6 Investments To Consider If You Receive an Inheritance of $100K or More

Over the next 20 years or so, older Americans are set to pass down an estimated $84 trillion in assets in what’s known as the Great Wealth Transfer. While this transfer of wealth isn’t likely to be equal across demographics, some people are bound to receive a sizeable inheritance.

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In fact, the Federal Reserve found that around one out of five people will receive an inheritance at some point in their lives. While the majority won’t receive that money until they’re in their 50s, some will get it much sooner than that.

Whether you’re a beneficiary of the Great Wealth Transfer or you simply come into a large inheritance — say, $100,000 or more — one of the best things you can do is invest. These are some of the smartest investments to consider making, according to experts.

Also see your options if you inherit a house.

Money mistakes the super wealthy never make - that you might be doing now.

Invest in Retirement

“The best thing to do is to invest in retirement. Period,” said Paul Gabrail, founder and host of “ Everything Money .” “Invest in long-term, low-cost ETFs.”

ETFs, or exchange-traded funds, are a common type of investment product. It essentially includes a whole host of other investments, like stocks and bonds, which makes them a good way to diversify your portfolio (and minimize risk). ETFs are generally best for newer investors, those with a low to moderate risk tolerance, or those who want a more hands-off experience.

Keep in mind that ETFs generally come with some fees, though they’re usually fairly low. Charles Schwab estimates that commission costs — fees a broker charges for making trades — are usually between $0 and $25. There may also be additional trading costs or other fees to consider; but, again, they’re not usually very high.

Another way to invest in retirement is to max out your annual contributions to 401(k)s and IRAs (Roth and/or traditional). If your employer offers matching contributions, as is sometimes the case with 401(k)s, take full advantage of that, too.

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Invest in Debt Repayment

This one won’t generate returns — at least not directly. But by paying off your existing debts, you could be saving yourself thousands, tens of thousands or even hundreds of thousands in interest charges. If you’re also paying to keep an account (like a credit card) open, getting rid of that debt also gives you the chance to close that account so you don’t have to keep paying monthly or annual fees.

“If you have any sort of credit card debt that has an interest rate higher than 6%, which is basically all credit cards, then pay it off,” Gabrail said. “Use this as an opportunity to change how you spend. If you don’t change your habits, you will end up with the same debt down the road.”

Depending on your situation, paying down your mortgage also might be a good investment in the future (and in your current financial situation).

“If you have a mortgage and find it emotionally hard to stomach, pay it down,” Gabrail said. “Remember that paying off a mortgage of 3% is not necessarily the best financial move; but, if eliminating financial obligations helps you sleep better at night, do that.”

Invest in Index Funds

Index funds aren’t all that dissimilar from ETFs, though they do work a little differently. Regardless of what size inheritance you get, a diversified stock index fund could be a smart long-term move.

“The stock market is a terrific vehicle to build wealth,” said Robert R. Johnson, Ph.D., CFA, professor of finance at Heider College of Business at Creighton University . “According to data compiled by Ibbotson Associates, since 1926 the average annual return on a large capitalization stock index (think S&P 500) is 10.3%.”

Johnson did caution against trying to pick winners, since it’s “a loser’s game.” Diversified index funds make it where you can still capitalize on those returns without as much risk.

“A big advantage to passive index investing is it minimizes costs,” he said. “Index investing is extremely simple and the KISS (keep it simple, stupid) is an appropriate acronym for the vast majority of investors.”

Invest in Real Estate

A $100,000 inheritance could get you started in the world of real estate investing, too. It’s a good way to diversify your existing portfolio.

“You can put part of that $100,000 into a rental property or even look at real estate investment trusts (REITs) if you want to avoid the whole ‘managing tenants’ thing,” said Alex Windsor, chief marketing officer and owner of Betting Tools (part of Gametime Digital). “It’s more of a long-term play, but you get both potential income and appreciation, which is nice for stability.”

Invest in Yourself

When you receive $100,000 or more, remind yourself that it’s OK to splurge — just a little. In other words? Invest in yourself.

“Splurge on a little something with part of the money,” Gabrail said. “It’s fun to splurge. Get it out of your system. Then refocus on saving for retirement. Again, long-term, low-cost ETFs would be my recommendation.”

Invest in Affiliates

This one might be a little less traditional, but it can also be rather lucrative when you know what you’re doing.

“When I first got a lump sum, I used a good chunk to build out a few niche websites,” Windsor said. “The beauty of affiliate marketing is that, once it’s up and running — great content, decent SEO — it can become pretty hands-off.

“You’re generating income even while you’re not actively working on it. … That passive income stream has been the game changer for me. It’s scalable, and I’ve found that the more you reinvest into it, the more it can snowball into something huge over time.”

Again, you can always mix things up by investing in affiliates, real estate, index funds and other assets. It never hurts to spread the risk factor and maximize those gains.

This article originally appeared on GOBankingRates.com : 6 Investments To Consider If You Receive an Inheritance of $100K or More