100,000 euros, for example through an inheritance or a successful business deal, is a lot of money that can yield even more if you invest smartly.
Our columnist Margarethe Honisch once mentally walked through it.
In addition to ETFs and bonds, she would also bet on a high-risk field: cryptocurrencies. Instead, their gold and petroleum don’t make it to the depot.
If you’re in the sweet spot of having $100,000 in your account — whether through an inheritance, gift, or a particularly lucrative business deal — and you just don’t know what to do with it, here are a few tips.
Should you invest at all now?
The Dax has lost more than eleven percent since the beginning of the year, the S&P 500 even more than 15 percent. That is even more than current inflation. Does it make any sense at all to invest the money and expose yourself to the risk of losing money in the stock market in addition to inflation? The answer is yes!
Stock market professionals even explicitly use times like these to expand their own positions and invest additional capital. The question is, of course, always: what to invest in?
The classic recommendation
Many investors would certainly fall back on one of the following two classic investment strategies for their investment:
- 60/40 split: Investors use 60 percent stocks and 40 percent bonds. That would mean: we invest 60,000 euros in individual stocks, ideally from different sectors and mainly in economically strong industrialized countries, and 40,000 euros in bonds from countries with a high credit rating. German government bonds currently pay a minimum of two percent interest per year.
- All-weather portfolio according to Ray Dalio: You want to achieve a stable return and, above all, avoid strong fluctuations in the portfolio. The portfolio then ideally consists of 30 percent equities, 55 percent bonds, 7.5 percent precious metals such as gold and 7.5 percent commodities such as oil. This strategy is therefore something for everyone who mainly wants certainty, attaches little importance to sustainability and does not necessarily want to increase the money quickly.
That’s how I would invest the money
Personally, I’m more of a risk averse type than averse. But from 100,000 euros, it is not only about increasing value, but also about value retention. Therefore, always consider in advance how much risk you ultimately want to take. Putting everything in crypto can make you rich overnight, but just as destitute. Anyone who has been following this column for a while knows that risk and return are always related.
Personally, I’d put a small 10% stake in bonds. Instead of a larger share of bonds, another 70 percent would be in broadly diversified ETFs, although I’ll stick with classic MSCI World and emerging markets. With this I have much more risk in the portfolio than with bonds and much more volatility – but also a higher return.
If you need a little less volatility, you can invest in the same low volatility index. These are so-called smart beta ETFs. For example, you can invest in the classic MSCI World, but with the “low volatility” factor. The companies are selected and filtered accordingly.
Since I’m more risk averse, the rest also goes to a riskier asset class that hasn’t been mentioned yet: cryptocurrencies. So of my $100,000 I would invest $20,000 in cryptocurrencies. That may seem like a lot and very risky to many. After all, the stock markets are recovering, but the world still looks gloomy on the crypto exchanges. Still, I am convinced of the technology behind it and I have already experienced a number of crashes in the five and a half years that I have been investing. While my bonds and ETFs let me sleep peacefully, I see crypto as the component that can really boost my investments.
I must say that you would only invest in established currencies such as Bitcoin, Ethereum, Polkadot or Monero. Of course, the risk of a total loss is still possible here. But I’m willing to put that 20 percent on a risky card.
Why I don’t invest in commodities and gold
Gold and oil are considered the crisis-resistant investments that shareholders flee to when sentiment elsewhere is low and crashes and sell-offs occur. Certainly: there is always a demand for gold and there is always a need for oil. This is, as it were, the insurance in the portfolio, and sometimes even more than that.
If you include commodities and precious metals in your portfolio, you ensure more stability in your deposit. Because your own investment strategy is always a personal decision, I’ve decided that I can sleep better at night if I don’t actively support these sectors and sometimes countries. That’s my very personal decision and I understand everyone who says, but you still fly on holiday and support it. The nice thing about investing is that you can integrate your own individual preferences and opinions.
Disclaimer: Stocks and other investments always involve risks. A total loss of the invested capital cannot be ruled out either. The published articles, data and forecasts are not an invitation to buy or sell securities or rights. Nor are they a substitute for professional advice.
Margarethe Honisch is a financial blogger and author. On your website lucky one and her namesake Instagram account She gives tips on retirement provision and investing. She writes the “Earn More With Money” column for Business Insider.