If you have $100k to invest, then you have many opportunities to make big chunks of money. However, you need to make sure that you are investing it appropriately or you may end up losing everything. If you are wondering how to invest $100k for income, investing in stocks is a great idea.
Why stocks? This is because stocks offer the best diversification for your portfolio. You can get exposure to almost every industry, and stocks also provide high returns on investment. Investing in stocks can get complicated, but here are three quick methods you can choose if you are wondering how to invest $100k.
Purchase individual stocks
Buying individual stocks is the riskiest but it also provides the biggest reward. When you go for an individual stock, it is important to have a clear concept of what you are doing and read more forex trading reviews. If you are not investing in thousands of stocks, you will have a low level of diversification. For instance, you may select ten different stocks to invest in. It will offer you diversity, but not like a mutual fund or an ETF would.
Before investing in an individual stock, you should start by reading the guides on value investing from genuine sources online. By picking individual stocks, you can reduce your risk significantly. Dividend-paying stocks can also provide you with some recurring revenue.
Another great way to start without a huge investment is through a brokerage. There are some brokers that do not need an opening balance, and you are allowed to start investing as little as you want. Develop your profile slowly while keeping your risk low. It is even better if the invest trade service you use does not charge fees.
Adding stocks to the watchlist is a good idea so you can keep an eye on them for some time before investing money in them. Finally, you need to spend some time to understand how to read a stock chart well. Only then, you will be able to analyze the performance of the stocks better.
Purchase mutual funds and ETFs
On the contrary of individual stocks, ETFs and mutual funds are baskets are stocks. They are pre-bundled and when you purchase them, you make a single investment and receive instant diversification. The difference between ETF and mutual fund is the way they are put together, managed, and sold.
ETF: ETFs act exactly like stocks and they are generally not managed actively. Usually, they follow an index. The S&P 500 or other stocks that invest in gold are examples of ETFs. Investors can go as narrow or broad they want with ETFs, and they can focus on things that are important to them. You can simply purchase an ETF if investing in socially responsible companies is your objective.
Mutual funds: Unlike ETFs, mutual funds are managed actively by an individual or a group of people. Usually, in most cases, someone picks the stocks that are in the mutual fund. However, there are some exceptions to this, for example, Vanguard, who has index funds.
Still, mutual funds act like ETFs and you can receive instant diversification, but it is monitored more meticulously. Moreover, the strategy to choose stocks may be based on the personal biases and investment preferences of the fund manager. Due to this reason, the cost is higher too. You have to pay a premium to invest in a mutual fund because someone is managing it for you.
Although mutual funds do not necessarily perform better than index funds or ETFs, you may still choose a strategy with mutual funds but with limited options. Keep in mind that they are nothing worse than ETFs and definitely offer benefits. However, they cost more, and you need to keep fees as low as you can when you invest $100k.
Choose a robo-advisor
When it comes to convenience and low cost, another way to invest your $100k in stocks is with a robo-advisor. This is a great option for both beginners and experienced traders. What is a robo-advisor? It is a broker that composes, monitors, and rebalances your stock portfolio by using a computer algorithm. All you need to do is invest the money and let the algorithms know about your goals and risk levels, and the rest will be taken care of.
Regardless of how best method to invest $100k you choose, make sure to pick a tool that can help you analyze your investments and performances as well. It is very important to monitor the overall portfolio performance.