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I would suggest putting all $40,000 into a mutual fund with a top notch manager, like Selected Value at Vanguard or Bridgeway Aggressive Investors 2. You are diversified when you own one mutual stock fund because there are maybe a thousand companies in it. You don't have to stress looking for more than one with only $40,000 to invest.

The economy is like the sea, with the tides ebbing and flowing. The most important thing to watch is the prime rate, which is at 8.25% right now, as it determines which direction the tide is flowing. Don't invest against the tide. When the prime rate is below 9.5% the best investment is the stock market. When the prime rate increases to 9.5% move your money to the money market fund and stay there until it starts to go down. If it has gone higher than 9.5% and is decreasing, move your money to a bond fund. When it lowers to 9.5% move it into stocks or a stock fund. Right now, because of the prime rate, your money should be in stocks.

I got this information, the "money movement strategy" from the book "Wealth Without Risk" by Charles Givens. The author ended up being a jerk, but his financial advice was still sound. It saved us during the dot com bust as we were out of the stock market during a critical ten months. We were making 5% in the money market while stocks were tanking. Then Alan Greenspan lowered the prime rate to 9.25% and we returned to the stock market. Everyone was afraid of it but we made this unemotional, mathematical decision and made a bundle. With all the doomsayers right now, the best place for your money is the stock market. Just keep your eye on the prime rate, and you will know where to put your money.
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