$100,000 makes that much money in interest

SmartAsset: How much interest can I earn on $100,000?

If you have $100,000 to invest for income, you can earn anywhere from a fraction of a percentage point to almost 10% of your money. Some interest-bearing investments are guaranteed by the US government, while others are subject to market fluctuations. Some have tax advantages, while others may limit the amount you can buy. If you’re not sure what to do, you can find a financial advisor to help you get the most interest income from the $100,000.

Basic investments for interest

Interest-earning investments represent only one way you can invest $100,000. You can also view stocks, including dividend stocks, as well as real estate, commodities, and even collectibles. Interest-bearing investments are generally safer than other investments, such as stocks, for which the return opportunity is based on price appreciation. For this reason, interest-bearing investments are suitable for investors with limited risk tolerance, especially when investing in a shorter time frame.

If you are more risk tolerant and investing for a longer time frame, such as a retirement date that is a decade or more away, you may earn higher returns by investing in stocks. Over longer periods of time, inflation can also be a major concern. Stocks may perform better against inflation than many interest-earning investments.

Compounding is an important concept in interest investing. Investments that earn interest on top of the interest you’ve already earned can increase the value of your portfolio surprisingly quickly. Diversification is another element to consider. Diversifying investments between different asset classes, such as stocks and bonds, as well as between different securities, can help manage risk and improve performance.

Where to invest $100,000 for interest

SmartAsset: How much interest can I earn on $100,000?

SmartAsset: How much interest can I earn on $100,000?

An investor with $100,000 in interest-seeking has a wide range of options. In general, the higher the return, the higher the risk. Investments also differ in terms of liquidity, or how easily and quickly an investor can convert the investment into cash. Here are eight common options:

  • Savings account. A savings account at a bank or credit union offers high liquidity and security. Savings bank accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC). The National Credit Union Administration (NCUA) protects credit union savings accounts from loss. Savings accounts pay from 0.01% to 1% annually. You can check out the best paying savings accounts using SmartAsset’s online savings account comparison tool.

  • Money market account. These bank and credit accounts may pay more interest than regular savings accounts and also offer more convenience, such as the ability to write checks, while also having protection from the government. Rates currently range from about 0.6% to 1%. You can find the best rates using SmartAsset’s online money market account comparison tool.

  • Money market funds. These mutual funds invest in short-term debt securities issued by governments, corporations and financial institutions. Money market funds currently pay seven-day returns of around 0.50%. You can buy money market funds at many banks, but they are not insured against loss, although they are considered safe and conservative investments.

  • Certificates of deposit. Banks and credit unions offer certificates of deposits (CDs) to investors who are willing to commit their funds for a certain period of time in exchange for higher interest rates. CDs typically have maturity dates between 28 days and 10 years. If you redeem the CD early, you may pay a penalty, so CDs are best for money you don’t think you’ll need before the expiration date. CDs currently pay interest rates from 0.8% to 2.75% depending on maturity. A jumbo CD that pays a somewhat higher interest rate is available for savers prepared to deposit at least $100,000.

  • Government securities. Bonds, notes, and bills issued by the U.S. government are extremely safe and pay market-determined interest rates every six months. They come in a variety of maturities, allowing investors to buy bonds that suit their time frames. Funds that invest strictly in government securities provide greater flexibility, liquidity and diversity.

  • Series I savings bonds. Sometimes called iBonds, these US Treasury securities currently pay 9.62% annually, one of the highest yields available. Their government backing also makes them very safe. Investors can buy only $10,000 of Series I bonds per year, plus another $5,000 if they use a tax refund. But Series I can be a safe, high-interest part of a $100,000 portfolio in interest-bearing investments.

  • Corporate bonds. Large companies borrow money by selling debt obligations to investors. Although less safe than Treasury bonds, they also tend to pay higher interest. Corporate bond rates vary widely depending on the stability of the issuer. Unlike other interest-bearing securities, corporate bonds can vary in price, so the interest rate is only one concern. Corporate bond funds offer a convenient way to invest in a diversified basket of bonds from many different issuers.

  • Municipal bonds. These bonds are issued by local governments to raise money to build roads and finance other improvements. Although not as safe as Treasury securities, municipal bonds are exempt from federal income taxes and, often, state and local income taxes. Municipal bond funds allow investors to easily buy and sell diversified baskets of municipal bonds.

Conclusion

SmartAsset: How much interest can I earn on $100,000?

SmartAsset: How much interest can I earn on $100,000?

An investor with $100,000 and a desire for interest income can choose from a variety of options, ranging from joint savings accounts to government-issued savings bonds. The interest rate, security and liquidity offered by these different investments differ significantly.

Investment tips for beginners

  • A financial advisor can help you implement a financial plan for your investments. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisors at no cost to decide who is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • Before you start investing for interest, consider paying off any high-interest debt you owe. Also consider building an emergency fund that will allow you to cover unexpected expenses without dipping into your investment portfolio.

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