How would you invest a sum of between £20k-25k?

MarkAlexander18

I currently have a chunk of money I would like to do something beneficial with. The only problem is, I am unsure what to do with it. I no very little about investment, so would need to make the correct decision in regards to investing. Saving the money would be another option, but I likely won't make much back on it.

I am not necessarily risk averse, but I understand the risk in investing to make money on that amount of money. It isn't the kind of amount I want to see vanish due to silly decision making. I want to make smart decisions with the money, but just unsure what to do with it. Some advice would be useful.

Aminatidi

I always say start with a basic question.

You put in your £20K and in ten months time (pick a period) you unexpectedly need to access it.

How important is it that there is a 100% certainty of there still being £20K in there.

That probably determines if you should be looking at saving or investment products.

Linton

Do you have a cash emergency fund of say 6 months of living expenses? If not, take that first from the £20K-£25K. You dont want to have to sell your investments in a hurry because you lose your job or your house or car needs an urgent repair.


Then whether you use the rest to invest (in share funds) or save in cash accounts depends on the time frame when you will want the money. Anything less than 5 years or possibly even 10 years keep it in cash, If you really are talking long term it can be most tax efficient to pay extra into your pension.

Albermarle

Do you have a current ( workplace ?) pension or any old pensions.
Also can you say your age .
The reason I ask is that often pensions can be the best place to invest money but we need to know some more about your current situation first.

steampowered

If you don't want to over complicate things, simply put the money into a Vanguard tracker fund. As much as possible in a stocks & shares ISA to shelter it from tax.

That's an extremely easy way to invest in a manner which is diversified across different companies and different markets.

The average long term return on stock investments is about 6-8% per year. Obviously some years will do better than that, and some years the investment value will go down. But the long term trend is pretty reliable so it's a perfectly reasonable risk to take.

steampowered

Linton wrote: »

Anything less than 5 years or possibly even 10 years keep it in cash

The probability of making a loss on a globally diversified stock market investment over a 2 year investment horizon is about 15% (ignoring fees). The other 85% of the time, you'd would make a profit.

DrSyn

SAVINGS: Money is in a safe place & not at risk. You expect to at least take out what you put in. In practice this means either,
(a) NS&I, which is loaning money to the UK government.
(b) Bank/Building Society covered by the FSCS protection (at present up to £85K).

Money need within 5 years should be kept in a savings account.

INVESTING: Putting your money at risk. You hope to take out more than you put in, but this is not guaranteed.

Think of investing for at least 10 years.
Hold the funds within a Stock & Shares ISA, this avoids complications with tax
Before investing make sure you have an emergency fund so you do not need to sell the funds.

Watch both of these first:-
http://www.kroijer.com/
https://www.ifa.com/indexfundsthemovie/

Now consider investing in a global multi asset fund at a risk grade you are happy with. The two below have wide diversification while minimising risk, at low cost.

Vanguard Life Strategy
https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link

HSBC Global Strategy
https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/

Hope this is of help.

capital0ne

DrSyn wrote: »

SAVINGS: Money is in a safe place & not at risk.

Not exactly, in as much you know what you're losing - currently about 2% a year loss.

Say you tuck away £100k, then in a year it's buying power will only be £98k

If you're earning say 1.5% the it will have buying power of £99.5k

Alexland

steampowered wrote: »

The probability of making a loss on a globally diversified stock market investment over a 2 year investment horizon is about 15% (ignoring fees). The other 85% of the time, you'd would make a profit.

Although I like that graph, and might have been first to post it to this forum, it is worth remembering that the 15% chance of loss over a 2 year period doesn't show the scale of the loss which could be 50%+. Investing over such a short period is a gamble. If 15% of toasters gave painful electric shocks there would be a product recall.

Alex

Thrugelmir

MarkAlexander18 wrote: »

I currently have a chunk of money I would like to do something beneficial with.

With what objective in mind? What timescale do you envisage committing the money for?