future net worth, and establishes an additional income stream. Genius!
19. Create an investment plan
Like most of the experts on this list, the money blogger below recommends clearing high-interest, revolving debts (especially consumer debt) before moving on to investing.
But once you have this sorted, he recommends starting a comprehensive investment plan instead of focusing on one or two assets:
“ I’d create an investment plan to continue building my wealth. I’d first aim to max out for the year my retirement contributions in a 401(k) and IRA. Once I’ve done that I’d invest in an HSA, this would invest in ETFs and Index Funds.” Kristian, Savology.
As Kristian points out, these options offer great bang for your buck, with solid past returns and low management fees.
20. Invest in Crowdstreet
Just as you were beginning to think that there’s no new advice under the sun or that everyone has been playing things safe, it’s time to throw a spanner in the works.
Monica offers some unique insight:
“I would invest it into 3-4 Crowdstreet projects so the money multiplies and diversifies her portfolio. During a time when profitable real estate buys are harder to come by and parents have little free time, these crowdfunding platforms offer a path to real estate investing with little leg work.” Monica, Planner at Heart.
Crowdstreet is a commercial real estate investment marketplace — it allows you to access residential and commercial deals as a certified investor.
It’s a great solution for those who want to invest in real estate but don’t quite have the time — I’ll certainly be giving it a look.
21. Invest in Your Freedom
Last but definitely not least is Melanie who is working towards to financial freedom. It’s a perfect end to to this post since for me, it perfect encapsulates what this blog is about; freedom.
The money would help her take the next level towards this goal.
“If I had a sudden windfall of $100K, I’d quit my job to focus on my side projects. I’m already at Coast Fire, and less than a year from passion fire, so this windfall would give me everything that I need to take that final plunge.” Melanie, Partners in Fire.
The bottom line
Hearing advice from 21 different financial experts in one place might be somewhat overwhelming, but hopefully, you’ve realized that there are many common threads here.
It’s encouraging to see the same recommendations crop up time and time again.
Most people would prioritize paying off debt or securing their emergency fund and then move on to real estate or index funds. That’s all advice I can get behind — especially the real estate part.
Whether you really have 100k to spend or not, being smart about how you investing can grow whatever money you do have.