So, how can you generate a steady stream of income from $100,000? First, speak with a financial advisor to determine your goals. There are plenty of investment options available for such an amount. How you choose to invest 100,000 depends on a large array of factors, two of those include:
- Your risk tolerance: Risk tolerance indicates how much you are willing to invest versus how much you are willing to lose. All investments carry a certain amount of risk and therefore you should analyze your financial capability and figure out how much money you can put into an investment. Consider talking to a financial advisor about risk tolerance.
- Your overall financial goals: Ask yourself the question; what do I want to achieve by investing $100,000? Are you an income-oriented investor? Or do you prefer to build wealth over a period of time? Are you looking to double or triple your initial investment capital in the next year or two? These create a map for your investment strategy.
Let’s look at a few conventional ways you can invest 100k today.
6 Traditional Ways to Invest $100,000 in 2023
$100,000 can buy you a considerable amount of company shares on the stock exchange. When the shares go up you can sell your stake for a profit. But, with the recent unpredictabilities of the stock market has become uncomfortably volatile for investors. One strategy to mitigate volatility is ‘dollar cost averaging’. This involves investing a fixed amount periodically, irrespective of the market’s direction. This can reduce the impact of market swings but still has considerable risk. But, the question you should ask yourself is, are you willing to risk 100k in the stock market in such uncertain financial times?
Bonds are typically less risky than stocks, but they also tend to offer lower returns. However, remember to consider the interest rate environment. If rates rise significantly after you’ve bought your bonds, the resale value could decline. The rate of returns for government bonds in the US in 2023 is between 4 and 6% for a 5 to 20-year period. Contrast this with a possible 8 – 10% annualized income distributed monthly when you invest in the CWS Investments mortgage note fund. The interest might add to your taxable income unless the bonds are held in a tax-advantaged retirement account like a traditional IRA or Roth IRA.
Pooling money to purchase a diversified portfolio of stocks, bonds, or other assets is a viable way of investing 100k. This strategy provides immediate diversification, even if you’re only investing a small amount. However, it’s important to understand the fees associated, as these can eat into your returns. Also, capital gains from mutual funds can result in a capital gains tax liability.
Traditional Real Estate
Traditional real estate investing requires a significant amount of upfront capital. The median price of a home in the United States in 2023 is over $400,000. This value can increase to several millions if you are looking to invest in cities or locations with high residential demand. 100k can get you a down payment for a mortgage and might cover your agent and legal fees. But, what if there is a crash in the housing market like in 2008? Traditional real estate investing also requires more hands-on management unless you hire property managers. Rental income is considered taxable income, so it’s essential to consider tax implications.
Alternative real estate investments, on the other hand, are typically independent of financial markets. They are therefore less volatile. Additionally, most of these strategies offer a hand-off approach to investing because investors do not directly own the properties. Because of their low correlation to financial markets, they also offer opportunities for steady and predictable income. A good example of such an alternative real estate investment strategy is investing in a high-yielding mortgage note fund.
Certificates of Deposit (CDs)
If preserving your capital is a primary concern, CDs can be an attractive option due to their predetermined interest rate, ensuring an exact return upon maturity. A common strategy adopted by investors is “laddering,” where instead of investing all your money in one CD in the long term, one divides the investment across CDs with varying maturity dates. As each matures, the return is reinvested, providing liquidity and the potential to capitalize on rising interest rates. However, the interest earned on CDs is taxable.
Index funds are favored for their low expense ratios since they are passively managed. This passive approach can result in higher net returns over time compared to actively managed funds. By design, an index fund’s performance will closely mirror its chosen market index. This means that while you might not significantly outperform the market, you’re also unlikely to underperform it.
Alternative Options for Investing 100k for New Investors
Are the above investment opportunities viable for you? If you are a new investor, we saw that a smart investment strategy would be to focus on capital preservation and consistent cash flow. Unfortunately, the above options do not do both. For instance, bonds, index funds, and Certificates of Deposit offer capital preservation prospects but their rate of return is lower to provide meaningful income for a 100k investment. The stock market is volatile while traditional real estate has a hefty upfront investment cost and related property management fees.
There are riskier alternative investment options like hedge funds and private equity that could also be viable for a $100,000 investment. But, like shares in the stock market, the returns from these strategies are highly speculative and in many cases have significant management fees associated with them. But for the most part, alternative investment strategies provide opportunities to preserve capital and generate consistent income. An example of a high-yielding alternative investment strategy that is founded on capital preservation and consistent income is the CWS Investments mortgage note investing fund.
About Mortgage Note Investment Funds
A mortgage fund is an investment vehicle that is used by companies to purchase mortgage notes for profit. These companies then restructure the delinquent mortgage note with borrowers which can generate income and subsequent profit for the investors.
The performance of these funds and the profitability of this strategy are primarily pegged on the borrower’s ability to pay the restructured installments. Mortgage note investment strategies have a low correlation to finance markets because the note is secured by actual property. To further hedge against unforeseen downturns companies like CWS Investments have diversified their investment portfolio in over 40 US markets. This means that, generally, an event in one local market does not affect the investment gains of the portfolio.
Because of the low correlation, such an investment strategy provides predictability in investment and can shield investment capital from potential market downturns. If you would like to know more about investing in mortgage note funds, speak with a member of the CWS team today.
Invest $100,000 in CWS’ Mortgage Note Fund Today
CWS Investments can be a trusted partner in alternative real estate investments. With a team of seasoned professionals covering major US markets, you can easily invest in our mortgage note fund from any corner of the country. Your investment will attract an aimed 8 – 10% annualized return. These gains are designed as dividends are distributed monthly.
6 Frequently Asked Questions about Investing $100,000
1. How much interest will 100k earn in a year?
The interest on $100,000 largely depends on where you invest it. For instance, traditional savings accounts or CDs might offer between 1% to 2.5% annually, meaning you could earn anywhere from $1,000 to $2,500 in a year. Alternative investments, such as mortgage note investing, can offer variable returns depending on the specifics of the deal, and the returns could be potentially higher.
2. What is the safest way to invest 100k?
For investors keen on capital preservation, government bonds, treasury bills, or high-yield savings accounts are among the safest options. These instruments offer a guaranteed return, albeit often lower than more volatile markets. If you’re considering alternative options, well-researched mortgage note investments, backed by the tangible value of the property, can also be relatively secure, offering both capital security and a decent yield.
3. How to turn 100k into 1m?
Achieving a tenfold increase in your investment requires a combination of time, strategic investments, and sometimes, a bit of risk. Diversifying your portfolio, reinvesting returns, and exploring high-yield alternative investments like mortgage notes can accelerate this growth. However, it’s essential to be patient and to understand the risks involved with each investment opportunity. Consult a financial advisor prior to investing.
4. What is the fastest way to save 100k?
Saving $100k quickly often demands disciplined saving, budget cuts, and wise investment decisions. High-yield savings accounts, bonds, or short-term high-return alternative investments can boost savings. It’s also essential to minimize debts, reduce unnecessary expenses, and potentially seek additional income streams.
5. How long does it take 100k to turn into 1 million?
The time frame to grow $100k into $1 million depends on the annual return rate. For instance, an annual return of 10% compounded may take about 25 years to reach $1 million. Alternative investments like mortgage note investing might offer higher returns, potentially shortening this time frame, but it’s crucial to evaluate the risks and ensure diversification.
6. How can I invest for a quick return?
While all investments carry risks, some avenues can offer faster returns. Stock trading, real estate flipping, or peer-to-peer lending platforms might provide quicker returns. For those considering alternative investment avenues, short-term mortgage note deals can yield quick returns, but it’s crucial to carry out thorough due diligence. Consult a financial advisor prior to investing.