Investing 100,000 euros: what matters?
If you want to invest 100,000 euros, it is important to clarify beforehand:
- What specific goals are you pursuing with your investment?
- How long can you (foreseeably) do without the amount (investment horizon)?
- How much risk can and do you want to take?
Your answers to these fundamental questions determine the right form of investment: from secure investments such as overnight deposits to high-return but more volatile investments on the capital market, such as equity ETFs.
5 important steps before you invest 100,000 €
The following five steps will help you to create a solid basis for your investment.
1. First pay off outstanding loans
If you have outstanding loans – in particular consumer loans with high interest rates – you should still pay these off before making a larger investment. This way you prevent, on the one hand, the often high loan interest from “eating up” the return on your investment and, on the other hand, having to draw on your investment (at an unfavourable time) to repay the loan.
2. Build up an emergency fund
So that unforeseen expenses (car repairs, a new washing machine, etc.) do not force you to touch your long-term investments, it is advisable to build up an emergency fund, i.e. a financial safety buffer, of about three to six net monthly salaries (rule of thumb). You keep your emergency fund, for example, in an overnight deposit account, so that you can access it at any time and, on top of that, earn a little interest.
3. Set yourself clear investment goals
Once you have made sure that you no longer have any outstanding loans and have sufficient financial reserves, you can think about your goals that you are pursuing with your investment. Would you like to invest your 100,000 euros, for example …
- … invest/park it short-term and comparatively securely for an imminent larger purchase (short-term investment)?
- … use it in a few years to buy a property (medium-term investment)?
- … or invest long-term in your private retirement provision (long-term investment)?
Your specific investment goal determines how long your money stays invested and how comparatively secure your investment should be.
4. Determine your investment horizon
Your investment horizon is directly tied to your investment goal. The sooner you need your money again, the shorter your investment horizon and, as a rule, the more secure the chosen form of investment should be. This way you avoid having to accept losses (through selling in a market low) precisely when you need your invested money again. The longer your investment horizon becomes, the more you can rely on high-return forms of investment such as equity ETFs.
Different investment horizons – different premises
- Short-term (up to 3 years): Security and quick availability are usually the priorities here.
- Medium-term (4 - 6 years): A mix of security (lower returns) and risk (higher returns) is ideal.
- Long-term (from 6 years): The focus can now increasingly be placed on high-return (and more volatile) forms of investment.
Which forms of investment are best suited to which investment horizon, we have summarised for you in our guides. Find out how you can …
… best invest your money short-term
… best invest your money medium-term
… or best invest your money long-term.
5. Define your risk tolerance
The higher the return opportunities of an investment are, the higher the volatility risk as well. Conversely, this also means that particularly secure forms of investment generally yield only comparatively low returns, but in return fluctuate less strongly.
You can, in principle, noticeably reduce a higher risk with the broadest possible diversification. If, for example, instead of investing in individual shares you invest in broadly diversified and cost-effective equity ETFs, you often invest in thousands of different companies worldwide and can accordingly benefit from global economic growth (and the resulting rising corporate profits and share prices), without the potentially heavy losses of individual shares having a noticeable impact (in contrast to single investments).
Which form of investment is suitable for which case?
Which is better: putting everything on one card or mixing forms of investment?
How exactly you divide up your 100,000 euros therefore ultimately depends on your individual investment goals, the investment period and your risk tolerance. With 100,000 euros you can structure your wealth in various ways. One possible split could look like this, for example:
- 15,000 euros as an emergency fund in an overnight deposit account for unforeseen expenses
- 85,000 euros in a broadly diversified ETF portfolio of equity and bond ETFs
As a general rule: Money that you will probably need again in the short term is best invested securely and with quick availability, for example in an overnight deposit account or in money market funds (which contain short-dated interest-bearing investments). For a property purchase in, say, 3 - 5 years, fixed-term deposits (with a 3-year term) are a good option, provided you are certain you will not need your money for anything else before the planned property purchase and do not want any price fluctuations at all. If, on the other hand, you want to invest your money long-term and use it, for example, for your own retirement provision, to save for children/grandchildren (studies) or, quite generally, to build wealth over the long term, broadly diversified and cost-effective ETFs (especially equity ETFs) are the best option: they offer an optimal ratio of return opportunities to risk diversification.
Investing the entire 100,000 euros in ETFs: is that a good idea?
ETFs (Exchange Traded Funds) are outstandingly suited to building wealth with 100,000 euros (and other amounts). Especially with a long-term investment horizon, you can benefit with equity ETFs from the opportunities of the capital market. To stabilise your equity-heavy portfolio, you can add bond ETFs in order to reduce the volatility risk of your overall portfolio.
At quirion, by the way, you do not have to take on the selection of the right ETFs yourself: You fill out a short and straightforward questionnaire and receive as a result an investment proposal that is tailored precisely to your personal risk profile. The selection of the ideal equity and bond ETFs for your portfolio is handled by our robo-advisor for you on the basis of scientific and in-house analyses.
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Invest 100,000 euros all at once or better in tranches?
Many investors ask themselves whether they should rather invest everything at once immediately or enter gradually in tranches. Historically, immediate lump-sum investments deliver the better returns on average compared with a staggered entry. If, however, out of concern about entering at the “wrong time” you keep putting off your investment, you can instead divide your investment into several amount tranches, which you invest on dates set in advance. These dates should then, however, definitely be adhered to.
“Time in the market beats timing the market”: This piece of stock market wisdom states that staying continuously invested over the long term is more profitable than trying to find the optimal entry and exit point through constant buying and selling.
Investing 100,000 euros with quirion
Whether from an inheritance, a property sale or your accumulated wealth: with 100,000 euros you have a rock-solid building block for building your wealth. quirion offers you a cost-effective and simple way to invest your money profitably. Start today and invest with a broadly diversified ETF portfolio in around 8,000 shares and 3,000 bonds at the same time.
