Having $100,000 to invest is a rare opportunity, and gives you a range of options. But the combination of a potentially life-changing sum of money and broad access to the world of financial services calls for discipline. If you're exploring how to invest $100,000, you should have a financial plan that outlines your goals and how you'll get there. You can create one on your own or work with an investment professional.

Video: How to invest $100,000

How to Invest $100,000

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Having $100,000 to invest can be exciting—and a bit overwhelming. Especially if the money is a surprise windfall, $100,000 can be a real life-changer.

The good news is that this should be enough to get you past most of the minimums you might face in the investing world and give you a lot of options.

In very broad terms, you could divide your options in two:

Either you go it alone, or you work with a financial advisor.

Going it alone could take more effort, but if you have the time and motivation to learn, just follow these steps:
First, start by setting some goals for your investments.

Are you investing to buy a house? Retire?

Setting goals will help you pick your strategy.

Next, identify your investments. Are you willing to take risks? Or are you more cautious?

Riskier investments can deliver higher returns but can also mean more significant losses, so pick investments that match your goals.

And finally, build a diversified portfolio. This means spreading your money across a variety of stocks, bonds, cash, and other assets in order to manage your risk.

That way your portfolio won't depend on just one asset.

Now if that sounds too time-consuming, then definitely consider working with a financial advisor.

An advisor can look at how that $100,000 fits with your overall financial situation and help you develop an investment plan based on your goals.

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There are many ways to invest $100,000, which can be tailored to your goals:

  • If you're investing for retirement and haven't maxed out your 401(k) or IRA, contributing more to these accounts may be a good first step. You can also consider various types of deferred annuities Tooltip Annuities are contracts between you and an insurance company that can provide you income through a unique combination of investment and insurance features. Annuities can complement other retirement plans and, depending on what type you select, they may provide guaranteed lifetime income, opportunities for tax-deferred growth, flexible withdrawals, and legacy protection for your beneficiaries. Guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company. , including fixed, indexed or variable.
  • For educational goals, a 529 plan, Education Savings Account (ESA) or custodial account may be a good option. But keep in mind, 529 plans and ESAs have contribution limits. And custodial accounts don't have the tax advantages of 529 plans and ESAs.
  • For other goals, you could open a traditional brokerage account to invest on your own. You may also want to consider a managed investing solution.

Let's get started.

Identify your goal.

The first step is to zero in on your goal.  What are you investing for? Are you saving for retirement or looking to build your overall wealth?

Select the appropriate account.

Once you've identified your goal, it's time to select an account.
There are many types of investment accounts but here are some of the common ones—organized by goal.

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    A range of goals

    A brokerage account can help you save and invest for a broad range of goals.

    Schwab One® Brokerage Account
    Allows you to invest in everything from stocks and bonds to mutual funds, ETFs, and more.

    Learn more

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    Retirement

    Tax-advantaged accounts can help you invest for retirement needs.

    Traditional IRA
    Allows you to invest pre-tax dollars for tax-deferred growth.

    Learn more

    Roth IRA
    Allows you to invest after-tax dollars, and qualified distributions are tax-free.

    Learn more

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    Education

    Tax-advantaged accounts can help you save and invest for educational expenses.

    529 College Savings Plan
    Allows you to save for college and qualified distributions are tax-free.

    Learn more

Choose your investments as part of a diversified portfolio.

Once your account is open, you'll want to select investments to build a diversified portfolio Tooltip A diversified portfolio contains different asset classes—such as stocks, bonds and cash and cash investments. It also contains diversity within assets classes. For example, within stocks you can buy stocks that represent large companies (large-cap), small companies (small-cap), international and everything in between. And within those divisions, it may be best to have stocks in different sectors (for example, technology, health care and communications) and different industries within the sectors. . Here's how to create one:

  • Determine your asset allocation.

    Asset allocation is the way you divide your money among groups of similar investments or "asset classes." The three main asset classes are stocks Tooltip Stocks (equities) represent ownership in a company. They can provide both price appreciation and dividend income. Stocks are considered relatively risky, because the stock price may also decrease and there's no guarantee you'll be paid dividends. Stocks also tend to be more volatile than bonds. , bonds Tooltip A bond represents a loan you make to a government, municipality or corporation (issuer). In return, that issuer promises to pay you a specified rate of interest and to repay the face value after a certain period of time, barring default. They can provide income and help balance the risks of stocks. As with any investment, bonds have risks such as default risk and reinvestment risk. and cash investments Tooltip Cash and cash investments include bank deposits (checking and savings accounts), money market funds and short-term investments (like CDs and short-term Treasury securities). These can provide flexibility and stability. Shorter-term investments tend to have lower returns than longer-term investments. . In general, if you're a conservative investor looking for income and stability, you may want to hold more bonds than stocks. But if you're a long-term investor looking for high-growth potential and less concerned about immediate income, you may want to invest more aggressively by holding more stocks. See our model portfolios for sample asset allocation plans.

  • Diversify within asset classes.

    Stocks and bonds can be broken down further into different types. For example, you can invest in stocks that represent large companies (large-cap), small companies (small-cap), international companies and everything in between.

  • Diversify within sectors.

    You can break down your investments even further. For example, with large-cap stocks, you can invest in different sectors (like technology, health care and communications). Within each sector, you can also invest in different industries. For example, within the health care sector, you could consider pharmaceuticals, biotechnology or equipment industries.

You also want to select short- and long-term investments. Your timeline for an investment is also called your time horizon.

  • Short-term investments

    Interest-bearing checking and savings accounts, and money market savings accounts, can help you set aside money for an emergency. These should cover three to six months of living expenses, just in case. For slightly higher potential growth, you can consider a money market fund Tooltip Money market funds are mutual funds that invest primarily in short-term debt obligations, such as Treasury bills and commercial paper. Their chief attractions are stability and liquidity, but they can lose value. You may want to use a money market fund for a portion of your emergency savings, or to park money you intend to invest until you've accumulated enough to make a particular purchase. . They're considered a relatively low-risk investment, but can lose value. Certificates of deposit (CDs) may be appropriate if your investment timeline is longer than three to six months, but there may be a penalty for withdrawing money before your CD matures.

  • Long-term investments

    Consider starting with index mutual funds Tooltip Mutual funds pool money from many investors to purchase a broad range of investments, such as stocks, bonds, cash and other types of securities. When you purchase a mutual fund, you get exposure to all investments in that fund. Mutual funds are purchased or sold once a day at market close. or exchange-traded funds Tooltip An exchange traded fund (ETF) is an investment fund or portfolio of securities that holds assets, like stocks, bonds or commodities. Most ETFs track market indexes, from the very broad to the very narrow. ETFs aren't purchased or sold once a day like a mutual fund. Instead, they trade like stocks on an exchange and experience price changes throughout the day, as shares are bought and sold from one investor to another. (ETFs). Both mutual funds and ETFs that track indexes tend to be relatively inexpensive, which can make them an attractive option.

Or let a robo-advisor choose for you.

If you'd prefer to have a portfolio set up for you, consider a robo-advisor. This service provides you with a diversified portfolio of low-cost ETFs Tooltip An exchange traded fund (ETF) is an investment fund or portfolio of securities that holds assets, like stocks, bonds or commodities. Most ETFs track market indexes, from the very broad to the very narrow. ETFs aren't purchased or sold once a day like a mutual fund. Instead, they trade like stocks on an exchange and experience price changes throughout the day, as shares are bought and sold from one investor to another. based on your preferences. All you have to do is fill out a questionnaire about your goals and risk tolerance, and the service will assemble and manage a portfolio for you.

Stay the course.

Consider making regular contributions to your account. Explore investing a set amount of money every month (or at any regular interval), regardless of how the stock market is performing—a strategy known as dollar cost averaging. When the market is down and prices are low, you can buy more shares for your money. When the market and prices are up, you'll buy fewer shares. While dollar cost averaging doesn't protect you from the ups and downs of the market, the net effect of this strategy is that it helps you minimize downside risk.

The idea is not to try to wait for the perfect time to invest, as that's very difficult to do over time. Get in the habit. Even small amounts add up over time, thanks to the power of compounding.

Take the next step

  • Take the next step.

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