While swinging for the fences brings excitement to the art of investing, slow and steady usually wins the race, which brings us to the best investments for 40-year-olds. Around this time frame, the emphasis centers on balance. You still want growth because you have time on your side. Nevertheless, you don’t want to take too many wild bets.
Unlike other demographics, stocks for 40-year-old investors will require a nuanced approach. For example, if you’re just starting out, speculative small capitalization plays might make sense. Basically, you have plenty of time on your side. On the other hand, those close to retirement should ease up on the risk-reward pedal.
For so-called buy now stocks for 40-year-olds, investors can’t be too conservative; otherwise, you end up missing the mark by retirement time. In contrast, though, being too aggressive can put you in a bad spot with less time to course correct.
Fortunately, with seven ideas, it’s a bit easier to craft a workable strategy. Below are the top stocks for midlife investing.
IBM (IBM)
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To be fair, legacy technology giant IBM (NYSE:IBM) might not seem like one of the best investments for 40-year-olds but rather for folks two decades older. As well, the company doesn’t quite have the pizzazz of its sector peers. However, Big Blue’s concerted efforts into revamping itself through relevant businesses such as artificial intelligence and cloud computing make it one of the buy now stocks for 40-year-olds.
True, IBM requires some patience. Since the Jan. opener, shares slipped more than 7%. At the same time, IBM stock is now undervalued. Presently, the market prices shares at a forward multiple of 13.83. As a discount to projected earnings, IBM ranks better than 77.24% of the competition.
Significantly, IBM offers a forward yield of 5.06%, handily beating out the tech sector’s average yield of 1.37%. With 30 years of consecutive dividend increases, it’s a status management won’t give up easily. Finally, analysts peg IBM as a buy with an average price target of $146.56 (implying almost 12% growth). Therefore, it’s a solid choice among ideal stocks for 40-year-olds.
AbbVie (ABBV)
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A pharmaceutical giant, AbbVie (NYSE:ABBV) ranks among the best investments for 40-year-olds because of burgeoning relevancies. In particular, its acquisition of Allergan offers longstanding significance thanks to Botox. With digitalization and social media making people much more shallow, you can almost bet the farm that Botox demand will skyrocket as millennials (and eventually Generation Z) hit middle age.
Put another way, AbbVie represents an opportunity you can grow with. That’s why without hesitation, it’s one of my top stocks for midlife investing. Eve better, the market prices ABBV at a forward multiple of 12.09. As a discount to projected earnings, the pharma ranks better than nearly 68% of the field.
In terms of passive income, AbbVie carries a forward yield of 4.39%. This stat ranks much higher than the healthcare sector’s average yield of 1.58%. As well, the company enjoys 51 years of consecutive dividend increases.
Lastly, analysts peg ABBV as a moderate buy with an average price target of $167.44 (implying 24% upside potential).
Chevron (CVX)
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I know, I know – electric vehicles are the future. Therefore, a hydrocarbon energy giant – particularly one that’s involved in the entire value chain of the underlying industry – seems irrelevant. Nevertheless, I believe Chevron (NYSE:CVX) ranks among the best investments for 40-year-olds.
Fundamentally, I’m having a hard time believing that we’ll see full integration of EVs anytime soon. Let’s set aside the fact that they’re quite pricey at the moment. More than a few sources have warned that the current electric grid can’t handle extreme weather conditions. So, if air conditioners running during the summer poses severe problems, let’s not even talk about EVs.
Plus, because so many voices in the mainstream talk up EVs, few appreciate the growth and profitability machine that is Chevron. As well, the company offers a forward yield of 3.92%, which isn’t bad considering its sustainable payout ratio of 42.23%.
In closing, analysts peg CVX as a moderate buy with an average price target of $189.55 (implying 23% upside). It’s somewhat risky but I believe is a relevant opportunity for buy now stocks for 40-year-olds.
Amazon (AMZN)
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Presenting Amazon (NASDAQ:AMZN) as one of the investments for 40-year-olds brings up some complications because of forward potential. You see, AMZN already skyrocketed more than 48% since the beginning of this year. So, it’s possible that in the immediate future, shares could lose some steam. Nevertheless, over the long run, I believe it’s a top idea to consider.
While it’s been around the block several times, Amazon still represents a massive growth machine. Per Gurufocus, its three-year revenue growth rate (on a per-share basis) clocks in at 21.9%, above 83.43% of its peers. Also, its book growth during the same period stands at 31.8%, above 85.9%.
Fundamentally, e-commerce as a percentage of total retail sales has been steadily increasing since the second quarter of last year. Personally, I see this metric rising and Amazon dominating e-commerce because of its convenience. With next day and sometimes same-day deliveries, you don’t need to ever enter a brick-and-mortar anymore.
Turning to Wall Street, analysts peg AMZN a consensus strong buy with an average price target of $139.80 (implying 10% upside).
MercadoLibre (MELI)
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While investments for 40-year-olds should arguably focus mostly in the domestic market, going international with MercadoLibre (NASDAQ:MELI) makes sense for more adventurous experienced investors. An Argentine company headquartered in Montevideo, Uruguay, MercadoLibre’s online marketplace and auctioning business is particularly relevant thanks to the Latin America angle.
Since the beginning of this year, MELI gained nearly 40%. Over the past 365 days, it gained just over 61% of equity value. However, that momentum came at a cost, with shares being overpriced. For instance, MELI trades at a forward multiple of 67.76, ranking worse than 92.86% of cyclical retail competitors.
At the same time, the company benefits from strong operational stats. Its three-year revenue growth rate pings at 63.3%. Also, it enjoys a trailing-year net margin of 5.46%, outpacing almost 70% of rivals. For patient buyers, MELI could be one of the ideal stocks for 40-year-olds.
Looking to the Street, analysts peg MELI as a consensus strong buy with an average price target of $1,597.50 (implying over 38% growth).
PayPal (PYPL)
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One of the higher-risk plays associated with investments for 40-year-olds, PayPal (NASDAQ:PYPL) began soaring from the lows of the Covid-19 pandemic through the final months of 2021. Unfortunately, a combination of consumer pressures (related to inflation) and competition in the financial technology (fintech) space cratered PYPL. Even now, it’s still struggling, losing 11% since the Jan. opener.
Still, PYPL could be one of the top stocks for midlife investing for those willing to speculate a bit. True, the red ink doesn’t exactly inspire confidence. However, PayPal carries tremendous brand power and awareness. Also, being around for since the late 1990s affords familiarity and provenance that fresh rivals just can’t compete with.
On a fundamental note, I’m looking to the burgeoning gig economy to bolster PYPL. According to Business Research Insights, the global gig economy could hit $873 billion by 2028. So, some patience with PayPal can go a long way.
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When it comes to investments for 40-year-olds, I might as well save the most awkward for last. With Service Corp (NYSE:SCI), we’re talking of course about final services. Based on the average U.S. life expectancy of 77.28 years, people in their 40s have fewer years remaining (on average) in their future than they’ve clocked on the odometer. Plus, with life expectancy in this country declining, it’s a very uncomfortable topic.
Fortunately, if I can even say that, Service Corp is a permanently relevant enterprise that will likely enjoy a pushed-up demand profile. Again, because life expectancy in this nation is declining, Service should more quickly reap the benefits of its…err…total addressable market.
Also, investors should take a closer look at SCI as one of the stocks for 40-year-old investors because it’s underappreciated. Per Gurufocus, the company’s three-year revenue growth rate pings at 13.8%, above 85.42% of its competitors. Also, it trades at a lowly forward multiple of 18.32, ranking better than 60% of rivals.
On a final note, analysts peg SCI a moderate buy with an average target of $82.50 (implying nearly 29% upside).
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
