If you’ve come into a large lump sum of money, your first instincts may be to save it. Or maybe that’s how you built up your pot in the first place. But what about investing? Knowing where to invest £50k – as an example – isn’t always easy, especially with so many different options out there. However, the best way to invest £50k in the UK won’t be the same for everyone and will vary depending on an individuals attitude to risk.
In this guide, I’m going to be taking a look at investment platform options. As always, where you decide to invest your money, is down to your individual circumstances.
Consider Paying Off Debts First
Before you start thinking about where to invest £50,000, you should consider paying off any current debts you have in place. Credit cards or personal loans. Anything that has a particularly high level of interest should be paid off before you think about looking at investing.
You might even want to consider paying down your mortgage if it’s relevant and/or beneficial to you. We have looked at before whether or not you should consider paying down your mortgage or invest. For now, however, it all depends on the rate of mortgage you are actually paying, term remaining and whether you’re likely to get a better return from investing.
In most cases, however, get those high interest debts paid off. Otherwise, you’re going to end up shedding money in all directions. Time to streamline, and once your free from any high interest debt, start looking at the best way to invest your money.
How Long Do You Plan to Invest For?
When considering where to put a large sum investment, you should of course think about how long you intend to put money away for. It’s worth keeping in mind that, of course, different investments will drive different rates of income over the months and years to come. What’s more, you’ll be looking at varying levels of risk. I’ll come to this side of things very shortly.
It’s worth using an online calculator to work out the compound interest on any investments you want to make over a given period (this is my favourite compound interest calculator). This way, you can at least plan ahead for the money you are likely to receive and can therefore start refining your options.
Investing in stocks from companies who have good long-term income potential is one avenue. Of course, diversifying your investments is a good idea too. Thankfully there are various excellent investment platforms available to UK investors which can manage your investments for you. All you have to consider is a risk level which is appropriate for you.
What’s Your Risk Tolerance?
Your appetite for risk is always going to be a big factor in where you invest your money. When considering where to invest your £50,000 you need to think about whether you value safety over potential return. By taking a low-risk option, you may not be able to make as much money as you’d expect long-term through a more aggressive portfolio.
If you are completely unwilling to take any level of risk at all then investing isn’t likely to be suitable for you. High interest savings accounts could be an option for people who are completely risk averse. However, there are far more lucrative options open to you where you can stand to make a good return if you are willing to take some level of risk.
For example, look at the stock market. While investing in stocks in a company such as Apple may seem like a safe bet, there is always a risk. However, depending on the amount of money you invest, and depending on the character and profile of the company you invest in, you’ll likely find potential returns to be much higher than what you’d achieve from bank interest. Of course, you can further negate risk level by diversifying your investment account with the use of index funds or ETFs. Or just leave it up to the professionals by using a wealth management investment platform such as Moneyfarm (more on that later).
This really is a case of measuring up what matters more to you. Do you value potential big returns over a financial safety net? If so then perhaps it’s time to take to the stock market and put your money to work.
Opening an Investment ISA
An investment ISA is a good option to take if you do want to invest your money. There are plenty of benefits to setting up a stocks and shares ISA, such as the fact that you won’t incur any tax on your returns.
In particular, it’s worth placing some of your lump sum of £50k into an investment ISA just so you can max out the annual limit of £20k. This means that you will stand to get maximum returns on your money, and you’ll still have £30k left to play with and diversify elsewhere. You can choose to drip-feed the remaining £30k, for example, into your ISA over the next few years if you wish.
This is a solid option if you’re keen to explore stocks and shares but want the safety of an ISA wrapper. What’s more, as stated, you won’t have to invest the whole of your £50k to really take advantage.
Do You Want to Be a Passive or Active Investor?
Your investor profile will also affect what you perceive to be the best way to invest £50k. There are plenty of options out there which allow you invest your money and earn passively, or you can choose to actively manage your investments and make specific choices on which stocks you want for your portfolio.
Many people prefer the passive investment route purely for the fact that it’s hassle free. Investing on an active basis can take a lot of time, energy, and knowledge! Stock markets are tricky to navigate and understand at the best of times, and thankfully, many passive investment platforms are making it easier and easier for everyday savers and investors to start building a part-time income.
There are further benefits to a passive investment model as it means that you won’t have to keep an eye on your money at all hours of the day. You’ll be able to diversify your options without having to get involved directly unless you absolutely need or want to.
The Best Passive Investment Platforms for £50,000
If you’ve been following PFF for a while now, you’ll know that I’ve occasionally reviewed some of the top investment platforms available in the UK. Many of these are passive platforms and are therefore great for beginners or those who want a passive solution. If you’re looking for the best way to invest £50k into the stock market, it is certainly worth considering the following options.
One key aspect to consider when looking for the best passive investment platform is fees. The less you pay on your investments, the more viable the platform is likely to be. Seemingly small platform fees can quickly add up when dealing with larger sums of money invested.
Let’s take a look at our picks for the best passive investment platforms.
Moneyfarm is a great investment platform for beginners, particularly as the interface is so user-friendly. It’s fully regulated, and you’ll have the chance to invest your £50k via an Investment ISA, a General Investment Account (GIA) if you already have an active Investment ISA elsewhere, or a Personal Pension. The best part is, of course, the fact that you can get started quickly with a ready-made portfolio service. There’s no need for you to worry about managing the finer points of your investments unless you really want to.
Pricing for Moneyfarm portfolios are nice and simple, with a rate of 0.6% per year on an investment of £50k. All portfolios with Moneyfarm are fully managed by their wealth managers so investments are chosen on your behalf based on a risk assessment that you complete at the start of the process.
Based on Moneyfarm’s current rates, you should expect to pay around £300 per year on a £50k investment – very competitive, on the whole.
Nutmeg is also something of a firm favourite here at PFF, and for good reason. It’s really easy to use, extremely reasonably priced, and what’s more, there are plenty of different diversification options for you. It’s great to know that you’re not going to be missing out on popular investment choices just because you are using a passive system. It’s also ideal for beginners, much in the same way as Moneyfarm, while still being appealing enough for seasoned investors, too.
You can invest in various Investment ISAs (junior, lifetime, stocks and shares), Personal Pension and / or General Investment Account (GIA).
The managed portfolio service at Nutmeg is also very affordable, with a rate of 0.75% that applies to anything up to £100,000. Invest more, and you will only be subject to a rate of 0.35%. Therefore, it works out cheaper the more you invest. At £50k, you’ll likely pay £375 over the year.
However, if you use the link below you can take advantage of six months with no fees at Nutmeg. It’s a great way to try the service, and to really make the most of your investment.
Wealthify is another very simple, user-friendly auto-investor that will appeal to beginners who are looking to get into investing on a passive basis. You can invest from as little as £1, and you’ll have a choice of Pension, Stocks & Shares (Investment) ISA, General Investment Accounts (GIA) and Junior ISAs from the get-go. It’s good to have a variety of options, and Wealthify always impresses in this regard.
Like Moneyfarm and Nutmeg, with Wealthify you can leave the service to invest in choices on your behalf after a brief questionnaire. This measures your risk and is a great way to ensure that your cash is going to sources which you agree with (for example you can choose only to invest in a socially responsible (ethical) portfolio), and which are diverse enough for your tastes.
In terms of fees, investing £50k through Wealthify should cost around £410.04 per year. This is a little higher for the ethical portfolio option, which will likely cost you £630 per year. Although if socially responsible investing options are important to you then you might be happy to pay the increased fees.
Be sure to sign up through my link, too, and you’ll be able to claim £25 back off Wealthify.
So – where to invest £50k? Do you want to play it safe and put it in savings at a high rate of interest? Or would you prefer maximising your potential returns and put it into stocks and shares? The choice is absolutely yours. In terms of lowest fees combined with a straightforward, user friendly platform, Moneyfarm is certainly a strong option. However, as I’ve explored above, there are plenty of variables to consider. You’re going to need to think about how long you actually want to invest for, as well as your own attitude to risk. Are you happy with some level of risk? If not, investing in a cash ISA or any kind of high interest savings account might be the best option for you. As always, as with any investment, your capital is at risk. Before you make any major financial decisions you may want to consider getting professional advice.