Once upon a time, I suddenly found myself in possession of $40K. You know what I did with it? Nothing. Or next to nothing — I put it in a savings account earning about 0.40% interest.
The money sat there for years before I realized that I could put it to work for my future.
I sure wish someone had advised me on where to invest 40K sooner. I can’t do that, but I can help other people avoid making the same mistake I did.
I don’t want your money gather moss. At the same time, I don’t advocate taking unnecessary risks. That’s why I’ve put together this “how to invest 40k” list featuring ideas that will enable you to diversify your investment, grow your net worth, and spread your risk across multiple asset classes. Here’s to your future:
So you’ve managed to save up $40,000? First off, congrats! That’s no small feat in today’s economy. I remember when I hit that milestone myself and sat there thinking, “Now what?”
Having $40k sitting in your account is both exciting and kinda overwhelming Should you blow it on something fun? Invest it all? Keep it safe? The options are endless, and that’s exactly what makes it tricky.
I’ve put together this guide to help you figure out the best ways to put your $40k savings to work. No matter if you’re thinking short-term growth, long-term security, or something in between, I’ve got you covered with real options that make sense for regular folks.
The Best Things to Do With $40,000 in Savings
Let’s jump right in with the smartest ways to handle that $40k burning a hole in your pocket:
1. Diversify With Alternative Assets
When most people think about investing, stocks immediately come to mind. But there’s a whole world of alternative investments that can help balance your portfolio.
One option I’m particularly fascinated by is fine art investing through platforms like Masterworks. Instead of needing millions to own pieces by famous artists like Andy Warhol or Claude Monet, you can buy fractional shares.
What’s impressive is Masterworks’ track record – they’ve delivered returns like 32% after selling a Banksy piece in 2020, and have consistently shown 14%, 17%, and 21% net annualized returns to investors. Plus, art has outpaced the S&P 500 for the past 20+ years and doesn’t follow the same patterns as the stock market.
The only catch? There’s usually a waiting list, but WallStreetZen readers can skip it through special access links.
2. Invest in Stocks and ETFs
Alright, now let’s talk about the classic investment avenue: stocks and ETFs.
When investing in individual stocks, the key is doing your research. Tools like WallStreetZen can help filter through all the noise about any given ticker to find quality investments. Their “Strong Buys From Top Wall Street Analysts” feature shows you which stocks are highly recommended by analysts with proven track records.
If researching individual stocks feels overwhelming, Exchange Traded Funds (ETFs) offer an easier path. Instead of investing in a single company, ETFs let you buy hundreds or thousands of stocks within one investment.
A sensible approach might be investing most of your money in ETFs across different market sectors while putting a smaller amount into a few individual stocks you believe in. This spreads your risk so that one poor-performing stock doesn’t tank your entire portfolio.
For investing in both stocks and ETFs brokers like eToro make it straightforward with their user-friendly platform offering commission-free trading across 221 different ETFs.
3. Explore Real Estate Investment Options
Think real estate investing requires hundreds of thousands of dollars? Think again! With $40k, you’ve got several paths into this historically stable asset class.
REITs (Real Estate Investment Trusts) let you invest in real estate without buying physical property. These companies buy rental properties and issue shares to investors. You earn income from monthly rents collected without dealing with maintenance or tenant issues.
Alternatively, real estate investing sites like Fundrise and Arrived Homes offer fractional ownership in properties:
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Fundrise offers low initial investments and access to commercial real estate, private credit, and even venture capital opportunities that typically aren’t available to regular investors.
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Arrived Homes focuses on single-family rental homes, letting you invest as little as $100 for partial ownership. They’ve funded 266 properties worth over $97 million across 49+ US markets.
4. Put Some Money in High-Yield Savings
While investing is important, keeping some cash accessible for emergencies makes sense too. But that doesn’t mean it can’t earn decent interest!
High-yield savings accounts exploded in popularity in 2022-2023 with rates over 5%. While rates have dropped slightly, you can still find accounts offering above 4% interest.
CIT Bank’s Platinum Savings account currently offers up to 4.35% APY on balances of $5K or more, while Empower offers as much as 4.70% without requiring any special membership.
5. Pay Off High-Interest Debt
This might not sound exciting, but paying off high-interest debt can actually give you a better “return” than many investments.
If you have credit cards or loans with interest rates of 10% or higher, paying them off essentially earns you a guaranteed 10% return – better than what many investments can reliably deliver.
Getting on a strict budget and focusing on one debt at a time (either the smallest balance or highest interest rate) can help you quickly become debt-free and improve your financial foundation.
6. Try Automated Investing
Not confident in your investing abilities? Automated investing through robo-advisors might be perfect for you.
Services like Acorns make investing almost passive. Their Round-Ups feature rounds your purchases to the nearest dollar and invests the difference. Based on your goals and risk tolerance, your money gets allocated accordingly.
For a middle ground between automation and DIY investing, M1 Finance offers a hybrid approach – some automation but with the freedom to choose your own investments.
7. Consider Bond Investments
Bonds are generally safer than stocks and real estate, making them a good option for stabilizing your portfolio.
When you invest in a bond, you’re essentially loaning money to the government or corporations, and they pay you regular interest payments in return.
Public’s Bond Account currently offers an impressive 6% yield (as of October 2024). Once you fund an account, your deposit goes toward a portfolio of investment-grade and high-yield corporate bonds, paying you monthly income that’s automatically reinvested when it reaches $1,000.
8. Boost Your Retirement Savings
Maxing out retirement accounts is always a smart move with significant tax advantages.
If you have a 401(k) at work, especially with employer matching contributions, that’s often the best place to start. Next, consider an Individual Retirement Account (IRA).
Traditional IRAs give you tax benefits now, while Roth IRAs provide tax-free growth and withdrawals in retirement. Platforms like Betterment and M1 Finance make opening and managing IRAs straightforward.
9. Invest in Your Skills and Education
One of the highest-ROI investments might be in yourself! Taking courses, building skills, or furthering your education can dramatically increase your earning potential.
Online platforms like Skillshare offer affordable classes on everything from investing basics (like their “Personal Finance Masterclass” or “How Not To Suck At Investing”) to specific strategies like real estate investing or options trading.
You can also learn skills completely unrelated to finance that might boost your career or help you start a side business – often for much less than traditional education costs.
10. Add Some Gold to Your Portfolio
Finally, consider allocating a small portion of your $40k to gold or other precious metals.
Gold has historically been a store of value that keeps pace with inflation, which is especially important during times of rising prices (like right now).
While you can invest in Gold ETFs, owning physical gold allows you to take custody of your investment without paying annual fees. Online marketplaces like Silver Gold Bull offer gold bullion coins and bars with minimal markup, shipped securely to your door.
How Should I Allocate My $40k?
Now that we’ve covered the options, you’re probably wondering how to split up that $40k. While there’s no one-size-fits-all answer, here’s a sensible framework:
- Emergency Fund (15-25%): Keep $6,000-10,000 in high-yield savings for unexpected expenses
- Debt Payoff (Variable): If you have high-interest debt, prioritize paying it off
- Retirement (20-30%): Contribute to tax-advantaged accounts
- Growth Investments (30-50%): Split between stocks, ETFs, real estate, and alternatives
- Personal Development (5-10%): Courses, education, or skills training
The traditional 60/40 portfolio (60% stocks, 40% bonds) is being challenged by research showing that a 40/30/30 mix including alternative assets might offer both higher returns and lower volatility, especially during high inflation periods.
Your ideal allocation will depend on:
- Your age
- Risk tolerance
- Time horizon
- Current financial situation
- Financial goals
Final Thoughts: Making the Most of Your $40k
The worst thing you can do with $40k is nothing at all. I know because I’ve been there – I once had $40k sitting in a savings account earning a pitiful 0.40% interest for years before I realized I was missing major opportunities.
Whether you choose stocks, real estate, education, or a mix of everything we’ve discussed, the important thing is to put your money to work. Financial security doesn’t happen by accident – it comes from making informed decisions about your money.
Remember that diversification is key. Spreading your $40k across multiple types of investments not only reduces risk but also gives you exposure to different growth opportunities.
And if all this feels overwhelming? Start small. You don’t have to deploy all $40k at once. Begin with one or two options from this list, get comfortable, and then expand your investment strategy as your confidence grows.
What’s your next move with that $40k? I’d love to hear about it!
Quick Reference: Best Platforms for Your $40k in 2025
| Best for | Recommended Platform(s) |
|---|---|
| Alternative assets | Masterworks |
| Stocks & ETFs | eToro |
| Real estate | Fundrise, Arrived Homes |
| High-yield savings | CIT Bank, Empower |
| Debt management | Empower |
| Automated investing | Acorns, M1 Finance |
| Bonds | Public |
| Retirement saving | M1 Finance |
| Skill development | Skillshare |
| Gold investing | Silver Gold Bull |
Remember, the best investment strategy is one you’ll actually stick with. Choose options that align with your financial goals, risk tolerance, and personal interests for the best chance of success!
How to get rich with 40k?
If you’re wondering how to invest $40k to turn it into millions of dollars, the best investment you can make is in skills. Taking online courses, learning valuable skills, and then putting them into practice can significantly increase your income. You can earn far more than $40k by choosing some well-designed educational courses (such as Skillshare) to bolster your skills.
Stocks + Exchange Traded Funds (ETFs)
I told you we’d talk about stocks. So let’s get to it.
With thousands of stocks and funds to choose from, the stock market is a great place to potentially invest your savings and grow wealth. But only if you make intelligent investing decisions.
Before you YOLO $40k into a stock like Gamestop (NASDAQ: GME) to try and 10x your money, you need to consider your investment strategy.
Picking a few quality individual stocks can be a great growth investing strategy. Choosing the right stocks can prove tricky. There’s a lot of “noise” out there about any given ticker, and it can be hard to know who to trust.
WallStreetZen provides tools for investors who believe that knowledge is power and want to make more intelligent investing decisions. On the site, you can research the companies behind thousands of stocks. Find out how they fare on dozens of due diligence checks like Finances, Performance, and Dividends.
You can also see what analysts are saying about stocks. One of the top features on the site is “Strong Buys From Top Wall Street Analysts” (a paid feature), which details the latest Strong Buy recommendations for analysts. For each listing, you’ll see what catalyzed the Strong Buy rating (whether it’s new, maintained, or reiterated) as well as the 1-year price target for the stock. You’ll also get insight into the analyst — their track record, historical performance, and best and worst trades are clearly displayed. I love this feature — I scan the most recent Strong Buys every day, and I love when I see a Strong Buy rating on a stock I already own, or one I’ve been considering.
And if all that info adds up to overload? We distill all of our findings into a simple, easy-to-read score that acts as our own “grade” for the stock. For instance, here’s the current score for Visa (NYSE: V):
The bottom line? WallStreetZen is a great tool to help you filter through all the “noise” to discover the simple truth about a stock.
For those who want a little more guidance, our Zen Investor stock newsletter features stock picks from 44-year market veteran Steve Reitmeister. He chooses every stock using a simple 4-step process he’s developed over the years — a process with a proven, market-beating track record.
But overall, stock picking is a bit riskier than diversifying your money with an index fund. While individual stocks let you invest in a single company, ETF index funds allow you to buy hundreds (or thousands) of stocks within a single investment.
Not interested in researching individual stocks? A safer play is to invest a majority of your cash into ETFs across several market sectors while picking a few individual stocks to put a much smaller amount into. This lets you spread your risk so that a poor-performing stock doesn’t sink your whole portfolio.
Personally, I prefer ETFs to mutual funds, which tend to have higher fees (but are also more actively managed than ETFs — which again underlines the importance of researching the investments you choose).
Investing in ETFs is pretty straightforward these days. You can find a quality online broker (such as eToro and invest in stocks and ETFs right from your mobile device.
eToro is easy-to-use, powerful, and modern, which is why it’s our #1-ranked broker — for the purposes of this article, the fact that ETF investing is one of its best features doesn’t hurt. It has virtually everything you could possibly want for ETF investing: You can research, set alerts, add to watchlists, and invest in 221 different ETFs, all with commission-free trading.
eToro securities trading is offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. https://www.wallstreetzen.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD.
What’s The Best Way To Invest $40,000?
FAQ
Is 40k a good amount of savings?
$40000 is a very good nest-egg. Don’t squander it on short-term fun. You should be looking at what will give you that edge for long term financial security. Investing in a home is one option. $40000 or even half of that would be a good down payment on a house, which in many locations is a good investment.
What to do with $40k in savings?
- The Stock Market. …
- Bonds. …
- Mutual Funds. …
- High-Yield Savings Accounts. …
- CDs. …
- Real Estate. …
- Exchange-Traded Funds (ETFs)
What is the $27.40 rule?
The “$27.40 rule” is a savings strategy that involves saving approximately $27.40 every day to accumulate about $10,000 in a year. It is a simple and accessible method that encourages consistent saving and budgeting discipline by making small, daily contributions to a savings account. This approach helps people reach a significant financial goal over a year, and the funds can grow further with compound interest.
How much do I need in my 401k to get $1000 a month?