What is the best way to invest 100k? Where to invest 100,000 shekels in 2022? How do you invest 100k to make a million? Read on for answers to these questions and more.
Warren Buffett, said “If you don’t find a way to make money while you sleep, you will work until you die.” This is why investing is extremely important.
You should let your money work for you, rather than you work for your money. The goal is to get to a situation where your main source of income comes passively through smart investments. You’ll have peace of mind and the privilege to only work on what you want to and spend your life doing what you love, rather than trying to earn a living.
Who is investing?
The answer to the question of how to invest 100k shekels depends on who is investing. There are a few variables to consider:
- Age and marital status: are you young and single or married with children? Are you in your 40s, 50s, or already retired?
- Current investments: are you already investing in specific channels? Diversifying investments helps you lower risks and can also affect your ability to invest in other investments, especially when it comes to real estate.
- Financial situation: how much money do you have to invest? Is 100,000 your entire savings? Or do you have more money for a rainy day? For example, if you’re a millionaire, you’d be more likely to invest in high-risk investments with very high return potential such as startups.
- How active do you want to be: do you want to invest and forget about it? Or would you like to invest your time as well for a chance to make more profit?
These are the things you should ask yourself when deciding on where to invest 100k. Read on for your different investment options.
Mark Twain once said, “Buy land, they aren’t making it anymore.” When supply is limited, the value will usually continue to rise, making real estate a preferred investment option. With real estate, you can get monthly income from a 100k investment from rents and it has attractive financing options in the form of mortgages.
The skeptics reading this will say: How can you buy real estate with 100,000 shekels?!
In Israel, you have two options for investing this amount in real estate:
- Buy in the periphery: Property in the periphery (the Kriyot, Netivot, Tzfat, Kiryat Shemona) costs about 500,000 shekels and can provide monthly returns of about 2,000 shekels, which is about 5%. If you have 100,000 shekels to invest, you can acquire the rest of the money in financing from the bank or create a partnership with a friend and make the purchase together. It’s important to note that property values in these areas are also rising at a rapid rate.
- Buy land: There are lots of land units in Israel that come with “property rights” relating to the future of the land. The rights can lead to a significant boost in the property’s value, however, it can take many years for this to occur. Once the right takes effect, the owner must pay an improvement levy on the land. The problem with this investment is that it doesn’t produce any returns, but it also means you don’t have tenants to deal with.
- Invest in funds: there are many real estate funds and stocks that you can invest in and receive a good yield.
Real Estate Abroad
Georgia, Ukraine, Greece, and other countries have great conditions to buy property for 100,000 shekels with attractive financing options. Investing abroad is a great way to diversify your investment portfolio. Portugal is a top option today for investing because there are many opportunities to buy new or like-new properties in great locations for 100,000 shekels. Portugal’s financing options are also impressive, as you can get a mortgage of 80% of the sales price for 30 years with a 1% interest rate.
The stock market is a great option for investing small amounts of 100,000 or less. It is an especially good option for people above the age of 60 because many stocks include dividends of up to 5% or more per year. This is a great investment to generate a passive income. The value of this investment is also likely to increase in the long term and usually leads to a stable annual return.
Not all stocks pay a dividend, so a good strategy would be to diversify your 100,000 shekels across at least ten different companies. This spreads your risks and creates a higher statistical potential for growth.
There are many types of financial funds in Israel including Keren Hishtalmut, Kupat Gemel Lehashkaah, and Polisat Chisachon. These three investment funds have different benefits, but also limitations. You can deposit money into these types of funds with investment houses or insurance companies who will manage the money and invest it in different routes, depending on your preferences.
The most general and stable route includes a wide variety of investments in tradable and non-tradable assets such as real estate. Another route, which is considered higher risk, but also has a higher yield potential is the bond route. There is also another route that follows the S&P 500 index. You can divide your investment in these funds across the different routes.
Generally, these funds have management fees between 0.5%-1% of the total accumulated amount each year. The fee varies across different companies and amounts invested. In recent years, these funds have led to returns ranging from 7% to 30% annually.
If you want to invest in these funds, it’s important to understand the differences and limitations so you can benefit the most when investing your 100,000 shekels. Keren Hishtalmut, for example, is the best investment in Israel because of its tax benefits, but you can only invest up to 18,000 annually. Kupat Gemel Lehashkaah also has tax benefits, but has a limit of 70,000 per year. A Polisat Chisachon has no tax benefits, but also no limit to the amount that can be deposited.
These financial funds are excellent investment options, depending on the goal of your investment. If you’re looking for the best way to invest 100k short-term, only one or two years, your best choice is a Polisat Chisachon because it is always liquid and you can withdraw the money whenever you want. Both Keren Hishtalmut and Kupat Gemel Lehashkaah require you to keep your investment in the fund for a specific number of years to obtain the tax benefits. It’s best to put the maximum amount in your Keren Hishtalmut so you can get the highest exemption from capital gains taxes.
Of course, there are other variables to consider, including timing and the investor’s age, so if you aren’t sure what is best for you, consult with an agent or financial consultant.
Social loans are loans made between two private individuals (P2P), two businesses (B2B), or even between private people and businesses (P2B). The lender provides the money as an investment in exchange for interest on the loaned money. The lender is basically taking the place of a financial institution such as banks, credit companies, or insurance companies. Borrowers might prefer taking loans socially because there is less bureaucracy and interest rates are more attractive. Generally, social loans have interest rates between 5%-9% and there is no intermediary in the middle.
If you invest 100,000 shekels in social loans, you can generally expect a 6% annual return, or 6,000 shekels per year.
The advantage of this type of investment is that it is relatively stable and highly profitable because there is no connection to capital markets, which rise and fall all the time.
Another advantage of social loans is that the net return is subject to “reduced” taxation. Capital gains tax in Israel is 25%. If you invest in the capital market, or in a fund, whatever you earn on your invested 100,000 is subject to 25% tax. With social loans, there is a different taxing structure, which may be less than 25%.
Investing in social loans is suitable for anyone with free and liquid money sitting in the bank, who wants a stable return, and knows that they might want to use the money in the near future. This is generally good for people who might want to purchase property soon or people who retired and received a large sum of capital. It’s great for people who want their money to be liquid and want to invest in a channel with very low risk.
If you’re interested in this type of investment, you can start with small amounts. B2B is a great platform for social lending and allows you to get started with no commitment.
Alternative Investments Funds
There are many funds run by private individuals or companies for the purpose of investing according to a pre-agreed upon policy. Usually these funds don’t guarantee a certain return percentage, but they have forecasts and successful investments can yield about 10% per year.
Recently, there have been many funds established for alternative investments. They choose different avenues for investments, such as real estate, hedge funds, capital markets, loans, or anything that can yield a profit on the invested amount.
The advantages of these funds are:
- They require minimal work from you. You just invest your money and wait.
- You can invest low amounts. Some funds will take even just 5,000 shekels.
- Good fund managers can provide a better annual return than other investments or money just sitting in the bank.
- You have contact with the fund manager who takes responsibility for the investment and the day-to-day management.
There are also disadvantages to these funds:
- You have no control. You deposit your money and have no say over the investments.
- There are terms for withdrawal, including fines.
- Reliability! You are relying on the credibility of the fund managers, which is critical because these managers may have their own interests.
- While stable funds may have low returns, high-risk funds can lead to losses. It’s difficult to find funds that balance the risks.
- These services generally cost money. There are two costs structures:
- Management fees on the total amount range from 1%-5%.
- A share of the profit ranging from 10%-25%.
For example, a classic fee structure is the 2:20 rule. This means you pay 2% as a management fee, plus 20% of the total profit. If you invest 100,000 shekels, you’d pay 2,000 shekels for management annually. Let’s say at the end of the year the investment was valued at 120,000, you’d pay 4,000 shekels from the profit (20% of the 20,000 profit).
What should you do with 100,000 shekels? It depends on your financial situation and other assets. If you’re young and single and looking to invest for the future, you should invest in real estate and obtain financing.
If you’re married with children and already own a house, the capital markets are a good choice.
If you’re older and already retired, stocks that provide dividends are a good option. For this bracket, a reverse mortgage is a great financing option that can enable you to make better investments at this stage.
To learn more, watch this video: https://youtu.be/Ppzpyjj1Zbk