How best to invest 20K?

Pipjo

Hi It has taken me 2 years to save 20K and I want to invest it.

I could put it towards 25% deposit for Buy to Let and look at rental income of £475 a month.

I could invest it by other means but then I have not a clue what I am doing!

I have read of 10% return on 20K min investments on adverts but not sure if this is a risk?

Need a wee bit of help please

bowlhead99

Pipjo wrote: »

I could put it towards 25% deposit for Buy to Let and look at rental income of £475 a month.

I could invest it by other means but then I have not a clue what I am doing!

So, do you have a clue what you are doing with starting a property development and rentals business?

Also you say 'put it towards' a deposit, do you also have the rest of the deposit, and a large separate fund for repairs and maintenance and decoration and to pay the mortgage on the other 75% of the property you financed, and insurance and council tax and income tax at the end of the year, in the months when you don't have tenants, or the tenants destroyed your place without paying? If you can only afford to buy one second property it is quite a risk.

I think most people who didn't need the 20k as part of a cash rainy day fund could sensibly invest it in one or more investment funds (with as much of it as possible being within a S&S ISA) and just leave it to grow, free of the hassles of owning and running a property rentals business that could wipe out all their investment. They might need to get some pointers by reading around this forum for some links and recommendations for books on investing, if they don't know much about investing in funds.

I have read of 10% return on 20K min investments on adverts but not sure if this is a risk?

Typically an advert for a return that high, which has a 20k minimum buy-in, is an unregulated investment designed for sophisticated investors (or greedy idiots). Best to avoid that type of financial promotion.

Yes there would be a risk because risk-free you can only get 2-3%, i.e. round about inflation, depending on how long you lock up your savings with a bank. You can get a little bit more if you surf around for all the high interest current account deals with banks, but you'd never get more than 5% and only on a limited amount of money.

By contrast, a selection of funds on a mainstream investment platform should give long term average returns of several percent above inflation. Although there will likely be plenty of ups and downs along the way, so you shouldn't invest (rather than save) if you are likely to need the money back any time soon.

An alternative that is particularly useful if you're a high risk taxpayer is to invest it in a pension and get a lot of tax relief, but you wouldn't be able to get it back before you were 55. If you're not a high rate taxpayer, there's less potential benefit from pensions - but if you can do without the money and, for example, you don't currently put enough into your company pensions scheme to get the maximum free money from your employer, you should investigate that.