How to Invest $100K: Millennial/Gen-Z Edition

Read time: 9 minutes

Welcome to the stock market of 2021, where top-performing investments include:

• A theater chain on the brink of bankruptcy.
• A brick-and-mortar video game retailer.
• A joke cryptocurrency based on a dog.

This isn’t your grandma’s stock market anymore and you shouldn’t invest like it is. To navigate the new investment world, we show you how to invest $100k — in Millennial/Gen-Z style.

A quick word of caution, this isn’t your standard 60% stocks/40% bonds portfolio. You definitely won’t find 1.5% yielding bonds or mutual funds with expensive fees in this portfolio.

These investments in this how to invest $100k guide are meant for the modern-day portfolio which includes 3 major asset classes — stocks, real estate and crypto — to optimize returns while providing diversification.

Content:

• 30% in Exchange Traded Funds (ETF)
• 30% in Individual Stocks
• 30% in Real Estate
• 10% in Cryptocurrencies
• How to invest $100k: quick-fire questions

How to invest $100k assumptions:

• You’ve paid off any credit card debt.
• You have an investment horizon of over 5-10 years.
• You’re not retiring any time soon.

This how to invest $100k guide acts as a framework for your portfolio. The allocations given for each asset are only guidelines and you should adjust based on your personal preferences. How to invest $100k like a Millennial/Gen-Z? Let’s get started. 

30% in exchange-traded funds (ETF)

This portion of your portfolio includes exchange-traded funds with a focus on those that invest in stocks — giving our portfolio the most upside.

There are lots of benefits to ETFs but one of the biggest ones is diversification.

Why does it matter? This portion of your portfolio will be less volatile compared to higher risk portions (i.e Individual stocks, crypto)

How to play it? One option is to allocate the whole 30% into a lower-risk ETF that tracks the S&P 500 — an index of 500 of the largest companies in the US.

• Example: the SPDR S&P 500 ETF Trust (NYSE:SPY).
• Since its creation in 1992, the ETF has given investors an annual return of ~10%.
• $100k would have turned into over $1.5million in 28 years — beating out many other investments.
• During periods of recessions or market crashes, the S&P 500 index tends to fall more than traditional asset classes like bonds. 

How else? If you’d like to diversify a bit more or play around with different industries, another option is to allocate a portion of the 30% into active or thematic ETFs.

• Actively managed ETFs are those that have investment managers actively buying and selling stocks in the fund — i.e. ARK Innovation ETF. 
• Actively managed ETFs have higher fees compared to passively managed ETFs — which simplify track the returns of an index (i.e. the S&P 500 — 500 of the largest companies in the US).
• Thematic ETFs are those that focus on specific industries or trends — i.e. the First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) invests in a basket of cybersecurity companies.

Below is a list of popular exchange-traded funds: Returns and portfolio holdings of the ETFs below as of July 9, 2021

Exchange-Traded Fund	Ticker	5-Year Return (Annualized)	10-Year Return (Annualized)	~# of Holdings	Theme/ETF Focus
SPDR S&P 500 ETF Trust	SPY	17.5%	14.7%	506	Tracks the S&P 500 Index: ~500 of the largest US companies
iShares Russell 3000 ETF	IWV	17.7%	14.5%	2684	Tracks the Russell 3000 Index: ~3,000 of the largest US companies
Invesco QQQ Trust	QQQ	25.0%	19.9%	102	Tracks the NASDAQ 100: ~100 of the largest US growth companies
ARK Innovation ETF	ARKK	46.2%	N/A	51	Actively managed index fund: Innovation/technology companies

How much to allocate? That depends on your risk tolerances and how active you want to be in selecting ETFs. You might want to stick with more diversified, lower risk ETFs like SPY if you have:

• A shorter investment horizon or lower appetite to volatility (I.e. seeing your portfolio swing more during market changes).
• Less time for research as thematic ETFs require selecting which industries/themes to invest in.

Autopilot mode: Look into stock trading apps like M1 Finance — which provides over 80 portfolios that diversify into different investment themes and ETFs. If you’re looking to be more active, eToro has a CopyPortfolio tool that allows you to copy the trades of the top investors.

Learn more: What are thematic ETFs and why should you invest in them?

30% in individual stocks

Time to have some fun. This portion of your portfolio will have higher upside potential compared to index funds — but higher return potential also comes with more risk.

Why does it matter? To build wealth, it’s difficult to leave stocks out of a portfolio. Historically, stocks have been one of the top-performing assets — but they’re also riskier than many other assets.

For those who are more conservative with their portfolio, a larger portion of this 30% could be allocated towards index funds.

Proper diversification… Which doesn’t mean investing your stock portfolio into one industry or into all growth stocks. Smart investing requires diversification in companies with different market caps, characteristics (i.e. growth, value) or sectors.

If the key to real estate is location, location, location — the stock market’s mantra would be diversification, diversification, diversification.

But how many stocks should you hold? According to portfolio manager Michael Lauer, a portfolio of 15 stocks could be a good amount for diversification. He noted in an interview in the Stock Market Wizards series that a portfolio of 15 stocks will achieve 80% of the benefits of much broader diversification.

• To achieve both exceptional performance and low correlation, investors shouldn’t diversify too much.
• Too much diversification can also lead to less time spent analyzing and managing each stock.

But what are the qualities of a good long-term investment? To answer that, check out our guide to picking long-term investments. 

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30% in real estate

We take the risk level down a notch in this section to invest in an asset class that belongs in everyone’s portfolio, real estate. But note, this 30% allocation excludes any existing real estate properties you might own (we’ll explain how to invest $100k in real estate with only $30k at the bottom of this section).

Why does it matter? Aside from being one of the best investments you could ever make, real estate has several benefits differentiating it from other asset classes.

Since 60% of our portfolio is already placed in stocks or stock-based index funds, we want to fill up our portfolio with investments that have different characteristics from stocks. This includes:

• Being less volatile than stocks: Real estate prices tend to fluctuate less during market crashes — with prices falling less than stocks. But during bull markets, real estate prices also tend to rise less than stocks.

Unlike stocks, the change in real estate value can’t be seen in real-time. For those of us who are addicted to checking our stock portfolio every day, this feature will give investors a peace of mind.

The biggest question: How can you invest in real estate with only $30k? By using real estate crowdfunding platforms like Fundrise or CrowdStreet, which has exploded in popularity. These crowdfunding platforms give investors the ability to invest in institutional quality properties like whole apartments, malls, warehouses and more with only a couple thousand dollars.

The downside: Investing in real estate is often less liquid (i.e. harder to sell) than other asset classes. We can’t sell our real estate investments as easily as stocks.

10% in cryptocurrencies

Most of the other guides you’ll read out there will tell you to avoid cryptocurrency. But this isn’t your grandma’s stock market anymore and this isn’t an article for those stuck in the past. How to invest $100k? Don’t be scared of making money.

We’re going to reserve the last 10% of our portfolio to invest in “moonshot” assets like crypto — which have the potential to grow 10-100x. But beware, these investments are extremely volatile and aren’t meant for the faint of heart.

In the past decade, Bitcoin has fallen over 29%, fifteen times. In three of those crashes, Bitcoin fell more than 80%. Imagine seeing your $10k investment fall to $2k in a matter of weeks. For this reason, we allocate no more than 10% of our portfolio.

Why does it matter? Despite the massive volatility, missing out on potential upside is something we’re not about to do. According to famous venture capital firm, Andreessen Horowitz, whose team created some of the most famous internet companies and pioneered early internet investments:

Crypto is not only the future of finance but, as with the internet in the early days, is poised to transform all aspects of our lives.

When it comes to crypto investments, the largest and most well-known cryptocurrencies are Bitcoin and Ethereum. There are also altcoins like Cardano, XRP and Uniswap and thousands more — which tend to be riskier.

To invest in crypto, you also need a trading platform like eToro — which supports cryptocurrency trading.

In the US, there aren’t any crypto ETFs that hold cryptocurrency but in Canada, there are both Bitcoin and Ethereum ETFs.

• Bitcoin ETF — CI Galaxy Bitcoin Fund (TSX:BTCG)
• Ethereum ETF — CI Galaxy Ethereum ETF (TSX:ETHX)

Source: Visual Capitalist

Warning: Crypto is still a relatively new asset class with limited history to pull from. Bitcoin was first created in 2009 and unlike stocks which have been around for centuries, we don’t know how these assets will perform in the long run.

Make your life easier: Investing in crypto is different than investing in stocks. Keeping up to date with both the stock market and crypto market can be difficult and time-consuming. Here are a couple tools to make crypto investing easier.

• eToro’s Copy Trader lets you analyze and copy the trades of top crypto traders on its platform.
• Titan is launching an actively managed crypto fund — which automatically diversifies and manages your crypto investments.

How to invest $100k: quick-fire questions

Why no bonds? If we were getting closer to retirement, then we would maybe consider investing in bonds — which are less risky but offer much lower returns. How to invest $100k like a Millennial/Gen-Z? Not in bonds. 

Why not put 100% of your money into crypto or stocks? So you can get a decent sleep at night. Why else? Diversification. Imagine losing 50% of your money over a couple of days.

Can I change up the % allocation? The percentages given are only guidelines. Investors should adjust according to their risk tolerance and investment horizon.

Could the portfolio go to zero? Cryptocurrencies — it’s possible. Stocks? Depends on what you invest in. ETFs? Also depends on what you invest in — If you invest in the $SPY ETF, what are the chances of the 500 largest companies going bankrupt?

How do I maintain this portfolio allocation over time? Every so often, you have to “rebalance” your portfolio which requires buying or selling assets to maintain your preferred portfolio weights. For the lazy, M1 Finance has an auto rebalance feature in their app.

What if I have credit card debt? Pay that sh*t down first.

Where should I look for new investments? Our stock and investment newsletter. No brainer.

Summing up how to invest $100k

When it comes to investing, there’s no one-size-fits-all solution. If you prefer to hold more ETFs and less crypto, go and hold more ETFs and less crypto. The one thing you need to have is discipline. Avoid deviating from your set portfolio allocation when you start investing. This how to invest $100k guide and the allocation provided act as a skeleton for you to build your portfolio around. 

Don’t increase the amount of crypto you hold in your portfolio just because the asset is doing well. If you do, you might start taking more risks than you can afford.

Now the fun begins — selecting the investments that make up these allocations. If you enjoyed this guide on how to invest $100k, check out our other detailed guides:

• Learn the commonly used terms in the stock market — to make your life easier when reading financial content.
• Learn how to pick stocks for long-term investment — by understanding the qualities to look for in a strong company.