What to do with 10k indefinitely?

ET1976

Received a letter a few days ago telling me a bond I have with NS&I is due to mature in 1 month, and I can cash it in or re-invest in one of their products. It's worth £10,000.

I'm not sure what to do with it, since I have a mortgage and savings interest rates are low, and I've never invested in anything like stocks and shares before. I don't mind tying the money up to some extent (I have other 'emergency' savings with instant access) but not sure if I will find better investments if I am prepared to tie it up completely for, say, 5 years. I have no plans for this money so unless my circumstances change dramatically I can keep it invested indefinitely. I think I have 3 options:

1. Invest it somewhere which allows withdrawals but with a penalty. The best rate I have found for this is 2 years fixed at 3.75%.
2. Invest it somewhere which won't allow me to get at it for X years but will give me a better return than option 1. No idea what sort of return I could reasonably hope for.
3. Pay a lump sum off my £59k mortgage (no penalty for doing this; mortgage is at 2% above base rate for remainder of term).

Any suggestions as to which would be a good plan?!

many thanks!

ET1976

should have said - I really want the capital protected, so I suppose I'm talking about saving rather than investing.

Seemore_2

http://www.fairinvestment.co.uk/best_fixed_term_savings_bond.aspx

This gives an idea of the rates you can obtain for longer term savings.

My only advice would be that as savings rates are quite low at the moment, better rates are always becoming available, so do you really want to tie up your money for as long as 5 years?

You can obtain a better return on savings than you are paying on your mortgage, so you would not really gain anything by reducing the mortgage.

Given that you would prefer your capital to be protected would definitely not recommend stocks & shares!

sss555s

I'd pay it off the mortgage as 2% above base rate isn't gonna look too good if the base rate is 6% which could easy be the case by this time next year.

isofa

Pay off the mortgage IMO.

gozomark

sss555s wrote: »

I'd pay it off the mortgage as 2% above base rate isn't gonna look too good if the base rate is 6% which could easy be the case by this time next year.

I'd be amazed if base rate is above 2% in a years time - fiscal rather than monetary tightening will happen first - significant base rate rises are way off

Lokolo

Can you save half of it and use the other half the pay some of the mortgage off?

gozomark

Lokolo wrote: »

Can you save half of it and use the other half the pay some of the mortgage off?

otherwise known as "if in doubt, sit on the fence", which is often not only comfortable, but also the best place to see whats coming :beer:

ET1976

Lokolo wrote: »

Can you save half of it and use the other half the pay some of the mortgage off?

I can do anything I want.

But £5k doesn't seem like a worthwhile dent in the mortgage.

Judging by the spread of opinion in the responses there's no obvious thing I should do. Think I may go for the 2 year bond at 3.75% with 90 day interest penalty in the unlikely event I need the money. Then I can reasses in 2 years.

Thanks everyone.

Jonboy1889

Why don't you go for A&L, better rate? 4.2%?

Or the AA, 4.35%

Jonboy1889

Oh sorry, just realised you said you might need the money.

Doh!