Or, if you'd do something else with it, what would you do?
Thanks HN!
If you have high risk tolerance and won't need this money until retirement, you should deposit it in your choice of Vanguard Total Market or Vanguard Retirement 2050~2065, and forget about it for the next ~35~50 years.
If you anticipate needing to actually spend it within the next few years, or you are risk adverse, you can put it in CDs, which will earn you virtually nothing but let you withdraw it at any time. You'd probably want to do a CD ladder, which would leave you with some money maturing in any given month, so you could use it without penalties.
The $100k is also not your primary asset at this point in your life. That would be the NPV of your nascent career. Depending on one's existing trajectory, I'd strongly consider building capital in oneself as opposed to investing it in the formal markets. For example, if one cannot program, $10k invested in learning to program will probably absolutely destroy the ROI of most investments in the public markets.
Price is what you pay, value is what you get.
A traditional option is to buy index funds over time.
Stay within your circle of competence. If you have to ask if something is within your circle of competence, you already know the answer.
If you're in a low income tax bracket, making contributions to a Roth IRA can be very wise in the long run.
If it were me at 20, I'd tell myself to take 30k, buy a decent car and pick up girls, and leave the rest to smooth over my life. Especially to avoid taking jobs when I don't really want it just for money. Then I could invest in my personal projects and skill growth.
Whatever investment growth for that 100k would have been really meaningless compared to the experiences I missed out on.
That said, in the US, it's also a good opportunity to max out a Roth IRA every year. There's a lot of upside to Roth IRAs and not too much downside: you can deduct your contributions anytime without any penalty or taxes. And in retirement years, the gains can be withdrawn tax free. In a Roth IRA you can hold a wide variety of assets, real estate trusts, and metals.
But overall I'd just hold onto the money as money and treat it as a rainy-day fund for the rest of your life.
If done right, you should be earning over $15,000-$20,000 a year in rental net income. Spend that money as freely as you'd like, making sure you keep aside 3-6 months of mortgage payments in cash.
Learn how credit works, and feel comfortable buying a car with little money down at 1% interest, rather than reducing your asset value buy buying a car with all cash.
You should read more about this but that's my suggestion, best of luck.
I'm not convinced on his returns tho.
I calculated renting out my condo, refinancing to buy a second one, with tax depreciation, repairs, etc. I was looking at a return of ~2% on assets and operated under the assumption housing appreciation would cover the cost of inflation.
(Be careful, though - American higher education can consume a lot of money and leave you with very little value. Be doubly careful with law in particular.)
If I did have a college degree, I would get a job and stuff the money into an automatic "growth" stock index and ignore it until time came that it became needful. Possibly in a retirement fund, possibly in a house fund, possibly in a "children's college" fund, depending on life priorities. For pure bang-for-the-buck long-term, an IRA wins here.
Then:
Education - despite grumblings about rising cost and legends of the Silicon Valley dropout billionaires, a degree still leads to earning an additional $1m+ over your career and provides a good foundation. Getting an education and leaving without debt will put you in a really strong position compared to your peers, who will be weighed down with student loan debt for decades.
Housing - Depending on where you are, put 20% down on a 30-year fixed mortgage on a modest but nice house (average for the area). If you move, you can rent it out. The bulk of household wealth is in primary residences. This will put you decades ahead of your peers, who due to student loan debt will be unlikely to be able to purchase homes until well into their 30s.
Mutual funds - Mutual funds allow you to match growth in the stock market. You are young so can put money into the aggressive funds which may even beat it, but don't worry too much about beating the market, even pros have a poor track record at that. Just put the rest into a mutual fund and forget about it. Read about Compound Interest to find out why.
Thing is, 100k isn't a lot (even if it seems like it now) and you probably don't have enough to do all of the above. But, it can create a great foundation that will allow you to take great risks (starting companies, speculating in real estate/stock market) if you want to, or a steady path to continue down.
Budget a trip to a destination you want to visit, with one rule: no flights. Then, slash the budget in half, invest/save the rest, and figure out how to get to your destination and home again.
Take your time.
It was created as very simple and easy to follow investment strategy by Harry Browne who had many years experience in the financial industry. It is meant to protect your wealth first and grow it with the market. No more, no less.
Also, Harry Browne's #1 rule of investing is:
Your career provides your wealth
Stick all (or at least most of it) in the Permanent Portfolio, forget about it and focus on your work.
Depends on housing prices where you live I suppose, here 85k landed me a quaint 1200 sq ft 3 bed / 1 bath place in suburbia. Not the best house, but one I'd be ok dying in.
Honestly being young, talk with a professional and see where would be safe and yet flexible if you need it later.
Similarly trying to find someone now that I can pay for advice is difficult because there's no one around working with young professionals. You either need a few mil in assets, want them to manage all your money, or be 10-15 years from retirement.
100k isn't usually enough to get the good guys' attention, though. It's annoying chicken & egg thing.
If you were 50, and had that 100k, my answer would be completely different.
Get yourself a roof upon your head and start building a life.