Investing 100K in Index Funds for 25 Years

Simon Quayson

4 months ago

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Investing $100,000 into Just One ETF for Next 25 Years

If you have a savings stash of $100k and above, and are wondering what to do with it? Consider investing 100k in index funds such as an Exchange Traded Fund (ETF). Or perhaps you have a windfall coming through with that size of cash; buy the whole index.

At first this may not sound very appealing; but could be the best strategy for parking an investment passively. You may grow your savings while thinking up the ultimate plan to grow that cash masterfully at a later date.

The strategy of investing 100k in index funds is a good move for the next 25 years. ETFs like Vanguard’s VOO are known to return an average of ~10% annually. It is Warren Buffett’s best advice for an intelligent alternative to his infamous Buffettology value investing philosophy.

Buy an S&P 500 ETF: VOO from Vanguard

When it comes to ETFs, you shouldn’t be torn when trying to pick the right one. There are many attractive baskets of stocks out there today. An S&P 500 index ETF like Vanguard’s VOO would be ideal for the next quarter of a century. Investing 100k in index funds will give you all the diversification you’ll ever need – provided that the underlying assets under the ETF are broad enough.

Using Lump-Sum Approach: 50% Allocation

Investing 100k in index funds intelligently requires a long-term focus on productive asset classes. So with stock market index investing, volatility may drive prices higher and lower naturally. With a 50% or $50,000 allocation into just one (or up to 3 broad ETFs), you’d have made a sufficient diversification implementation with the rest of the funds awaiting further allocation.

Using DCA Approach: Other 50% Spread Out

After you firmly take the first step of lump-suming $50K into your ETF(s), keep the rest in a cash equivalent position. A high-yield savings account is a simple place to stash your funds for a fair interest yield. Now buy monthly (or even quarterly) rounds of the same (or new) ETF with a fixed sum such as $10k over the next 5 months. Note that this simplistic example of Dollar-Cost Averaging does not consider fees or commissions expense – for simplicity sake.

Sage Tips:

Leverage with Stock Options Underwriting

While you hold both ETFs and cash in your brokerage account, your assets could earn you some more money. One underrated and overlooked way of getting more from an ETF or cash position is the use of Stock Options Underwriting. While investing 100k in index funds, you could also be selling covered calls on the ETF(s) you hold, while the cash balance also acts as leverage or more room to collect the maximum options premiums in cash into your account.

Systematically Investing 100k in index funds Monthly

And just when you thought we were done with investing 100k in index funds, earn more money and contribute systematically on a monthly basis. Your investments over the next 25 years would grow astronomically because of the power of compounding. You’ll have ETF growth added upon stock options premiums, along with more monthly cash deposits from your full-time income and side-hustles.

Specialize in Index Investing or Diversify

If you have this semi-passive intelligent strategy of investing 100k in index funds, stay in the game for the long-term. Allow the investment engine to work for you. Do not break this system. Diversifying into more asset classes would be prudent for some; but most small investors should stay put and ride the yield wave from a $100,000 investment to their first million dollars.

The End Game: The Financial Freedom Goal

In all this toil, you should be working for a purpose. As much as the million dollar goal seems quite attractive – aim for the intrinsic holistic fulfillment. Set a goal to achieve the feeling of independence and freedom to live life at your own terms. The pursuit of a specific net worth amount and the material things it buys should be your bonus.

A Few Parting Words

So now you know that investing 100k in index funds could turn into freedom and happiness within a short while. Exchange Traded Funds like Vanguard’s VOO present themselves as a passive approach to creating wealth on the stock market.

If you’ve already got the money saved up, and you have 25 years ahead of you, then why not take the plunge. Investing 100k in index funds is an agile approach that can allow you to withdraw your funds at anytime to pursue another endeavor. But until then, enjoy this no-brainer timeless stress free strategy – to attain your financial freedom goals.

What one thing would you reward yourself with if you could turn $100k into a million dollars or more within 25 years? Share your comments below at the bottom.

Investing 100K in Index Funds for 25 Years

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