Don’t Stop When You Hit That Financial Milestone: 3 Ways to Grow Your Portfolio From $100,000 to $500,000

Most people agree that the first $100,000 is the hardest to invest in a portfolio. This can be difficult for many reasons, including because you don’t have much compound interest at first and you may be just starting to establish your investing habits.

But once you hit that milestone, the growth potential doesn’t stop. In fact, $100,000 may not even be enough to secure financial independence, depending on when you plan to retire and how many dependents you have. That’s why it’s only natural to eventually set your sights on a brighter, more ambitious goal of $500,000.

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Check your asset allocation

Once you have $100,000, you have plenty of money to spread around. So it’s really important to make sure you diversify your assets. You can’t put too many eggs in one basket, and you have a lot of eggs to manage here.

If you’re young, it makes sense to take more risk with your $100,000 to maximize your long-term returns. A good rule of thumb is to determine the percentage of stocks that should be in your portfolio by subtracting your age from 110. For example, if you’re 30, you might consider allocating 80% of your portfolio to stocks.

As you get older, you may want to reduce your exposure to the market. You’ll also need a good mix of stocks. That means spreading your money across different industries and companies of different sizes so you don’t overinvest in any one type of company. Fortunately, that’s easy with ETFs.

You have the option to purchase funds that give you exposure to large-cap stocks, which are less volatile, mid-cap stocks with moderate volatility, and small-cap companies, with the greatest volatility but the greatest potential for large gains.

By creating the right mix, you reduce the risk of losing money while ensuring you get the returns you need.

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Be strategic with your accounts

With a high-value portfolio, it’s important to make sure your money is in the right accounts. After all, you don’t want to miss out on tax benefits. At the same time, you don’t want to have your money tied up and unable to access it when you need it.

For most people, it makes sense to maximize tax-advantaged accounts first. A company 401(k) plan is a good place to start, and it’s in your best interest to invest enough to get your employer’s full contribution.

Once you’ve done that, it’s a good idea to make contributions to a Roth IRA to grow your savings tax-free until retirement. Using a traditional IRA can also have some advantages over a 401(k) once your contribution has been capped, including access to a wider range of investments.

If you’re planning on retiring early, it might even make sense to put some of your money into a taxable brokerage account so you can access it penalty-free before you turn 59 1/2 (which is typically how long you have to wait to withdraw from your 401(k) or IRA without penalty).

Evaluate your investment timeline and goals

Finally, when you reach that all-important six-figure balance, it’s important to consider what time constraints you might face in the future. You have a lot of money working for you, which will help you build wealth faster. But at this point, it’s important to consider how much time you have left in your investing journey and what big expenses you might have to take on in the years to come.

If you want to retire early or become financially independent, you can invest actively. With the $100,000 you already have, you could reach a goal of $500,000 in ten years if you invest about $1,200 more per month, assuming an average annual return of 10% (the historical return provided by the S&P 500).

If you’re still 30 years away from retirement and already have $100,000, you may not need to invest that much, since that could turn into $1.7 million in retirement even if you don’t save a dime more. That doesn’t mean you should stop investing altogether, since a bigger cushion is always better. But you may want to consider reducing your investments to avoid burnout or risk exposure.

The key is to define your goals, clearly define your timeline, and then set up fixed investments to achieve your goals. It’s wise not to assume that your $100,000 portfolio will be enough.

By considering these three steps, you can harness the potential to grow your wealth from $100,000 to $500,000 and beyond.

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This article is provided for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.