How to Invest 400k for Beginners

by | Feb 23, 2024 | blog

Four hundred thousand dollars can change your life and set you on a path to financial freedom if used wisely. Today, 400k can be invested using any strategy for a significant amount of return. There is so much information freely available about “investing wisely” on the internet and in self-help books. This is a blessing and a curse for new investors.
Information and factual data are mostly free, so you can learn as much as you can about your preferred investment. On the other hand, such a sheer volume of information and investment options can cause analysis paralysis.
To tackle such a challenge you need to define the key factors that underpin your investment strategy. These factors will help you cut through the noise and settle on a strategy that aligns with your investment preferences and your financial goals. Always consult a financial advisor prior to investing.

Investing 400k at a Glance

  1. Define Your Investment Goals and Risk Tolerance: Understand how much you are comfortable risking to make a return.
  2. Aim to Diversify Your Portfolio: Your investment portfolio should be diversified across different asset classes to spread risk. You can also choose an investment strategy that has a portfolio spread out in different markets and locations like CWS Investments mortgage note fund.
  3. Seek Guidance from Financial Advisors: Always consult at every stage of your investment journey to help you make better decisions.
  4. Prioritize Long-Term Growth Over Short-Term Gains: A new investor should focus on consistent growth and steady gains. Avoid high-risk strategies that can lead to unprecedented loss of capital.

Getting Started on Investing $400,000

Ideally, there are three key factors that help you navigate the maze of information about investing. All investments are associated with some form of risk. You have to understand risk in terms of how much you are comfortable losing without disrupting your personal finances. This is called risk tolerance.

Your investment strategy should also provide safeguards for your capital as it works to generate returns. This is the most important factor for first-time investors. How safe is your initial investment capital? What measures have been set by your investment firm to protect your money?

As a new investor, you should also set your mind on expanding your investment portfolio. One way of doing this is by ensuring that your investment strategy provides a steady stream of income. You can use these returns to venture into other investments or leverage your cash flow for even larger amounts of investment loans from lenders.

If you are a new investor, these three factors should influence you on how to invest 400k:

  • Risk tolerance
  • Capital preservation
  • Steady income stream

It is advisable to consult with a financial advisor about risk tolerance before you start investing. But always keep in mind that you are the decision-maker when it comes to investing. As much as consulting is advisable, you should research and learn as much as you can about investing and the risks and rewards associated with different strategies. To help you along with this, let’s look at some popular strategies and analyze if they have an emphasis on capital preservation and a consistent income stream.

Investing in the Stock Market

When you invest in the stock market, you purchase shares of companies. This can be through individual stocks or dividend stocks. However, the stock market can be volatile. While you might see substantial growth, it also comes with high risk. There are various interconnected factors that affect the stock market that are not in the control of an investor.

The chances of losing your capital overnight are as high as making a quick return on investment. If your goal is capital preservation, the stock market may not always align with your risk tolerance.

Traditional Real Estate Investing

Real estate investing typically involves buying rental properties or commercial real estate. This can provide cash flow from rental income. However, commercial real estate investing and residential real estate can be affected by market unpredictability brought by factors like inflation, the job market, and geopolitics.

Rental income is always at risk because of the possibility of vacancies. Traditional real estate investing is also capital-intensive and most new investors have to part ways with a large initial investment amount before securing a property. These high costs coupled with property management fees and taxes can diminish returns for new investors.

High-Yield Savings Accounts

With a high-yield savings account, you deposit your money and earn interest over time. While this is a safer option for conservative investors, this option may not provide consistent passive income that you can use for other investments.

Index Funds

Index funds mirror specific market benchmarks, diversifying your investment across various stocks or bonds. But, like the stock market, index funds can be susceptible to market downturns. Index funds often spread risk better than the stock market but are still at risk from the market’s volatility.

Private Equity

Private equity lets you invest directly in private companies. Typically suited for accredited investors, it requires a significant initial investment. While there’s potential for high returns, it’s also a high-risk game. Your money might be tied up in private companies for years without guaranteed returns.

Precious Metals

Precious metals, like gold or silver, don’t produce cash flow. They are a safer way to preserve capital although their value fluctuates based on global demand, making it unpredictable for capital preservation.

Preserve Capital, Earn Passive Income, Invest 400k in a Mortgage Note Fund

If you are a new investor looking to preserve your capital as it works to earn passive income for you, then investing in a mortgage note fund might be a great choice for you. A mortgage note fund pools money from investors to purchase mortgage notes for purposes of investment.

The fund purchases distressed mortgage notes from the secondary market and a new restructured payment is made for the borrower. The fund earns income from the new payment structure. This income is then distributed to the investors of the fund. So, how does investing in a mortgage note fund preserve capital and guarantee a consistent income stream?

Invest 400k in CWS Investments’ Mortgage Note Fund

Our mortgage note fund has invested in a portfolio of mortgage notes that span across 40 US markets. CWS Investments has a dedicated team of professionals who actively manage the portfolio and therefore you can invest 400k from anywhere in the country.

We aim to provide our investors an annualized return of 8 – 10%. These returns are designed as dividends and are distributed monthly. Dividends are generally taxed lower than income and therefore our investment structure allows you to keep more money in your pocket.

Our 360-degree due diligence process ensures the profitability of the fund by analyzing the property, the borrower, the situation, and the note itself. Chris Seveney, the founder and CEO of CWS, ensures that the investment process upholds the highest integrity and professionalism. Earn passive income while trying to preserve your investment capital, schedule a call with Chris Seveney today.

Frequently Asked Questions about Investing 400k

1. What type of investment is best for 400k?

The best investment for your 400k depends on your financial goals, risk appetite, and time horizon. Mutual funds, individual rental properties, and tax-advantaged accounts like Roth IRAs are popular choices. There are also alternative options like investing in mortgage note funds. Always evaluate how much risk you’re willing to take before you start investing.

2. Can I invest 400k from my inheritance?

Yes, you can invest 400k from your inheritance. Depending on the source, there might be tax implications. Consult a financial advisor to discuss your finance goals.

3. Can I invest 400k from my retirement account?

Yes. Retirement accounts, especially tax-advantaged accounts like Roth IRAs, allow for a variety of investments. The way to invest depends on the terms of your retirement plans and your age, as certain withdrawals can trigger penalties. Always be mindful of interest rates, fees, and other terms associated with retirement accounts.

4. What is the best thing to do with 400k?

Consider investing 400k. Avoid putting all your money into one asset in one location – you can allocate funds to a mix of mutual funds, individual rental properties, and other assets. It’s also smart to keep a portion in a savings account to earn interest and cover unexpected expenses.

5. Is $400,000 a lot of money?

While $400,000 is more money than the average savings for many individuals, its value can diminish if not invested wisely. In personal finance, 400k is a substantial amount but not enough for most to retire on without other investments or income streams.

6. Can I retire with $400,000?

Retiring with $400,000 depends on your lifestyle, expected retirement expenses, and where you live. While it might seem like a lot, without earning additional interest or having other income sources, it might not suffice for a long retirement.

7. Can I learn how to invest 400k for non-accredited investors?

Yes. New investors, even if non-accredited, have several avenues to invest 400k. There are mutual funds, individual properties, Roth IRAs, and alternative real estate investment strategies like mortgage note investing. Do your due diligence and consult with a financial advisor to align your investment choices with your risk and financial goals.