Before you can get to $1 million, you must first get to $100,000. Even though $100,000 doesn’t purchase the same amount of stuff as it did way back when, $100,000 is still a nice chunk of change. Let’s go through how I’d invest $100,000 today.
With $100,000, you can pay for four years of tuition at public university. You could also buy one Patek Philippe complication watch or a BMW M4 and still have $20,000 leftover. Of course, you could wisely invest the money as well.
Ever since getting repeatedly kicked in the nuts working in finance, I’ve focused most of my effort on turning new capital into passive income. I wanted to have children one day. Most of us should be able to earn between 2% – 5% in relatively low-risk ways. Therefore, $100,000 should be able to generate $2,000 – $5,000 a year.
Currently, I’ve got about $145,000 in cash, which is more than what I normally keep for random expenses. The cash has been piling up due to a tax refund, a surprise real estate crowdfunding distribution, and stronger-than-expected rental income from my vacation property in Tahoe.
As a result, I’ve got to figure out how to invest the $100,000+. Perhaps you too have a good amount of cash piling up and are looking for ideas on what to invest in as well. Let me share with you what I’m thinking.
Please note, this is not my investment advice to you. This is a deep-dive mental exercise on how to best allocate capital today for potentially greater returns and more joy.
How I’d Invest $100,000 Today
Before investing, it’s a good idea to look at all your existing asset classes. Go through them one by one and analyze their investment cases. After all, for every dollar you invest in one asset class, it is one less dollar you have to invest in another asset class.
How much you diversify your investments is partly dependent on where you are on your financial journey. If you’re in your 20s, perhaps a concentrated position in your favorite asset class is appropriate.
For me, I’ve spread my chips around because I can’t stand losing a lot of money. Visible loss is also why I like to invest in alternative investments and private funds. The wealthier you get, the more you won’t mind paying a fee to have active managers try and make money for you.
The S&P 500 – Up To $10,000
With the S&P 500 over 4,300, I’m not enthusiastic about investing new cash in the index. We’re already beyond my year-end target price of 4,200 and I’m uncertain whether to lift it further. By year-end, I think there’s a 30% chance the S&P 500 hits 4,400, a 50% chance the index lands between 4,200 – 4,300, and a 20% chance the index closes below 4,200.
The S&P 500 is overvalued based on The Buffett Indicator, which is the ratio of total United States stock market valuation to GDP. The aggregate U.S. Market Value = $52 trillion. The annualized GDP estimate is roughly $22.6 trillion. Therefore, The Buffett Indicator is at 231%, which is 85% higher than the long-term trend line.
Then there’s the traditional P/E ratio. The current S&P500 10-year P/E Ratio is 37.2. This is 88% above the modern-era market average of 19.6, putting the current P/E 2.2 standard deviations above the modern-era average.
Whenever an opponent is playing out of his mind in tennis, to stay in the game, I always tell myself he will revert back to his mean. Invariably, he always does. Of course, the stock market isn’t a tennis opponent. It can always get better. However, when asset allocating new capital, I’ve found it helpful to look at historical valuation bands.
As earnings continue to rebound, valuations will decline if the S&P 500 stays at the current level. However, given we’re so far above the historical average, earnings need to aggressively beat expectations for the next 12 months. The higher the expectations, the greater the potential for disappointment.
One of the main arguments for why stock valuations should be higher is because interest rates are lower. Bonds simply don’t look very attractive in comparison. However, if interest rates continue to creep up, we should expect stocks to normalize and come down. We just don’t know when or by how much.
I would invest $10,000 if there is another 2-3% correction like we saw in May. Otherwise, I’m not buying the S&P 500 index for now. I’m already fully allocated in stocks based on my risk tolerance. In fact, I went from about 32% of overall net worth in stocks down to 30% recently. My historical asset allocation of net worth in stocks is between 20% – 30%.
Bonds – Up To $20,000
After the 10-year bond yield rose from about 1% at the beginning of the year to 1.73% on March 19, we’ve been in a holding pattern between 1.53% – 1.6%. If the 10-year gets back to 1.7%+, I’d invest $10,000 in a Treasury bond fund. If the 10-year gets back to 2%, I’d invest $20,000.
Bonds are more attractive today than they were last year. However, there seems to be very minimal upside opportunity, if any, at current levels.
To believe in upside, you must believe the 10-year bond yield will decline again. With the economy opening up and the government committed to spending more money to boost the economy, higher inflation expectations will keep bond rates elevated. Therefore, I’m not buying bonds for now either.
Related: The Proper Asset Allocation Of stocks And Bonds By Age
Speculative Investments / Individual Stocks – Up To $20,000
With cryptocurrencies down 40% – 70% from their recent highs, I’m a buyer of up to $10,000 worth of Bitcoin around $30,000. I don’t find Bitcoin to be a great way to conduct transactions, unless you are doing something illegal. I’m also a buyer of HUT, a ethereum mining company that just listed on the NASDAQ.
Why use your Bitcoin to buy something when it could be worth more in the future? Whether you think cryptocurrencies are bogus or not, cryptocurrencies are here to stay. Maybe I’ll look at NFTs again, since they’ve also crashed.
With tech down 10% – 30%, I’m also a buyer of up to $10,000 in various names like Tesla, Twitter, and Amazon. These names have been hit by rising inflation expectations and rising labor costs. However, tech companies should be able to work through inflation issues better than most due to productivity gains.
I’m always going to invest in tech because tech is where there is usually the most innovation. All of my big winners (and losers) have come from tech. Part of the reason why I enjoy living in San Francisco is because I get to meet a lot of new people doing new things. The people I’ve met have also gotten me into various venture funds that have or are doing well.
Overall, I like to allocate between 10% – 20% of my investable assets in speculative investments. This way, if they blow up, I’ll still be alright. And if they become multi-baggers, then they’ll make a difference. And perhaps most curiously, I won’t suffer as much from investing FOMO.
Debt Pay Down – $20,000
Whenever I’m not feeling a lot of conviction, I always turn to paying down mortgage debt. Even though interest rates are very low, it’s still debt. And I’ve never regretted paying off a mortgage. The most surprising thing I experienced when I paid off my first mortgage was how much less motivation I had to hustle. When you free up more cash flow, you naturally don’t need to work as hard.
I will be spending $20,000 immediately towards paying down my vacation property mortgage. The rate has been fixed at 4.25% and cannot be refinanced since it is a condotel mortgage. During the 2008 financial crisis, the 30-year fixed mortgage rate was actually at 5.875%. Thankfully, I got a free loan modification.
There’s only about $120,000 left of debt to go. Once I pay it off within 12 months, it will free up $2,480 a month or almost $30,000 a year in cash flow. Then it’s off to focusing on my other rental property mortgage at 2.625%. This mortgage used to be my primary residence until I rented it out in January 2020.
Stay On Top Of Your Asset-To-Liability Ratio
Because I also bought a forever home in 2020, I levered up further. I was able to get a 2.125%, 7/1 ARM primary residence mortgage, partly thanks to relationship pricing.
Since real estate has done well since purchase, the returns over the cost of debt kind of feels like free money. Therefore, I have no problem using some extra cash to pay off my higher rental property debt at 2.625%. Mortgage rates are still very attractive if you want to check online. The 15-year mortgage looks especially enticing today, averaging below the 5/1 ARM average rate.
As you consider taking on debt to buy a home or some other asset, please pay close attention to your asset-to-liability ratio. Leverage feels nice on the way up, but feels terrible on the way down. Right now, times are good. But it is during good times when you should be the most proactive.
Before you declare financial independence, I think you should shoot to have an asset-to-liability ratio of 10:1 or higher. This way, you will have full peace of mind your debt will never get you in trouble.
Below is my suggested net worth and asset-to-liability target ratio by age. Of course, if you can get to a $3 million net worth with an asset-to-liability ratio of 10:1 or greater at an earlier age, then even better. You will have even more time and flexibility to do whatever the heck you want.
Hospitality Real Estate – $35,000
The one thing I’ve clearly noticed is the surge in hotel, Airbnb, and VRBO pricing this summer. My stronger-than-expected vacation rental income in Lake Tahoe is evidence that travel demand is back. People are booking months in advance.
Recently, I was looking to rent a very normal-looking 5-bedroom house in a middle-class neighborhood in Honolulu this summer. It would have cost me $32,000 for the month plus cleaning fees and other charges.
And you know what? I’m tempted to pay it because it is close to my parents’ house. Further, we’ve made good investment returns since the pandemic began. Before the pandemic, I might have been willing to pay $10,000 for the month for this property.
The Opportunity Cost Of Not Investing
But instead of spending $32,000 + fees to rent this home that has three other properties on the lot and is not a “manor,” I’d rather invest the $32,000+ in a hospitality real estate deal instead!
This is the consistent and common “problem” we personal finance enthusiasts have. Opportunity cost. After one month of lounging around the pool, my $32,000+ would be gone forever.
What if I find a hospitality deal on CrowdStreet in a city that is about to see a massive influx of visitors for years to come? At a 10% Internal Rate Of Return (IRR) for 5 years, my $32,000 would turn into $51,536. It’s worth signing up for free to take a look.
Now let’s say the 10-year bond yield rises to 3% in five years (unlikely) and I could somehow get an A-rated municipal bond that paid me 4% for 25 years. I could then collect a healthy tax-free $2,061 a year in passive income for a very long time!
In my investment-focused mind, having perpetual income beats out one month of temporary pleasure 99 out of 100 times.
The Solution To Living It Up Responsibly
At some point, we have got to start spending our money for a better life, rather than always investing it. We must do our part to contribute to the YOLO Economy right? After all, many of us are wealthier now than before the pandemic began.
Here’s the solution to living it up responsibly. Go to the maximum of what you can afford. Explore it. Pretend you actually do spend that kind of money. Then come to a compromise. Psychologically, it will make you feel like you’re getting a good deal.
For example, let’s say your family could afford to pay $32,000 for a monthly vacation rental. But if you spent that much money, you would feel like a donkey. Instead, do what Economy Plus does for people who feel bad about paying for First Class, even if they can afford to. Come to a reasonable compromise.
Why not try and find a decent $12,000 a month vacation rental and invest the other $20,000 instead? This way, you can still make great memories while also investing for your future. A double win!
It’s worth searching for hospitality deals in good locations today. We know that hospitality got crushed during the pandemic. But for those who are still standing and who are seeking capital as business revs up, I think there’s an opportunity. Hotel and vacation rental prices are up between 2X – 4X their pandemic lows.
Investing In A Real Estate Fund
Another great way to invest $35,000 is to invest in a private eREIT from Fundrise. For most investors, investing in a diversified real estate fund is the way to go. You don’t have to worry about each individual property. Further, you’re gaining broader exposure to ride the real estate appreciation wave.
It all depends on your risk-tolerance and current asset allocation. Personally, I enjoy investing in funds so I don’t have to think about the investments. I’ve currently got $810,000 in a real estate fund that invests mainly in the Southern and Midwestern commercial real estate opportunities.
One Last Splurge That Doesn’t Build Passive Income
For the first time in 15 months, I went to the shopping district in downtown San Francisco. I had a doctor’s appointment, so I figured why not visit some stores now that I’m fully vaccinated. One store I visited was Shreve & Co, my favorite watch store.
I hadn’t realized this, but it now costs $1,100 if you want to clean and change some springs in an automatic luxury watch! Back in 2008, the cost was “only” about $500. Rolex, for example, recommends its $1,100 cleaning every 5-8 years. You drop off your watch at a dealer who then sends it to Rolex HQ in Geneva, Switzerland.
Inflation truly creeps up on us. We often anchor prices at a certain point in time. The mind doesn’t naturally do compound interest calculations. Therefore, please find ways to own assets that tend to appreciate in value.
With the remaining $25,000 in funds earmarked for better entry points in the stock and bond market, I’m thinking it might be time to get a watch. Like cars, I used to buy and sell luxury watches all the time for profit and for personal enjoyment. Maybe it’s time to buy a forever watch at my age.
One timepiece which I find interesting is the 42 mm Panerai Submersible with a black ceramic bezel. Perfect for wearing in the hot tub while voice dictating a post! The cost? $9,800 pre-tax. Check it out.
But do I really want to spend $9,800 pre-tax on a timepiece? I could buy a $130 Casio G-SHOCK that works great the next time I go scuba diving 200 meters below sea level. Then I could invest the remaining $9,670 in a speculative investment that might one day turn into $100,000!
Then I’d be right back to where I started, writing this post again. Where’s the joy already?!
Letting Existing Investments Do The Work For You
Unless the stock market falls by greater than 30% and the real estate market declines by greater than 15%, my family should have enough passive income to last indefinitely.
Given I believe the housing market will continue to stay strong for years to come, I expect rental income to increase. Further, I also expect dividend payouts from blue-chip companies to increase as well. Therefore, it may not be necessary to continue investing as aggressively anymore. Your current investments may just naturally continue to grow on their own.
If you’re thinking about retiring or taking things easier, now might be one of the best times ever as the U.S. opens up. If you have enough money to be happy, you just need to fight greed.
Undoubtedly, if the bull market continues, many more people are going to get much richer than you if you take things easier. You just have to be OK with that as you spend more time on more important things.
Readers, how would you invest $100,000 right now? What are the most attractive investment opportunities? Or, would you rather spend the $100,000 on luxury goods and experiences? How would you invest $100,000 for more joy?
Build an ADU in our backyard and rent it out. With the prefab boom, constructing such efficiency units is cheaper than ever, and recent California laws cannot be more friendly to expedite local government approval / permitting. Absolute best return if you already have California residential real estate and you meet the statewide criteria to build a qualifying ADU.
How much did the ADU cost to build and how long did it take?
I’d invest 100K in Japanese whiskies – Yamazaki, Chichibu, Mars, Karuizawa, Hakushu. This may not be the safest choice but I’m doing it more as a hobby.
In general, I highly recommend the paper “Neville et.al. (2021). The Best Strategies for Inflationary Times. http://dx.doi.org/10.2139/ssrn.3813202 ” for a in-depth analysis of various investment strategies and asset classes returns in historic environments of high and rising inflation.
Keep up the good work, Sam! Thank you!
Surprising that Options rarely, if ever, takes the stage in your articles or the comments sections. I mean it would be relatively easy to run a CSP/Wheel strategy with a 100k and generate the aforementioned 2-5% annual return in potentially a month’s (or less) time with weeklies/bi-weeklies. 2-3x annually with relatively stable priced companies doesn’t take too much effort.
A strong argument could be made for utilizing this strategy, rather than actively buying into most growth companies at current prices.
Happy to have a guest post on options if you’re interested! I don’t invest in options, which is why I don’t write about options. But I do invested in structured products, which uses options.
Well the absence of discussing them makes much more sense. I assumed you might be holding out! That possibly you did not want to delve into something that might be considered too much for the average person accustomed to index investing.
That was an interesting read. I have never looked into those products before. In one of the cases, S&P one I believe, it seemed very similar to a covered collar with LEAPs. I assume there is some fee/commission involved on the front end of the purchase in the case of the structured products (I think you referenced 1-3%)?
Okay Dogen, here’s what we would do with your 100 K headstart. Of course a lot of this has to do with stage of life.
We’d split it into our 2 granddaughters custodial accounts. Then equal parts to each of TSLA, (Musk is 500 years ahead of any other human being he is talking to), a FAANG etf which also has MSFT, a pre ipo tranche of Commonwealth Fusion Systens (not possible because of higher buy in limits, we know), FAN etf, TAN etf, and an etf which centers on the CRISPR based gene editing technologies. There a number of them.
After that our crystal ball gets a little hazy. When the kids hit age 18, the age of majority in their state, they’ll spend it on a car and clothes anyway, but by the rules of this exercise that’s not our concern. Maybe parenthetically that behavior would fit in t b e “and some fun” portion. :)
Wow! 50/50 in Tesla! As a shareholder of Tesla since 2018, I can’t complain! I’ve got a ~$200,000 position in Tesla now. Hmmm, maybe I should buy more. I’ve got to do more research.
I have $100k-$150k to invest due to a recent windfall. I want to invest in real estate. I live in the Bay Area. Undecided between buying an investment property or investing in a diversified real estate fund focused on the Sunbelt (ie. Fundrise)? I’ve also considered buying a rental in Atlanta where I have family and visit frequently. I already have a lot in stocks in my 401K ($2.25mm) and would prefer to diversify and generate passive income through real estate. I also could pay off a $70k loan at 3% to a family member but feel like I should be able to generate more than 3% return investing in real estate. The loan helped me fund a renovation of my primary residence. Maybe I should use $35k to pay down the loan and invest the rest in real estate?
Fun exercise. Agree with your take on each category. Even more so now than when you initially wrote it. We’ve been derisking our portfolio a bit over the last couple of weeks (ie putting cash in the war chest).
If I had an extra $100k right now, I’d properly buy rental property.
The most frustrating thing about investing, when you are not a pro and are still learning, financial planners will NOT recommend alternatives, only the stock market.
I’d have known nothing about real estate investments if I hadn’t, by a fluke, stumbled onto a local real estate investment group.
I just recently got a 250k cash infusion. I’ve invested 50k of it in stocks/reits/bdc etc and I am sitting on the rest, for now. How would I invest 100k? Right now, I wouldn’t. Down the road? Probably another 50k in stocks/reits/bdc and 50k in crypto. I’ll probably keep 100k or so in cash in the near future just because it makes feel good.
The asset to liability chart appears to be new. I don’t think that works for real estate investors. 45% of my net worth is in real estate and my debt to asset ratio is 43%. Leverage and real estate were the keys to building my wealth over the past 8 years from my early to late 40s.
Great post (as always) Sam! I think I’d agree with you on most things, but as I am still quite young, if I had $100,000 I’d weight it more towards riskier investments with higher potential. Maybe something like:
– $10,000 in ETFs
– $25,000 in individual stocks
– $25,000 in crypto
– $40,000 in real estate.
Thoughts?
Depends on what percentage $100,000 is of your net worth. I’m assuming $100,000 is high as a college student graduating in 2025. So you can definitely take more risk.
But if you had to work for your $100,000, you might not want to be as aggressive.
As a 19-20 year old, I wouldn’t buy physical real estate because I don’t know where I’ll be living/working after college. But I may buy college real estate and live in it, then rent it out to roommates.
I would invest the $100,000 in growth stocks that have fallen significantly since February. I would really love to be putting money into the market now. Since I don’t have the cash, I opened up a paper trading account with Webull and am looking forward to seeing how I do in the next twelve months. I started paper trading 17 business days ago. I was up 4% until the fed’s inflation news yesterday washed away all the gains. The loss was short lived since I’m back up 2% today. It’s disappointing to see days with losses (in my paper and real life accounts) but I remind myself that these investments are for the long-term and the stock market always moves up and to the right over time.
In March of 2019 I hypothetically invested $100,000 in nine categories (stocks, gold, commodities, fixed rate investments and cash) and actually started buying SFHs. This is where the value of the investments is as of 31 May 2021:
First TMP – TheMonopolyProject.com (2.0 Houses) $162,623
2nd VTSAX – Total Stock Market Index (1,425 shares) $151,221
3rd Gold (77 ounces) $146,885
4th WOOD – iShares Global Timber & Forestry (1,600 shares) $146,368
5th VGSLX – Vanguard REIT (845 shares) $119,610
6th VBLTX – Total Bond Market Index Fund (9,600 shares) $107,904
7th CD – Certificate of Deposit (3.1%) $106,938
8th US10YT – 10 yr Treasury Bond (2.82%) $106,293
9th USL – United States 12 Month Oil Fund, LP (4,500 shares) $105,525
10th Cash $100,000
Had I been more aggressive in timing and number, the SFH would be way ahead of all the other investments. I realize that this is primarily luck. I’m not a financial genius. Everyone makes money in an up market. Let see what happens when conditions turn.
My investments are split fairly evenly between the stock market (active value investing in my brokerage account and passive index investing in my 401k, IRA, and 529 plans) and real estate (seven single-family rentals and one commercial property).
My current focus is on my active stock investing, using traditional Benjamin Graham style as well as more modern Buffett style value investing. My portfolio has averaged a 40% annual return on average equity since the beginning of last year when I first start active equity investing.
Over the next few years, I plan to sell off the single-family rentals and transition that equity into commercial RE syndications for better cash flow. I plan to use that and other income sources to transition away from my day job, which I still have (I’m 40 with 4 kids).
I’m thinking of paying off my 50k mortgage I have left. The interest rate is 2.4% should I pay it off or keep it at that rate? I’m maxing out my savings and that’s spare cash i’d use.
“In my investment-focused mind, having perpetual income beats out one month of temporary pleasure 99 out of 100 times.”
I agree with your sentiment but as I get older (I’m 60), I’m finding that it is extremely difficult to change that mindset once established. I recently visited my parents in the US, and it finally dawned on me that unfortunately I have been following in my father’s footsteps. He is now 85 and one of his primary goals in life now is to pay no federal income tax. So every year, rather than enjoying the fruits of his wealth, he donates his minimum IRA withdrawals to charity so he does not have to pay any tax. When I point out that the charities he gives money to pay salaries to their employees who in turn pay federal income tax on those earning and that this is the equivalent of an alcoholic who gives a friend money to buy him booze so he can claim he never has purchased alcohol he only gets angry. I’m not disagreeing with his wanting to donate money but rather his flawed reasoning behind such donations rather than any altruism. One organization in particular is clearing taking advantage of him to ensure future donations – my mother sees this as well but is unable to convince him otherwise as well. She has to live with him, so she has simply remains quiet.
At what age, if any, do you think you might start prioritizing temporary pleasure over future income? This might actually be a good subject for a future article. Of course, I’m not one to write it as I fight with this concept on a daily basis!
I hope your dad is not getting too angry. Donating is a good thing to support other people.
For me, I’ve been slowly spending more money beyond the norm starting in Dec 2016 when I bought my 2015 Range Rover after leasing a Honda Fit in 2014.
I have been spending more money due to my property purchases in 2019, 2020. Although 2019 purchase was more an investment. 2020 house purchase was to live it up.
I think there’s a reason why people have a midlife crisis. And so perhaps the time to spend more money is once you hit that midlife crisis between the ages of 40 and 45.
My father in almost all cases, gets disappointed with the organizations that he donated money. He wants them to use the money in a particular way but it almost never works out that way. I have also tried to convince him to set up his own fund whereby he could actually control how the money is spent but he has little interest. His only goal seems to be to not pay taxes.
I’ve recently found out about creating your own fund for donations and will actively pursue it. The sad thing is that most people don’t know about this.
What about putting a few $ toward an allocation to some Crypto Stablecoins like Gemini Dollar (GUSD) or USD Coin (USDC)? Blockfi, for example, is offering 8.7% interest. Just beginning to do some research in this area but may be interesting if they are offering such compelling rates. I also like the idea of putting my toe in the water to get familiar with the different platforms and how they function.
Sure, fits into my speculative investments section. Just in case it all turns out legit, you don’t want to miss the boat.
$100,000 in iBonds. Risk free 3.5%.
Hmmm….. maybe 20%. But not 100%, unless you’ve got maybe $10+ million and don’t really want to bother making capital gains anymore.
Hi
Long to listener, 1st time caller.
100k on our Mgt.
Keep up the great work.
Thanks Jen
It looks like Sam is really wanting people to post what they’d do with $100k, so I’ll comment here for the first time. For this exercise, I’m going to assume $100k after taxes in excess of what I already have in cash (which is significant due to my job instability).
1) Top off my and my wife’s Roth IRAs – $4k
2) Pay off our mortgage – $53k
3) Pay off the rest of my student loans – $7k
Those plans are already set and have been for some time. And we just got back from vacation (first one in over a decade), so no trips again anytime soon. That leaves $36k to figure out how to utilize in taxable accounts (or start 529s for our kids). That’s why I find this post interesting, as we’d be reaching this point next year anyway–the end of our current approach of tax-advantaged accounts –> mortgage –> student loans and into the wilderness of having money in excess of tax-advantaged accounts without the debts to pay down. As such I have been doing a lot of research into diversifying away from being so equities heavy (hard to do in 401k’s) as well as ways to maximize tax efficiency.
I’d probably use at least some of the remaining $36k to dip my toes into direct real estate (e.g. FundRise) and farmland (e.g. Steward and/or Harvest Returns, as I’m not an accredited investor). This would let me get a feel for these tools before engaging in them more seriously next year on a more continual basis. I’d probably keep the last $10k or so to make improvements to our house that my wife has been wanting though. Happy wife, happy life. :-)
Thanks for the thought exercise!
Always good to max out your tax advantageous accounts.
I like your conservative allocation of the $100K. Hard to go wrong paying off debt.
Thanks for sharing!
Thanks for the great article Sam.
If I currently had $100k to invest, I would find either an AirBnb or Commercial Real Estate to invest in. Using leverage the returns are just to good to ignore.
Hi Sam – Love your advice – “What if I find a hospitality deal on CrowdStreet in a city that is about to see a massive influx of visitors for years to come? At a 10% Internal Rate Of Return (IRR) for 5 years, my $32,000 would turn into $51,536.”
However, I always feel I’m at a disadvantage when it comes to valuating a real estate opportunity as I don’t have your experience level in the field. Do you ever publish advice on specific CrowdStreet opportunities when you see a good one come up?
Hi Barry,
I would read every one of the posts linked here: https://www.financialsamurai.com/real-estate-crowdfunding-learning-center/
You need to understand the capital stack. Further, I would really focus on the sponsor’s track record and history. The longer the better usually.
Sam –
Curious why there is no recommendation to allocate a percentage to international investments. Vanguard Total International Stock fund for example.
Do you recommend and invest in the US only?
Great breakdown! It speaks to me a lot, as I am in almost this exact situation. Don’t have a lot of conviction in the market at the moment, but have about 100k in cash and am looking for avenues to invest in.
Will probably follow a similar allocation as you mentioned unless I find a good property.
Really interested in your experience buying and selling watches. I think they could be a great investment if chosen wisely. Looking to splurge on a nice watch as well later this year.
Thanks. You’ll enjoy this post about watches if you want a nice one that will likely also appreciate in value: https://www.financialsamurai.com/how-to-buy-and-sell-watches-for-a-profit/
How do you think about your liquidity (cash) as a percentage (%) of your net worth at any given time? Seems as though you keep yours fairly low and you are running fairly “efficiently”. Though most of your big purchases (i.e. home) are behind you so probably doesn’t make as much sense to maintain such a large balance.
I enjoyed the article, thanks!
Check out this post: The Need For Liquidity Is Overrated If You Are Financially Competent
How would you invest $100,000 today? Thanks
Thank you, sir!
How would I invest $100,000? I would invest $40k in real asset / infrastructure funds for protection against inflation and current yield. $20k in a basket of undervalued large-cap china-based securities. $20k in US-based individual stocks. $10k bonds. $10k cash/vacation.
Should think about working real estate in there more specifically but likely would be encompassed in the real asset bucket.
I love your break-down here, it touches on a lot of points that people don’t discuss much.
Personally, I only allocate 5% – 10% of my portfolio in the more speculative investments (I’m still fairly young, so I’m trying to establish an excellent foundation before I’d feel comfortable enough to allocate more there). Also, as you said, paying off debt when you’re in doubt isn’t a bad decision!
I like commercial real estate right now. But I invested earlier this year already so I’m good.
For the rest of this year, I’m saving up cash to prepare for our around-the-world trip next year.
Oh, I’m also finally splurging on a covered pergola for our deck.
I should have done it 2 years ago when lumber was more reasonable. Bah!
Curious with your financial experience what you think the current trend in MEME stock investing. Redditors trying to force hedge funds holding shorts into short squeezes and driving the stock price “to the moon”?
AMC stock seems to be the “meme stock” de jour right now. Have you considered ever placing a bet on a stock like AMC for short term gain? Kinda amazing seeing a 543% return in 1 month.
In addition, do you see this sort of Meme stock gambling as a potential destabilizing factor in the broader market and economy or just a side effect of our inflationary environment that can be safely ignored?
It’s truly incredible right? It’s one of the reasons why I always allocate between 10% – 20% of my capital to speculative investments. There’s always a moonshot, somewhere. I rode a 50X moonshot in 2001 from $3K – ~$155K. This gave me enough capital to put 20% on a property in SF in 2003.
Never stop fortune hunting with the capital you can afford to lose.
The problem for most people is, as they get wealthier, they get more complacent. This is one reason to farm out money to the hungriest money managers.
Related post: Real Estate Is Less Risky Than Stocks And The Irony That Follows
For my wife and I, it’s been all about real estate. We own all kinds of different investment vehicles, from a state pension (untapped), to long and short term rentals and everything in between. Nothing has performed like real estate. For example, we turned $300k into $700k in four years on two SFH’s not counting rent collected. That’s not all of our properties either. And it certainly only seems to be getting better in my neck of the woods. I genuinely don’t think I’m a great investor. Mainly just lucky.
Not bad! And the reality is, millions of people have probably gotten lucky as well over the past 5, 10, 20, 30+ years. This massive wealth creation by asset owners is greater than people realize.
Now thing about people who have been focused on investing and making money for their careers and such. So many people have gotten rich.
It’s really time to spend more of our money on others and on more joy.
I am with you on the lucky part. I bought a ten acre plot (at about USD150/acre) seventeen years ago because I wanted to be as far from my nearest neighbor as possible. Farming and investing were not in my mind – I just wanted peace and quiet. Fast forward to 2021, the same plot is now more than USD20,000 an acre and rising! I still can’t believe it. This appreciation of land made me buy another plot where I am building apartments. BTW, these plots are in my home country in Africa.
Correction – price was $1,500 per acre seventeen years ago….
Sam,
I’d like to thank you for all your writing over the years. Because of you I recently diversified my holdings by buying a future retirement condo. I found one on a golf course that was listed from out of town sellers by an inexperienced realtor. Combined with your love letter a 7 hour deadline to either accept or deny my offer I got the condo for 2k less than the deceased owner paid for it in 2016. The estate was selling the condo. I’m easily up 75k and I just closed.
If it hadn’t been for your writings on the benefits of real estate combined with your tips, “love letter” “inexperienced realtors” and dislocations in the market I’d never even be looking for deals. Not only was this a great deal but it will provide much joy for myself and family in the future.
Thank you very much!
Bill
Wonderful Bill! Congrats, and you’re welcome too. Fun to spread the knowledge and help folks get ahead.
And when my book with Penguin Random House comes out in 2H2022, I hope to have hour support. Shouldn’t cost much and it should provide at least 10X, if not 100X the value of its cost, upon finishing.
I’m actually working on the real estate chapter now.
Hi financialsamurai,
Your thoughts on precious metals such as gold and silver? Like having a nice stack of gold and silver bars in your safe
Great points Sam, but I want to emphasize to all newbie investors that equities are still the best in terms of getting into investing due to low cost and low barrier to entry compared to anything else. If someone has only $100,000 to their name I think their best chance of the highest ROI would most likely be stocks, specifically index funds.
“Therefore, it may not be necessary to continue investing as aggressively anymore. Your current investments may just naturally continue to grow on their own.”
Great points Sam, including this one you wrote as I often go to the well on my DA Davidson retirement/ future income growth calculators of what will be the worth.
If you have 3 million and basically did nothing and figured 15% return (only because I know 10% is about average and only because I have been averaging 25-30% returns with dividends going to be reinvested as well for even higher returns) and did so for 10 year period, (again, not adding a dime to the accounts) the same account would be worth 12+++ million dollars.
I think once you get to 5 million and even think in the William Bengen terms, 200,000 a year should afford you the greatest lifestyle in the world! It would basically be a house paid for, as well as cars, as well as a lot of charitable giving as well.
I am firmly in this boat I think………………..and I think you may be right
If you’re thinking about retiring or taking things easier, now might be one of the best times ever as the U.S. opens up. If you have enough money to be happy, you just need to fight greed.
Help me get out!!!!!
The Minimalist Movement is one of the best ways to live this lifestyle as noticed too many have too much and too little use for most of it too. One TV, One Car, One good beats 10 crappy items any day of the week.
Sure! Negotiate a severance so you feel like you’re winning while leaving and winning again once you have all the time in the world.
Then, make sure you retire to something!
See: Pre-retirement Checklist For A Post-Pandemic Life
I’ll retire to be as lazy as I want plus not deal with annoying work supervisors.
Indeed. And, given your dad was a partner at GS, no worries at all!
Dear FS. Sometimes the articles switch up on me
Like gremlins. One day I’m caught up with new articles, then boom! The next time I check in the articles have been jumbled up. Is your son editing format on occasion? I suppose your method works. I start reading al the articles again trying to find where I had left
Off!
$100,000 to invest now-
$20,000 allotted for a rental home on Kauai, airfare, food for the decision maker, our twins and grandparents for 10-14 days. We were married there many moons ago. It’s our favorite location outside of our house.
24,000 allotted for ROTH conversion for taxes. Our
Income bracket will likely always be in whatever is the 24% zone. This will get us down the path to 7 figures in ROTH accounts. ROTH accounts are earmarked for our kids.
25,000 in Fundrise long term eReit.
5000 local children’s hospital.
5000 boys and girls club.
529s – nope, fully funded as of this year to cover in state costs.
21,000 on mortgage which a 10 y fixed. Slated to pay off in 30 months. This will speed that up.
Not sure if you are insulting my son or not, but thanks for sharing what you’d do with $100,000.
As for my son, I’ve got to put him to work so he rightfully earns money for his Roth IRA and custodial investment accounts.
No way am I insulting your baby. But sometimes the articles disappear And reappear. Makes me think I’m
Losing my marbles.
Letting him edit now would provide succession planning for the future of FS. No way should you ever contemplate selling again. Keep it rolling in the family for generations.
We opened custodians over 2 years ago. You can fund them at 399 per year without having to file.
Gotcha. I purposefully make the top articles disappear whenever I think another article deserves more attention towards the top.
You have to scroll down to read the other articles.
This is confusing for many readers. In the past I thought you had taken down the most recent chronological post.
Sorry to confuse you. I wouldn’t necessarily go through my chronology of writing when it comes to financial issues. One day I could be writing about cars. But if the Fed is hiking rates, I think it would be pertinent to sticky a post on how to make money in a rising interest rate environment for example.
Most people don’t leave a pertinent comment either. For example, I’d love to hear how you’d invest $100,000. But for some reason, most people don’t share and leave comments on different things.
I totally hear ya on the opportunity cost analysis. I always do that too before I spend money on anything big. I can afford to fly business or first class, but I just can’t do it. I always think about what I could use that money on instead. Especially since I only take short flights when I do fly, which isn’t often anymore.
I’d be more inclined to spend up on a long flight, but then it costs that much more. so I probably still wouldn’t pay up for it. I’d rather use the money for something tangible that I could use long-term or invest it.
I also like paying down principal when there’s nothing I feel like investing in when I have extra cash. It always feels good to see my mortgage decreasing!
Yeah, paying $10,000 to fly first class to Japan is nice. But man, once that 8-hour flight is over, you kinda wish you gutted it out in economy! $9,000 could buy you the best sashimi for two over many, many meals.
I think I’d need to start regularly earning over $2.5 million to comfortably afford first or private on short flights.
I’m seriously considering trading in some points to fly business class for my next trip to Thailand. That’s the only way I’d consider flying that luxuriously.
Although, my trip in January was pretty good. The plane was 1/4 full and I could stretch out. I don’t mind flying economy like that. Heh heh.