How you choose to invest your £50k will depend on your financial circ*mstances and your priorities, timeframe and appetite for risk. There are, however, some great options available for those looking for the best way to invest £50k in the UK, including the following:
- Property
- Stocks & shares ISAs
- ETFs
- Stocks
- Mutual funds
- Bonds
- Annuities
- Peer-to-peer lending
1. Property
While investing in property might be one of the safest and most profitable ways to invest £50k wisely, it isn’t entirely without risk. This is because the housing market, like the stock market, is subject to price corrections and crashes (just think back to the 2008 financial crisis). However, the property market does tend to perform well against FTSE investment options.
If you choose to invest your £50k in property, you’ll need to offset your earnings against any capital gains and income tax. Investing in property may only provide optimum returns when you have next to no mortgage in the buy-to-let sector.
2. Stocks and shares ISAs
While a cash ISA is simply a tax-free savings account, a stocks and shares ISA is a tax-efficient investment account that allows you to invest in a range of different assets. These assets include individual shares, investment funds, investment trusts and bonds. Note that ISAs have an investment limit of £20,000 per financial year, so you won’t be able to invest £50k all at once in an ISA.
Most stocks and shares ISA providers are protected by the Financial Services Compensation Scheme (FSCS), which means that up to £85,000 of your money per banking group will be covered in the event that the institution you’ve invested with collapses. This is something you should always check before opening an ISA.
3. ETFs
An Exchange Traded Fund (ETF) is a type of investment where stocks are traded in an exchange market. Although ETFs can invest in any number of industries, they often track a specific index. Stocks in ETFs can typically be bought and sold throughout the day.
ETFs hold assets such as stocks, bonds, commodities or a mixture of all three, and generally operate on a type of mechanism designed to keep trading close to the asset’s net value, which allows stocks to be bought and sold easily.
4. Stocks
Stocks are shares of ownership in a company. Companies usually sell shares of stocks to raise capital when they want to develop or grow their business.
When you’re looking for the best way to invest £50k, buying stocks can generate a good return, but it all depends on how well the company you buy stocks in performs, and if they underperform, you could lose some or all of your money.
5. Mutual funds
Mutual funds are amongst the most popular types of investment for both beginners and experienced investors.
They allow you to pool funds with other investors to invest in securities such as stocks, bonds, money market instruments and other assets. Your investment will ultimately hinge on the performance of the fund, and you need to be aware that you don’t have the same voting rights as with investments in normal shares.
6. Bonds
Bonds represent a company or government debt. When a company or government issues a bond, they are issuing debt and agreeing to pay interest on the money you’re ‘lending’ them. Bonds typically pay out annual interest, repaying their debt at the same time. Because of this, bonds are often considered one of the safer types of investment, especially if you want to invest over a short term.
The different types of bonds are best described as a spectrum from most to least risky, starting at ‘gilts’, or government bonds, at the safer end, through to high-yield bonds from companies with low credit ratings at the much riskier end.
7. Annuities
An annuity will provide you with a guaranteed income stream for a certain amount of time without needing to worry about investing it or managing it yourself. It will, however, mean you give up your right to access your cash.
8. Peer-to-peer lending
Peer-to-peer lending (P2P) is an alternative way to invest or diversify your existing investment portfolio. This type of investment facilitates direct loans without involving banks. What this means is that you lend an individual, or ‘peer’, money and earn interest while they gradually pay it back. All parties collaborate via online platforms which keep the operational costs down and make for better rates of interest.
While this sounds risky, P2P companies mitigate this risk by splitting your money across several different borrowers, rather than lending it all to just one. The downside is that P2P lending is not currently covered by the FSCS, meaning there is more risk of losing your money should the borrower fail.
The upside is that interest rates can be very competitive, and the first £1,000 of interest earned from P2P lending is tax-free for basic rate taxpayers. Some P2P savings can also be held in some ISAs.
