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Recently, I was asked if I were given $100k today, how would I invest it?

I reflected a bit on this question.

Assuming:

First, I’d look at other households - what benchmarks can I use to guide my decision-making?

Let’s start with average households. The US Federal Reserve provides a rare glimpse into asset allocation by household net worth tier.

Let’s take a look at the $100k tier:

Now let’s consider above-average households.

Here’s a conventional net worth allocation recommended by Financial Samurai for people who are willing to work until the traditional retirement age of 65+:

These are a couple examples of benchmarks I would consider.

I would dig into the “why” behind these allocations and see if they align to my goals.

Here’s how I would allocate $100k:

I’d allocate enough for a 6-month emergency fund.

In this case, I’m assuming I’m living in a tier 2 global city like Mexico City, Austin, or Melbourne.

$4k/month would cover my day-to-day individual living expenses (again, no kids).

If I were living in a tier 1 city like San Francisco, Singapore, or Sydney, I’d increase this a bit.

I’d put 2/3 of this amount into a short-duration like 4-week US Treasury Bills using TreasuryDirect.gov

Here’s why:

Note: This will not be very liquid during the bond duration, so make sure you don’t need the capital within 28 days.

Then I’d put the other 1/3 into my high-yield savings account. This is just in case I need liquid funds for a seriously emergency situation.

For years, I’ve used a Capital One High-Yield Savings Account:

Betterment Cash and other interesting cash options have also emerged on the market. I’ll do some research and come back with any changes I’d make (if any).

Over the next 3-6 months, I’d invest the remaining cash in the following:

I’ll go in order of risk.

Public equities have shown a ~7% return (after inflation) over the past 200 years, making it one of the best-performing asset classes:

I view public equities as a foundational component of my portfolio.

Furthermore, I view this as a long-term investment for retirement goals. I don’t expect to withdraw the capital I allocate to equities for another 10+ years.

I prefer low-fee passively managed index funds that track a broad, diverse market index.

Picking individual stocks is a very difficult game. 90% of the S&P 500 companies since 1955 have gone bankrupt, been acquired or fell off the list.

As an American, my favorite index funds are:

If I were non-American:

I like Real Estate as a part of my portfolio due to:

Over the past 50 years, US REITs have generated relatively higher returns (12.7%) than the S&P 500 (10.2%).

With that said, past performance doesn’t guarantee future returns. You can see in recent years, stocks have largely outperformed REITs:

However, real estate also consistently generates passive income.

With $20k invested, the distributions won’t be much — but you’ll get a taste for if this is a compelling proposition to you.

You can either go with Real Estate Funds or individual REITs.

For funds, I prefer low-fee, diversified real estate fund like Vanguard Real Estate Fund (VNQ).

I’ve also used Fundrise for private US real estate funds (see their returns vs public REITs vs S&P 500) So far, my Fundrise portfolio performance has been comparable to my public US REITs, but will see in the long-run.

For individual REITs, I still hold some REITs with a long track record like:

I’d allocate 10% to entrepreneurship and “moonshot” opportunities.

For example:

While not everyone is designed to be an entrepreneur, I think it’s smart to give yourself some leeway to experiment in high-risk pursuits.

This is a bit of a “dumbbell” strategy.

While the bulk of your portfolio is lower in risk profile, the other end of your dumbbell gives you the chance to capture very high-reward opportunities.

But also be cautious with your investing here and take it slow.

I’d expect to lose 100% of this money.

And don’t rule out the notion of taking a bet on yourself with it.

So that’s it.

This is how I’d allocate $100k:

Hit reply and let me know if you agree with this allocation.

(and what you’d do differently).

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That’s all for today!

Whenever you’re ready, here’s how I can help you:

For daily insights, follow me on Linkedin or X (@dexteryz).