Smart Investment Ideas for $100K: Maximize Returns & Minimize Risk
Want to get the most out of $100,000? Explore investment options to grow your wealth and achieve your financial goals.
Real estate, shares, peer to peer lending and superannuation have different strategies to grow your wealth.
Passive income or long term growth? These practical tips will help you make informed investment decisions.
Real Estate
Understanding property prices is key to finding an affordable entry point. Recent data shows massive differences in median house prices across Australian cities:
Sydney: Median house price is around $1.2m, one of the most expensive in the country.
Melbourne: Median price is around $930,000, slightly more affordable than Sydney.
Adelaide and Hobart: Median prices below $600,000, more affordable entry points for first time investors.
Rental Yields
Rental yield is a key to cash flow. Areas with higher yields give stronger immediate returns. Notable data:
High Yield Suburbs: Queensland and Western Australia have yielded over 17% in some regions, especially in towns near mining projects.
Example: Mallacoota, Victoria has a 17.9% rental yield on median priced homes due to local economic activity.
Market Trends
The Australian property market is influenced by economic conditions, interest rates and supply and demand. What to watch:
Growth: Regional areas with infrastructure projects are seeing property values grow.
Fluctuations: Interest rate changes have caused temporary slowdowns in the big cities, but demand for properties in affordable areas is strong.
Financial Goals
Your financial goals will determine your investment strategy. Here are three to consider:
Income
Objective: Generate passive income from rental properties to top up your income.
Strategy: High yield areas or dual income properties with separate rentals.
Capital Growth
Objective: Build wealth by increasing the property’s value over time.
Strategy: Growth suburbs with strong demand, proximity to amenities and future development.
Retirement
Objective: Create a long term property portfolio that generates passive income in retirement.
Strategy: Buy properties with a history of steady capital growth and low vacancy rates for consistent income.
Risk
Before you invest, consider your tolerance to market volatility. Risk tolerance varies among investors and each strategy has pros and cons.
High Risk
Characteristics: Investing in high yield areas like mining towns gives strong rental returns but higher volatility.
Example: During mining booms property prices can skyrocket, but a market slowdown can see values plummet.
Moderate Risk
Characteristics: Investing in the metropolitan areas gives you a balance of risk and reward.
Example: Properties in the Melbourne property market or Brisbane real estate may not give extreme returns but they give steady capital growth and rental demand.
Low Risk
Characteristics: Choosing properties in established suburbs with a history of stability.
Example: Suburbs near transport, schools and employment hubs tend to have lower vacancy rates and stable property values.
Investment Timeframe
Your investment timeframe is key to your property strategy. Here’s how different timeframes impact:
Short-Term (1-5 years)
Objective: Get quick returns through property flipping or short term development.
Strategy: Find undervalued properties, renovate and sell for profit.
Medium-Term (5-10 years)
Objective: Hold properties for medium term growth.
Strategy: Invest in growth corridors where infrastructure projects are happening, demand will increase.
Long-Term (10+ years)
Objective: Build a rental portfolio for passive income and long term growth.
Strategy: Focus on properties in the metropolitan areas with steady growth like Sydney or Brisbane for consistent cash flow and growth.
Financial Advisor
Working with a financial advisor can give you valuable insights and personal advice. Here’s how they can help:
Customised Strategies
Benefit: Advisors will assess your goals, risk and timeframe to create a tailored plan.
Example: If your goal is passive income an advisor may recommend cash flow positive properties with minimal maintenance costs.
Market Intelligence
Benefit: Access to industry data and reports not available to the public.
Example: Advisors may have access to off market deals or know trends that aren’t widely known.
Portfolio Spread
Benefit: Spread risk by diversifying across property types and locations.
Example: Instead of investing all $100,000 in one property an advisor may suggest spreading it across multiple properties or asset classes.
Investment Strategies
Using Equity
How It Works: Use your $100,000 as a deposit to buy a property up to $500,000.
Potential Return: Leverage amplifies returns if the property grows in value, you get bigger profits for a smaller cash outlay.
Example: If a $500,000 property increases by 10% your $100,000 equity grows much more than a cash only investment.
Cash Flow Positive Properties
How It Works: Invest in properties where rental income is greater than expenses, creates a cash surplus.
Benefit: Immediate passive income without having to sell the property.
Example: Buying in regional towns or growth areas with higher rental demand than supply.
Diversified Property Portfolio
How It Works: Spread $100,000 across multiple properties or property types (e.g. residential, commercial or industrial).
Benefit: Diversification reduces your reliance on one property’s performance.
Example: Use $50,000 as a deposit on a house and the remaining $50,000 to buy units in a real estate investment trust (REIT).
Watch this video for more detail:
Investing $100,000 in Australian property is a way to create wealth and passive income. But it requires planning, goal setting and risk assessment.
Use this guide to shape your strategy and seek professional advice for personal guidance. By making informed decisions you can turn your $100,000 into an asset for your future.
Superannuation Contributions
Maximising your superannuation contributions is a tax effective way to grow your retirement savings. Contributing $100,000 can make a big difference to your long term financial security.
Contribution Types
Understanding the two types of super contributions helps with planning:
Concessional Contributions: Pre-tax contributions taxed at 15% within the super fund. Annual cap is $27,500 including employer contributions.
Non-Concessional Contributions: After-tax contributions, capped at $110,000 per year. If you haven’t contributed to super in previous years you can use the bring forward rule to contribute up to $330,000 in one year.
Tax Benefits
Super contributions have tax benefits for both concessional and non-concessional strategies.
Concessional Contributions: Reducing your taxable income by contributing pre-tax funds reduces your overall tax bill. Example: If you’re in the 37% tax bracket and contribute $27,500 to super you save 22% in tax.
Non-Concessional Contributions: No immediate tax benefit but earnings in super are taxed at 15% to maximise long term growth.
Investment Growth
Super funds invest your contributions into a diversified portfolio to grow your money over the long term. Strategies include:
Balanced Portfolios: For steady growth while managing risk, these invest in shares, property and fixed income assets.
Example: Over 20 years a $100,000 contribution earning 7% pa could grow to over $386,000.
High-Growth Funds: Invest in shares and property for higher returns but come with higher short term volatility.
Retirement Goals
Getting super early helps you retire comfortably. Key strategies include:
Early Contributions: Investing $100,000 earlier in your working life gives you more time for compounding growth. Example: Contributing at 35 instead of 50 can almost double your returns by retirement.
Post-Tax Lump Sums: Contributing a lump sum close to retirement means your savings are tax effective when you start drawing an income stream.
Risk Tolerance
Before you contribute, consider your risk tolerance and time to retirement. Super strategies can be suited to low and high risk.
Low Risk: Conservative funds invest in cash and bonds for more stable returns over time.
High Risk: Growth funds invest in equities and property for higher returns but fluctuate with market movements.
Seek a Financial Advisor
A financial advisor can shape super contributions to your situation.
Tax Strategies: Advisors help you save tax while staying within the annual contribution caps.
Investment Allocation: They recommend funds that match your risk profile and long term goals.
Prototype Tactic
Use the bring forward rule and contribute a $100,000 lump sum to your super fund to turbo charge growth. This strategy means tax effective compounding and more super in your account.
Super contributions is a way to grow wealth and secure your future.
By contributing strategically you get tax savings, compounding growth and diversification and a stress free retirement.
Peer-to-Peer Lending
Investors can try Peer-to-peer (P2P) lending where they can connect directly with borrowers through online platforms, no banks required.
With $100,000 you can earn competitive returns and support individuals or businesses looking for loans.
How It Works
P2P platforms act as intermediaries, matching lenders with borrowers who need funds. Platforms assess borrowers’ creditworthiness and assign risk grades that determine the interest rate.
Borrowers repay the loan through monthly payments of principal and interest, giving investors a regular income stream.
Gains and Uncertainties
P2P lending offers higher returns than traditional investments but risks vary with borrower profiles.
High Returns: Investors can earn returns of 5% to 12% pa depending on the loan terms and borrower risk.
Example: Investing $100,000 at 8% pa can give you $8,000 per annum in passive income.
Default Risk: Higher returns come with higher risks. Lower grade loans have a higher chance of default which can reduce your returns.
Diversification
Diversify your investment across multiple loans to reduce risk and stabilise returns.
Loan Allocation: Platforms allow you to split your $100,000 into smaller portions across hundreds of borrowers.
Example: Lending $1,000 to 100 borrowers reduces the impact if one borrower defaults and you still get overall income.
Automated Tools: Many platforms have automated tools that allocate and re-invest funds, saving time and maximising diversification.
Passive Income
P2P lending is perfect for investors who want regular, predictable cash flow.
Monthly Repayments: Borrowers repay the loan monthly, giving you a regular income stream of principal and interest.
Compound Growth: Reinvesting repayments into new loans allows your $100,000 to grow, more long term earnings.
Risk Management
Understanding your risk tolerance is key to managing returns and exposure.
Low Risk: Focus on A-grade borrowers who have excellent credit history and lower returns.
Moderate to High Risk: B- or C-grade loans can give you higher returns but comes with higher default risk. Balancing these tiers will give you the best outcome.
Example
A strategic allocation of your $100,000 will give you risk and return for a long term investment plan:
40% A-grade loans (low risk, low returns)
40% B-grade loans (moderate risk, moderate returns)
20% C-grade loans (high risk, high returns)
This mix gives you stability and room for growth in higher yielding loans.
Investment Timeframe
P2P lending is good for short to medium term goals depending on your financial plans. Short term loans (1-3 years) give you faster returns, medium term loans (3-5 years) give you a steady cash flow.
In Summary
P2P lending is a great option for investors who want higher returns and regular income.
By diversifying your $100,000 across multiple loans and understanding your risk profile you can reduce exposure and maximise passive income.
With the right strategy and reinvestment P2P lending can turn your investment into a wealth building machine.
Gold or Precious Metals
Investing in gold and other precious metals is a tried and true way to protect and grow your wealth. With $100,000 you can diversify your portfolio and benefit from the stability these assets give you during economic uncertainty or inflation.
Process
Gold, silver, platinum and palladium are the most popular precious metals people invest in.
These metals are bought in physical form like coins, bars and jewellery or through financial products like exchange-traded funds (ETFs), futures contracts or mining stocks.
Their value is affected by global economic conditions, inflation and geopolitical events.
During times of financial stress or currency devaluation, precious metals tend to do well, as a hedge against market volatility.
Earnings and Volatility
While precious metals are considered safe haven assets, their returns can be unpredictable compared to other investments like stocks.
Moderate Returns: Gold has historically given an average annual return of 6-8%.
Example: A $100,000 investment in gold with a 7% return would give you $7,000 per year.
Price Volatility: While gold and other metals rise during economic crisis, they can also go stagnant or even drop in price during good times. Investors need to be prepared for this.
Liquidity Risk: Precious metals are liquid but selling large amounts quickly can result in lower prices due to market conditions which can impact returns.
Investment Mix
One of the biggest advantages of investing in gold and precious metals is that they can diversify your portfolio.
Inflation Hedge: Precious metals are seen as a store of value when inflation eats into the purchasing power of traditional currencies.
Portfolio Balance: Allocating a portion of your $100,000 to precious metals reduces your exposure to more volatile assets like stocks and real estate.
Example: If you allocate 20% ($20,000) of your funds to precious metals you can offset the higher risks of other investments.
Passive Income Potential
Unlike stocks or bonds, gold and precious metals don’t generate passive income through dividends or interest. However their value can appreciate over time and you can get capital gains.
Capital Gains: The main profit from gold is from price appreciation. Buying low and selling high can give you big returns.
Contingency Planning
Precious metals are perfect for long term investors looking for stability and wealth preservation.
Low Risk: Investing in physical gold or silver like bullion or coins is considered safer as it’s less exposed to market fluctuations than stocks or ETFs.
Moderate Risk: Gold mining stocks or ETFs give you exposure to precious metals prices with potential for higher returns through dividends and stock appreciation.
High Risk: Investing in gold futures can give you higher returns but higher risk due to market volatility.
Example Strategy
A balanced strategy helps you manage risk and returns:
50% physical gold or silver (low risk, stable value)
30% gold mining stocks or ETFs (moderate risk, growth)
20% precious metals futures (higher risk, higher returns)
Investment Horizon
Precious metals are perfect for long term investors looking for stability and wealth preservation.
Short-Term: For short term gains precious metals can be volatile so not reliable.
Long-Term: Over the long term precious metals tend to hold their value especially during inflationary periods or economic downturns.
Conclusion
Gold and precious metals are a great opportunity for those who want to diversify their portfolio and protect their wealth. With a well thought out strategy and risk management a $100,000 investment in these assets can give you long term stability and potential capital appreciation.
Dividend Paying Stocks
Dividend paying stocks are a great way to get passive income and long term capital growth.
By investing $100,000 you can get regular dividend payouts and have the stock price appreciate over time.
How it Works
Dividend stocks are shares in companies that distribute part of their profits to shareholders as dividends.
These are paid quarterly and can be reinvested to buy more shares, compounding returns.
Established and reliable companies are more likely to pay dividends so you get a steady income stream.
Profits and Risks
Dividend stocks have attractive returns but there are risks.
Steady Returns: Dividend yields range from 2% to 6% depending on the company. Example: A $100,000 investment at 4% yield will give you $4,000 a year.
Dividend Growth: Companies with dividend growth can give you growing income.
Market Volatility: Although dividend stocks are more stable than growth stocks, market fluctuations can affect their value and dividend payouts.
Investment Spread
Dividend stocks allow you to spread across different industries to reduce risk.
Sector Exposure: These stocks are available in healthcare, consumer goods, utilities and energy sectors.
Risk Mitigation: Spreading your investment across different sectors will protect you from downturns in any one sector.
Example: Investing $25,000 in four sectors (e.g. energy, healthcare, technology, consumer goods) will spread the risk and give you steady income.
Passive Income
Dividend stocks give you passive income. The regular dividend payouts can add to your income and reinvesting them can increase your holdings and future income.
Regular Payments: Dividends are paid quarterly so you get predictable income.
Compounding Returns: Reinvesting dividends to buy more shares will compound over time.
Example: Reinvesting $4,000 in dividends can buy more shares and get higher future dividend payouts.
Risk Control
Dividend stocks are considered safer than growth stocks but still have risks.
Low Risk: Blue chip stocks with consistent dividend payments are low risk.
Moderate Risk: Mid cap companies have growth potential but may have less stable dividends.
High Risk: High yield stocks give you higher returns but come with dividend cuts or price drops risk.
Example Plan
A balanced approach will give you better returns and lower risk.
50% blue chip stocks (low risk, steady dividends)
30% mid cap stocks (moderate risk, growth potential)
20% high yield dividend stocks (higher risk, higher return)
Conclusion
Dividend paying stocks are a great way to get passive income and grow your wealth.
Spreading across sectors and reinvesting dividends will give you a steady and growing income.
Invest $100,000 in dividend stocks and build a long term financial plan.
Term Deposits
Term deposits are a low risk investment where you can earn fixed interest by locking in your money for a fixed period.
With $100,000, term deposits give you predictable returns so they are suitable for conservative investors who want stability and security.
How it works
In a term deposit, you commit a fixed amount of money to a bank or financial institution for a fixed term which can be from 1 month to 5 years.
During this period you cannot access your funds but you earn a fixed interest rate. The interest is paid monthly or at maturity depending on the terms of the deposit.
Yield and Exposure
Term deposits give you reliable returns with minimal risk but with limitations.
Steady Returns: Interest rates for term deposits range from 2% to 4% depending on the term. Example: A $100,000 investment at 3% interest for 12 months will give you $3,000 in interest.
Low Risk: Since term deposits are insured by government guarantees (up to a certain limit) they are one of the safest investments.
Inflation Risk: The fixed interest rate may not keep up with inflation and reduce your purchasing power over time.
Asset Allocation
While term deposits give you a safe return, spreading your investment across different terms or financial institutions will give you better returns.
Staggered Maturity: By putting your $100,000 in multiple term deposits with different maturities you will have liquidity while maximizing interest earnings.
Example: Allocate $50,000 in 12 months, $30,000 in 2 years and $20,000 in 5 years to balance flexibility and returns.
Passive Income
Term deposits give you a steady passive income. You can either reinvest the interest earned or use it as additional income.
Interest Payments: Interest can be paid monthly, quarterly or at maturity giving you regular income.
Reinvestment: At maturity you can choose to reinvest the principal and interest into a new term deposit and compound your earnings.
Risk Reduction
Term deposits are low risk but you should consider a few things before committing.
Low Risk: As long as you choose a reputable institution your principal is safe.
Liquidity Risk: You must be comfortable with locking away your money for the term, early withdrawal usually incurs penalties.
Example
A conservative approach would be to allocate $100,000 across different term deposits with varying terms to balance liquidity and returns.
50% in 12 months (lower interest, higher flexibility)
30% in 3 years (moderate interest, less flexibility)
20% in 5 years (higher interest, least flexibility)
Conclusion
Term deposits are a safe and steady investment for those who want returns with minimal risk.
By spreading your $100,000 across different term deposits you will have predictable income and liquidity at different times.
High-Yield Savings Accounts
High-yield savings accounts (HYSA) are perfect for those who want to earn more interest than traditional savings accounts but still have liquidity.
With $100,000 a HYSA is a safe and easy way to grow your savings with low risk.
How it works
A high-yield savings account works like a regular savings account but with a much higher interest rate.
The money is accessible anytime but the interest rate is higher than the average savings account because the bank is competing for depositors.
The interest is compounded monthly or quarterly.
Rewards and Risks
HYSA gives you moderate returns with low risk. They don’t give the same growth as higher risk investments but they are safe and liquid way to earn interest.
Higher Returns: The annual interest rates for HYSA usually range from 3% to 5% depending on the institution and market conditions.
Example: A $100,000 deposit earning 4% per annum would give you $4,000 in interest in a year.
Low Risk: High-yield savings accounts are FDIC or government-insured so they are one of the safest investments. But the returns may not beat inflation over time and may reduce the purchasing power of your money.
Capital Allocation
Although high-yield savings accounts are safe you can further maximize your returns by spreading your funds across multiple accounts.
Multiple Accounts: Spreading your $100,000 across different banks or accounts may allow you to take advantage of different interest rates. Example: Put $50,000 in an account with 3.5% and $50,000 in another with 4% to balance access and returns.
Monetary Flexibility
One of the best things about high-yield savings accounts is their liquidity, you can access your money anytime. Unlike term deposits or CDs there are no penalties for withdrawal.
Access to Funds: You can withdraw or transfer money anytime without penalties so it’s a good option for emergency funds or short-term savings goals.
No Lock-In Period: Unlike other high-interest options like term deposits the funds in a HYSA are not locked for a set term.
Risk Management
Although high-yield savings accounts are low-risk you still need to manage your expectations and understand the risks.
Low Risk: The funds in a HYSA are insured.
Inflation Risk: The interest earned may not beat inflation especially if rates drop or if inflation is high and may reduce the real value of your savings.
Model
A balanced approach would be to allocate your $100,000 across different high-yield savings accounts with different interest rates to maximize returns and liquidity.
50% in an account with 4%
30% in an account with 3.5%
20% in an account with 3%
Conclusion
High-yield savings accounts is a safe and easy way to grow your savings.
By choosing accounts with higher interest rates and spreading your deposits you can maximize returns on your $100,000 and have liquidity and safety.
Managed/Index Funds
Managed and index funds is a way to diversify your investments with a $100,000. These funds pool money from multiple investors to invest in different assets so you don’t need to do extensive research yourself.
Mechanics
Managed funds are managed by professional fund managers who make investment decisions based on market analysis.
Index funds on the other hand aim to replicate the performance of a specific market index like ASX 200.
Both types offer exposure to a broad range of stocks, bonds or other assets depending on the fund’s strategy.
Pros and Cons
Managed and index funds have different returns depending on the market and the fund’s strategy.
Index Funds: Generally offers stable long-term returns by tracking a market index. Expected returns 5% to 8% per annum depending on the market.
Example: A $100,000 investment in an ASX 200 index fund would yield $6,000 to $8,000 per annum based on 6-8% return.
Managed Funds: These funds can offer higher returns but with higher risk as it’s actively managed. Returns vary depending on the fund manager’s strategy 4% to 12%.
Example: A 10% return managed fund would generate $10,000 per annum on a $100,000 investment.
Variation
Both types of funds gives you diversification by investing in a mix of assets.
Index Funds: These funds tracks a broad market index, gives you exposure to a wide range of companies across different industries.
Managed Funds: Depending on the fund’s objective they may invest in equities, bonds, real estate or international markets.
Example: An index fund tracking ASX 200 gives you exposure to 200 top Australian companies, a managed fund might invest in global markets and asset classes.
Liquidity and Flexibility
Both managed and index funds are relatively liquid, you can buy and sell units in the fund anytime, though the process may take a few days.
Index Funds: Most index funds are highly liquid, you can buy or sell units on any business day.
Managed Funds: While liquid, some managed funds may have restrictions on withdrawal, like quarterly redemption windows.
Risk Management
Managed and index funds gives you risk management through diversification but you need to assess the risk involved with each.
Low Risk (Index Funds): These funds offers steady returns with lower risk as it’s diversified across a broad range of companies.
Higher Risk (Managed Funds): Managed funds can expose you to higher risk if the fund manager is aggressive in their investment decisions.
Example: An index fund tracking ASX 200 is less volatile than a managed fund investing in high growth high risk companies.
Test
Allocate your $100,000 across both index and managed funds for a balanced approach to risk and return.
60% in a broad market index fund (low risk, stable returns)
40% in a managed fund that targets higher returns through active management (moderate to high risk)
Conclusion
Managed and index funds gives you an accessible and diversified way to invest your $100,000. By choosing a mix of both you can get stable long term returns and balance risk and reward.
Exchange Traded Funds (ETFs)
Exchange-Traded Funds (ETFs) is a versatile and cost effective investment option that allows you to diversify easily.
With a $100,000 investment, ETFs allows you to diversify across different asset classes like stocks, bonds and commodities.
Traded on stock exchange like individual stocks, ETFs gives you liquidity and flexibility.
How It Works
ETFs are a collection of assets that tracks specific indices or sectors. For example, a stock ETF might tracks S&P 500, a bond ETF might tracks a corporate bond index.
When you invest in an ETF you buy shares in the underlying assets and get exposure to a broad portfolio. ETFs are traded throughout the day so you can buy or sell during market hours.
Outcomes and Risks
ETFs can give you good returns but risk levels varies depending on the type of ETF.
Stable Returns: ETFs that tracks broad market indices like S&P 500 tends to give steady long term growth. Historically such ETFs returns around 7-10% per annum and can grow $100,000 to $107,000-$110,000 in a year.
Higher Risk: Sector specific ETFs like technology or emerging markets ETFs can give higher growth but also higher volatility. They can give you big returns in a bull run but bigger losses in a bear market.
Allocation
ETFs is a great way to diversify your portfolio.
Broad Diversification: By investing in ETFs you get instant diversification across multiple sectors or asset classes. For example an equity ETF might include stocks from various industries and spread the risk.
Lower Costs: ETFs have lower expense ratios than mutual funds so it’s a cost effective way to diversify and keep fees low.
Asset Liquidity and Access
ETFs is known for its liquidity and accessibility.
24/7 Trading: Unlike mutual funds, ETFs can be bought or sold during market hours.
Easy to Get: Most brokerage platforms offers ETFs, often with commission free trading so it’s accessible to many investors.
Risk Management Plan
While ETFs is less risky than individual stocks, it still has market risks.
Diversification Strategy: To manage risk you need to spread your $100,000 across different sectors and asset classes. A diversified approach will help you minimize losses if a sector underperforms.
Example
For a $100,000 investment:
40% in broad market ETFs
30% in sector specific ETFs
20% in international ETFs
10% in bond ETFs
Conclusion
ETFs is a great way to diversify a $100,000 investment with low fees and flexibility.
By choosing a mix of ETFs across different sectors and asset classes you can tailor your portfolio to your risk tolerance and investment goals.
With its liquidity, diversification and cost effectiveness ETFs is a good for long term investors.
Cryptocurrency
Cryptocurrency is a high risk high reward investment for those who dare to venture into digital assets.
With $100,000 cryptocurrencies can be a great way to diversify your investment portfolio and give you big returns. However they comes with high volatility and regulatory uncertainty.
How it Works
Cryptocurrencies is a decentralized digital currency that uses cryptography for transactions.
Unlike traditional currency they are not controlled by central banks but by blockchain technology—a distributed ledger that records all transactions.
Bitcoin, Ethereum and other altcoins can be bought, sold and stored through digital wallets so it’s flexible and accessible for investors.
Performance and Risks
Cryptocurrency investments can give you big returns but comes with big risks due to price volatility.
High Returns: Cryptocurrencies has shown impressive growth over the years.
For example, Bitcoin’s price went from under $1,000 in 2017 to over $60,000 in 2021, that’s a 6,000% return. A $100,000 investment in Bitcoin in 2017 would have given you over $6 million at its peak.
Volatility and Risk: Cryptocurrencies is very volatile. For example, Bitcoin’s price can move 10% or more in a day.
This volatility can result to big short term loss. A $100,000 investment can go down 30% or more during market downturns.
Portfolio Allocation
To manage the risks of cryptocurrencies, diversification is key.
Diversifying Between Coins:
Instead of investing only in Bitcoin, you can diversify across different cryptocurrencies.
Ethereum, Binance Coin and Solana for example has different use cases and growth potential. This will spread the risk and minimize the impact of a poor performing asset.
Stablecoins:
For a more stable approach, you can allocate a portion of your investment to stablecoins which is pegged to traditional asset like US dollar.
They has less volatility and gives you exposure to the cryptocurrency market.
Liquidity and Accessibility
Cryptocurrencies is known for its liquidity and accessibility.
24/7 Market: Unlike traditional stock market, cryptocurrency market is open 24/7, 7 days a week so you can buy or sell at any time.
Access Through Exchanges: Cryptocurrencies can be bought on multiple online platforms like Binance, Coinbase and Kraken. These exchanges allows users to convert fiat to crypto and vice versa with minimal entry barriers.
Risk Management
Understanding the risks of cryptocurrency is key to managing your investment.
High-Risk Assets: Cryptocurrencies is highly speculative and prices can be affected by market sentiment, regulatory news and technological advancements.
Secure Storage: To minimize risks of theft, it’s important to store your cryptocurrency in a secure wallet. Hardware wallets and cold storage is ideal for long term holding.
Blueprint
For a $100,000 investment in cryptocurrency, a diversified strategy can be:
50% Bitcoin (the most established cryptocurrency)
30% in Ethereum and other top altcoins like Solana or Binance Coin
20% in stablecoins for lower volatility and liquidity
Conclusion
Cryptocurrency can be a fun and profitable investment if you want high returns and can tolerate high volatility.
With $100,000, diversifying across multiple coins and considering stablecoins will help you manage risk.
Remember, cryptocurrency is a speculative asset class so careful consideration and risk management is key.
Originally Published: https://www.starinvestment.com.au/investment-ideas-for-100k/
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