If you’re looking to invest $25,000 you’ve saved up, received as a work bonus, or otherwise, you’re likely wondering what to invest in right now. The fact is, there’s no “best” way to invest money that works for every person.

But you can figure out your individual path by asking yourself a few questions—and the great news is that you have lots of investing options.

4 questions to consider before investing

1. Do you have an emergency fund that’s large enough?

Whenever you have some money to play with, it’s easy to think ahead to how you might invest your money and make that cash pile grow. But just about every personal finance expert would suggest investors ensure they have their financials in order first.

Crucially, most experts say, investors should have an emergency fund that’s large enough to cover at least three to six months’ worth of household expenses. If something unexpected happens that affects an investor’s income, like a job layoff or medical event, it’s important that they have savings to tap for the mortgage or rent, food, car loans, gas, and all of the other costs it takes to keep their household going.

If your emergency fund is too small—or nonexistent—it’s a good idea to consider putting your money here first to protect against those possible life events. 

2. What are your goals for this money? 

Your $25,000 may be able to help you achieve goals you’ve set for yourself or your family for the near, middle, or long term future. How far into the future your goal might be is your time horizon. Those with a long time horizon—young workers saving for retirement, for example—may have a greater appetite for risk because they have longer to recover from any losses. Those with a short time horizon may be more risk averse.

Personal values can also factor into your goals. Socially responsible investing—focusing on companies with a solid track record in environmental, social, and governance issues (ESG) and eschewing those they see as bad for society, such as alcohol, tobacco, firearms, and fossil fuels—is one way that investors can align their dollars with their beliefs.

3. How risky of an investment am I comfortable with?

Risk tolerance

is an investor’s willingness to potentially take a loss. Speaking generally, the level of risk moves inversely to the possible reward: Lower-risk investments like bonds usually have the benefit of steady but modest growth, with a limited potential for a big payday. High-risk investments such as cryptocurrencies are the opposite, with often volatile action that may bring big wins or significant losses.

Risk tolerance generally falls into one of three categories:

• Aggressive

  . Willing to accept volatility and risk for the possibility of a large return.

• Moderate

  . Seeking a balance between investing in the stock market and choosing safer options.

• Conservative

  . Retiring soon or otherwise has low tolerance for risk, preferring to invest in the safest vehicles.

4. Is my investment portfolio diversified?

Diversification

is the opposite of putting your nest eggs in one basket. It’s an investment strategy focused on spreading money across different types of assets—like a mix of stocks, index funds, real estate, bonds, and more. This strategy may help investors’ money to grow while also mitigating risk: If one investment or asset class at large takes a dive, other assets may keep the wider portfolio still performing well on balance.

5 ways to invest $25,000

1. CD ladder

A lower-risk investment option for your $25,000 is a certificate of deposit (CD). It’s a savings account alternative that offers fixed interest rates that are typically higher than banks’ rates. CDs have terms of different lengths, from as short as a month to as long as several years—the longer the term, typically the higher the interest rate. CDs’ rates are locked in for the duration of the term, so they stay the same whether federal interest rates rise or fall.

But investors also usually can’t access the money until the term ends, unless they’re willing to pay a penalty. So some create a “CD ladder,” spreading their money across multiple CDs with different maturity dates—say, $1,000 each in a one-year CD, a two-year, a three-year, a four-year, and a five-year.

When one CD term ends they can choose to reinvest it in a five-year to get the better interest rate, and by the time their original five-year CD matures they’re on a schedule that has a five-year CD maturing each year. They can keep reinvesting to continue the ladder, or pull out the cash.

2. Individual stocks

If certain companies are of particular interest, you may choose to invest some or all of your $25,000 in specific stocks and trade them yourself through brokerage accounts. Perhaps more than many other asset classes, the stock market offers many options: You can invest in riskier or less risky sectors, select companies that pay dividends to shareholders or ones that reinvest earnings into the corporation, choose value or growth stocks, opt to buy partial or “fractional” shares, and more. While no investment is guaranteed, stocks may generate passive income and stay ahead of inflation.

3. Actively managed funds

Stock market investing doesn’t mean you have to make your own picks, however. You can select from a variety of actively managed funds—a collection of investments that’s built by professionals who frequently trade investments in and out of the fund.

The major advantage is that investors get the benefit of the fund managers’ knowledge of the market, which leverages technical research and fundamental analysis, and they also experience active investing without actually having to engage in the market themselves. The disadvantage, however, is that fees tend to be higher: Fees or commissions may be levied on many of the frequent transactions, and investors often must pay a percentage of their assets under management plus potential additional fees based on a percentage of profits.

4. Real estate 

If you’re hoping to invest in real estate, $25,000 may help you start. That sum is enough to cover a 20% down payment of a $125,000 home, or you might explore pooling money with another investor to purchase an investment property that you rent out or improve and resell. Note that the housing market can be volatile, especially if the broader economic picture or interest rates change. For example, higher rates mean people can afford less house—which can depress the market and leave investors hanging onto a flip longer than they would like. Real estate is also considered an illiquid asset, as investors can’t quickly unload it if they’re in need of cash.

5. Art

If you trust your knowledge of art or its wider market—or if you simply want to support an artist whose work you enjoy—you may opt to spend your $25,000 on an artwork. Art is considered an alternative asset class, and it’s quite different from purchasing a share of a company that is priced based on supply and demand in the stock market.

Buying and selling art tends to be a long-term investment, as it’s illiquid. The market has periods of booms and busts, often tied to the wider economy. Selling artworks may offer solid or even big returns when people are flush—but when the economy crashes, art values often do too.

Art can be either physical or digital—and the digital art world is burgeoning thanks to non-fungible tokens (NFTs), which can authenticate the ownership of digital art in the form of JPGs, gifs, videos, and more. In March 2021, digital artist Beeple’s NFT “Everydays” sold for the equivalent of $69.3 million. Note that most digital art buys are made in the cryptocurrency Ethereum, so you may need to buy Ethereum before you can buy an NFT. 

The bottom line

Investors looking to make their $25,000 grow can explore several opportunities. First, it’s important to ensure they have a large enough emergency fund and to determine their time horizon for achieving financial goals. Possible investment vehicles include CD ladders, stocks, actively managed funds, real estate, and art.