If you have $400,000 to invest, you might be wondering what to do.
Between the stock market, real estate, digital real estate, and other alternative investments – the options can be overwhelming.
But you need to manage your money correctly so you don't lose money or make bad investments.
In this post, I'll explore how to invest $400k safely, how to invest $400,000 for income, and much more. Let's get started!
Best Ways to Invest $400,000
Below are some of the top ways to invest $400k. Always be sure to consult your financial advisor before making any investment decisions.
Invest in Crowdfunded Real Estate
Crowdfunded real estate can be an excellent way to invest your money and generate cash flow each month from your investment.
With crowdfunded real estate, you can use a platform like Fundrise to invest in apartment buildings and other large multi family complexes that you would normally need millions to get started.
It works by pooling money together from many investors to buy a property.
You can then earn money from the monthly rent payments that come in from the tenants.
This is a great hands-off way to invest in real estate and earn monthly cash flow.
Secondly, the average returns are extremely competitive. Many investors have made over 10% annually on their money – making it one of the best compound interest investments.
Finally, it's extremely easy to get started and you'll get $10 completely free for new investors.
If you're ready to get started, register here to create your free account and claim your $10 free.
Invest in Commercial Real Estate
Where Fundrise focuses more on residential real estate, commercial real estate is another lucrative investment to make passive income.
By using a platform like EquityMultiple you can invest in commercial real estate with as little as $5,000.
The average return for EquityMultiple is 17.4%, making it one of the strongest returning investments you can make.
Ready to get started? Create your account here to start investing in commercial real estate.
Invest in Real Estate Debt
Real estate debt is another investing option and a great way to diversify your portfolio to optimize returns.
Platforms like Groundfloor allow you to invest in short term real estate debts to grow your money and build wealth.
Here's how it works. Whenever someone is looking to flip a property, they need money for the short term to complete their project. For example, maybe they need to put in a new floor or purchase new appliances. If they don't have the money themselves, they can use a platform like Groundfloor to find money from investors to complete their project.
For investors, you'll earn interest on your money and can choose to have it paid back monthly or when the loan is complete.
Interest rates can be as high 15% or more with the average around 10.5% – making it a very attractive investment.
Related: 12% Compound Interest Accounts
Invest in a REIT
A REIT, or real estate investment trust, is another easy way to build wealth with real estate investing.
REITs are publicly traded on the stock market and function similar to a mutual fund.
The money is pooled together from many investors and used to purchase income-producing real estate properties.
The goal of a REIT is to generate monthly dividends for shareholders from the rental income of the properties.
REITs have become increasingly popular in recent years and offer a great way to invest without having to put down a large sum of money.
Purchase a Rental Property
Purchasing a rental property is another real estate investment option that some investors prefer because it is a tangible investment.
The downside of this investment is that it will require the most work and energy to generate returns.
The main benefit is that your returns can be lucrative and often over 15% annually if managed correctly.
If you're willing to do the work and have the time to manage tenants, collect rent payments, and perform maintenance on your property, owning a rental property is a great way to invest $400k in real estate.
Invest in Index Funds
If you're looking to grow your money in the stock market, index funds are one of the best investments to turn your money into more money.
Index funds are an easy way to keep your investment portfolio diversified because they track a specific market index.
This means that when the stock market goes up, your investment goes up with it – giving you exposure to potentially large returns.
The best part about index funds is that they're incredibly easy to invest in. You can get started with an investing app like M1 Finance and receive up to $250 free.
With index funds you can earn anywhere from 7% to 10% annually from your investment.
Invest in ETFs
ETFs are another popular stock market investment many investors love because of the low fees.
The average returns of ETFs will depend on the specific fund you're investing in.
However, many ETFs are known for providing high returns of around 10% annually and are a great way to grow your money.
Invest in Mutual Funds
Mutual funds can be another great investment option to make passive income and reach financial freedom.
With mutual funds, the fund is managed by a professional fund manager who actively makes decisions about the investments held within the fund. This means that the fees for mutual funds tend to be higher than index funds or ETFs but sometimes they can perform much better than the others.
The average return on a mutual fund is around 7% annually, but some funds have provided returns of over 12% in the past.
While mutual funds are a great way to make passive income, they do come with some risk – just like other investments.
Finding a mutual fund with low fees can be a great way to start investing in stocks and equities while keeping your portfolio diversified.
Invest in Dividend Stocks
Dividend stocks are a popular way to generate passive income and cash flow from your investments in the stock market.
Dividend stocks can be excellent investments that pay monthly so you can reach financial freedom.
It's possible to make $1,000 a month in dividends and some people even live off dividends.
With dividend stocks, you can reinvest your dividends to purchase more shares and grow your investment even faster.
Dividend stocks are a great way to make money while you sleep and achieve financial independence.
You can get started investing in dividend stocks with an app like M1 Finance which has no fees and offers up to $250 free for new accounts.
Bonds are another popular investment that can provide a great return on investment.
Depending on the type of bonds you choose, these can be safer investments than stocks.
However, bonds tend to have lower returns than stocks – around 3% to 5% annually.
Bonds can be a great way to diversify your investment portfolio and reach your financial goals. Check out the video below to learn more about investing in bonds!
Invest in Small Businesses
Small businesses can be extremely profitable, however many investors don't have the time or energy to dedicate towards starting and growing a business.
From restaurants to breweries, there are plenty of options to grow your money.
The target returns range from 10% to 25% annually (which is much larger than other investments). Create your free account here to start investing!
Invest in Cryptocurrency
Cryptocurrency can be an extremely profitable investment if you know what you're doing and choose.
The main thing to remember with cryptocurrency is that it's very volatile – meaning the price can go up or down with massive swings throughout the day.
This can be good or bad depending on when you invest and how much risk you're willing to take.
If you choose the right coin to invest in, you can make millions. However, if you choose the wrong coin you could lose money rapidly.
In general, I recommend sticking to more reputable coins like Bitcoin and Ethereum as these tend to be more stable than other “alt coins”.
Invest in High Yield Savings Accounts
If you're looking for a safe investment to generate cash flow, using a high yield savings account is an easy way to earn interest on your money.
While you won't get rich from high yield savings accounts, it's a good way to make money that's essentially risk free.
My favorite account is through CIT Bank. You can earn 7 times as much as the national average in interest and you only need $100 to open an account.
To get started, simply create an account and deposit your money. Your money will then start earning interest immediately.
Invest in Retirement Accounts
Retirement accounts like an IRA or 401k can be tremendous methods to make more money and reduce your taxable income.
With an IRA, you can contribute up to $6,000 per year (or $7,000 if you're over 50).
With a 401k, you can contribute up to $19,000 per year (or $25,000 if you're over 50).
The great thing about a 401k is that you can often get a employer match – meaning if you contribute $5,000 to your 401k, your employer may contribute $5,000 as well.
This is essentially free money that can help you grow your retirement fund even faster.
You can open an IRA through M1 Finance – my favorite investing platform where you can get up to $250 free for new accounts.
Start Your Own Business
If you have $400,000 to invest, starting a business can be one option to grow your money.
However, this isn't for everyone. You'll want to be knowledgeable about how to start and grow a business before taking this route.
There are plenty of business ideas you can consider but I recommend low cost businesses that have a clear path to profitability.
How to Invest $400k for Income
If you're looking to generate cash flow from your investments, some of the best investments include:
- Real estate investing with Fundrise or EquityMultiple
- Dividend stock investing with M1 Finance
- Digital real estate investing
What to do with $400k?
Depending on your risk tolerance, there are plenty of investments to consider.
But before investing your money, it's a good idea to consider your other financial situations.
For example, if you have high interest debt, you should almost always pay this off before investing.
Additionally, if you don't have an emergency fund setup – it's smart to save money in a savings account for unexpected expenses.
Once you have these basics in place, you can start thinking about how to grow your money with investments.
Final Thoughts on How to Invest $400k
There are plenty of options to invest your money and grow your wealth – no matter how much money you have.
The key is to find an investment that meets your needs and fits your risk tolerance.
Keeping your portfolio diversified is essential to lower risk and optimizing your returns.