Where I would Invest $100,000

**This is in no way financial advice, I am just listing what I would plan to do with $100,000.**

I am not a finance nerd. Lyn Alden is. I trust her opinions and thoughts. Amazingly, I am getting to the point where I have some money lying around. Some money I don’t want to lose to inflation, and, so, I want to invest it. But where should I invest it?

Overall, I’ve learned over the past 10 years the best investment by far is myself.

1. The 4% rule

To accumulate wealth, I need to have money to invest and a positive Annual Rate of Return (ARR). So, a higher income and spending less will increase the amount of money I have to invest. And a higher % return on my invested money will help me make more money.

The main idea here, for you finance dudes/dudettes out there, is that to be “financially free” all you need to do is essentially spend no more than half of what you earn from investments every year (the 4% rule suggests that if you assume 8% returns on your money, you can spend half of that, 4%, and have a 95% chance to not lose all your money in 30 years). That way, assuming the rate of return stays the same from your investments (big “if”) your overall money never decreases:

• Year 1
  • You have $1 million invested in the S&P 500
  • In 1 year, it returns 10% (+$100,000)
  • You lose 2% to inflation (-$20,000)
  • You spend $40,000 (-$40,000)
  • You gain $40,000 that year
• Year 2
  • You have $1,040,000 in investments
  • The market has a “bad” year and returns 6% (+$62,400)
  • Inflation goes up and you lose 4% to it (-$41,600)
  • You spend your normal amount $40,000 (-$40,000)
  • You lose $19,200 
• Year 3
  • You have $1,021,800

So, you’ve spent $80,000 and become $20,000 richer in 2 years all with a high inflation and “bad” year of the S&P, this is the power of wealth creation!

(This is a life game-changer when you get your head around it, I’ll dive deeper on next weeks newsletter)

(As an important caveat, this assumes you are in the <$40k a year tax bracket so paying essentially 0 taxes, but there are other ways to have cash at hand without taking from your investments)

2. Where I Would Invest

To learn more, Lyn Alden dives much deeper here.

Ok, so if that’s my goal, what should I do? Well, everything I can to accumulate wealth, I can only do 3 things:

• Increase money gained (Work, investments, side-hustles)
• Decrease money lost (Spending, investments)

Some ways to get a higher net income (Revenue – costs):

• Higher Income (Physician, Consultant, etc.)
• Side Hustles (YouTube, Website, Courses)
• Start a business (to possibly sell later)
• Spend less

Now, assuming that all goes well for me, I need to invest it somewhere. Here is where I might do, in order:

• Myself (YouTube, Business, Education)
• Emergency fund (1 years expenses)
• Bonds
• Index Funds
• High-Yielding dividend Stocks
• International stocks or ETFs
• Private Equity or Real Estate
• Bitcoin or Angel Investing

Why so many things? Well what I want to do is have a diversified portfolio of investments. That way, if you remember our year 1, year 2, year 3 example above, I don’t get hit too hard if one of my investments goes down because the others ones, hopefully, behave and respond differently to the world, so go up.

Making my net % change that year not so huge. Which means I can keep my spending the same (half of my % returns).

3. My Plan

Anyway, here’s my thinking:

The Hierarchy of Investment

Before picking specific investments, I realized there’s an order of operations:

1. Invest in myself (YouTube, business, education) — Highest ROI, but caps out at some point
2. Emergency fund (1 year of expenses) — Boring but necessary
3. Tax-advantaged accounts (401k, IRA) — Free money from employer matching
4. Index funds — Boring but proven
5. Individual stocks/dividends — More risk, more reward
6. Alternative investments (real estate, Bitcoin, angel investing) — Highest risk

The key insight: the higher something is on this list, the more certain the return. The lower, the more speculative.

My Actual Allocation:

To get more specific here is what I would think about doing:

• Maxing out employer matching 401(k) – $20k (I’d drop this the FASTEST, if there was some personal education slot I think I could invest in)
• Maxing out roth IRA – $7k
• Index Funds via Vanguard Three Fund portfolio split 80/15/5 – $43k (VTI/VTIAX/VBTLX; US stocks / International stocks / Bonds)
• ​Dividend Growth Investing – $10k
• More Risky (Bitcoin, Angel Investing) – $10k

I want to repeat again, this is not investment or financial advice in any way, these are just my thoughts after doing a little (keyword) research.

People dedicate their whole lives to investing. The only place where I am sure to win is myself, so I don’t mind dumping up to 100% of that 100k of investment into me as long as I still have the emergency fund. For example, YouTube, my courses, and my book have easily returned in the high six-figure range from a ~$5,000 initial investment.

The other good thing, and the main reason I am doing this, is to learn. Likely I will mess up, likely I will lose money. But that’s ok, because the education is worth it (hint hint, “personal investment”).

In the future I hope to make more money. I’m ok with losing this money now because the learnings will help me make more money in the future.

Have a fantastic week,

Zach