How to Invest 1 Million Pounds? (5 Ways for the Highest Returns in 2021)

How to Invest 1 Million Pounds 

1. Invest in Real Estate

2. Make a Stock Market Investment

3. Buy Bonds

4. Save With Savings Accounts

5. Invest in Cryptocurrency

1. Invest in Real Estate 

Return Potential:  ★ ★ ★ ★ ★

Risk:  ★ ★ ☆ ☆ ☆

When it comes to knowing how to invest 1 million pounds, real estate investment should be at the top of your list. 

Real estate investment, otherwise known as property investment, is the process of buying a property as an asset to generate income. 

The investment class has surged in popularity in recent decades, thanks to the UK market seeing substantial growth over the last few years. 

Particularly in 2020, property prices surpassed the £250,000 mark for the first time and have continued to grow in 2021, with a current average of £265,668 – 13.19% higher than a year prior. 

This is key for any investor, as it shows the ability to earn a huge profit on the resale of their property, alongside getting monthly income through rent. 

Widely considered the best investment for 1 million pounds in 2021, real estate investment is currently offering a compelling traditional alternative to cryptocurrency and stocks. 

But how should you invest in real estate? 

Well, there are currently two popular ways you can start investing in real estate today. 

These are: 

1. Buy to Let Property 
2. Real Estate Investment Trusts 

What Is Buy to Let Property? 

Undoubtedly the most popular form of real estate investing, buy to let property investment is the purchasing of a property to rent to a tenant for income. 

You can buy different types of properties, with residential, student, and commercial property all falling under the BTL banner (although residential and student are likely your best bets for the bigger returns in 2021). 

All market data currently points to buy to let being the best investment for 1 million pounds. 

Alongside house prices rising, rent has also seen substantial growth.  

According to the HomeLet Rental Index, the average rent in the UK as of July 2021 was £1,029, which is a record high and is 6.6% higher than one year ago. 

This means that not only can you enjoy increasing rental income, but you can also sit back and enjoy excellent capital growth for the future. 

Current predictions from Savills have estimated that prices in the UK are set to rise by 21.5% by 2025, making now an ideal time to invest. 

These numbers show the low risk involved in property investment. You can continuously enjoy rental income and feel secure knowing your property is consistently growing in price. 

Factoring in cut stamp duty tax rates until October 2021, and there’s perhaps never been a better time to get started with real estate. 

With the right purchases, you can turn your initial investment from one million to two. 

Overall, buy to let property investment is likely one of the best investments for 1 million pounds. 

If you are looking for smart investments and trying to figure out how best to invest 1 million pounds in 2021, this is the method for you. 

2. Make a Stock Market Investment 

Return Potential: ★ ★ ★ ★ ★

Risk: ★ ★ ★ ★ ★

Stocks and shares are a wild beast. 

The epitome of high risk/high reward, you could make substantial gains one day and lose it all the next. 

If you bought £1 million worth of stocks and shares in Apple in the late 1970s, you would probably be living on a private island by now.  

However, for every success story, there are 10,000 failures. 

Stocks, or equities, allow investors to buy small parts of a company. 

You can purchase multiple stocks, which will increase your total income through dividends.  

You can buy and sell shares at any time on the stock exchange, with you ideally selling stocks for a considerable profit when the company increases in wealth and popularity. 

It sounds straightforward, but there’s a nuance to stocks. 

Knowing what stocks will rise and what will decrease, the ideal time to sell, and exactly what company to invest in has confused even the most seasoned investors. 

This nuance stems from the fact that the stock market is uncontrollable and incredibly volatile. 

Prices of stocks fluctuate almost always and can peak and trough from a variety of factors. 

From the crashing of overseas economies to a new tax introduced by a government on home soil, everything in the stock world is connected, and things can drastically change. 

Stocks aren’t safe. If you have any semblance of concern for your finances, you should avoid putting any sizeable percentage of your one million into the market. 

Check out our guide to rental property vs stocks to learn more.

Should You Invest in the Stock Market? 

There are many success stories caused by the stock market. 

If you are brave enough, money can be made. This high-risk strategy brings with it some profound strengths. 

Chiefly, stocks are flexible. 

You can quite easily buy them, with some apps available to buy stocks at any time of day. 

You can also buy through brokers and financial planners, too, sometimes in the space of minutes. You can buy stocks in several companies and can decide how much you want to buy in each. 

Likewise, they are easy to sell. 

Stocks are often classed as “liquid,” which means you can quickly turn the shares into real money by selling them. 

This is great if you need a quick buck, but as mentioned, doing this could mean you make sizeable losses. 

Stocks are both short term and long-term investments. 

If you have the guile and willpower, you can sit on stocks for several years. 

Holding your nerve is key here and having the instincts to know when to hold on to a stock or sell it for a profit is critical. 

Your stock may increase by 1000% one day, but two days later, tank into oblivion and never recover in price. 

This is the world of stockbrokers – with each investor running the line between financial failure and vast wealth. 

Stocks are an emotional rollercoaster.  

While technically a good option for those wondering how to generate passive income, its demands for monitoring the stock market limit its passive nature. 

If you have the strength of character to ride the wave, there is money to be made, but there are other more secure methods. 

You can certainly put some money into stocks, but large amounts of wealth are risky. This is perhaps not the best investment for 1 million pounds. 

3. Buy Bonds 

Return Potential: ★ ★ ★ ☆ ☆

Risk: ★ ★ ★ ☆ ☆

There isn’t just real estate and the stock market to consider, though. Investing is a vast field, and another form you could consider are bonds. 

Bonds are fixed-income investments used by companies, and even governments, to generate funds. 

A company will essentially borrow money from you, and they will pay a fixed interest rate over time. 

They can get a bit complicated, though, with bonds rated from Triple-A to C. 

Triple-A means there is little risk as the company involved is very likely to pay you back with interest added. 

Unsurprisingly then, C bonds are the lowest grade and are riskier but offer much higher yields. 

Why Invest in Bonds? 

There are several benefits to bonds. 

Firstly, the investing returns are fixed, so you know exactly what you are getting out of it. 

Compared to stocks, they are also far more reliable and less volatile. 

When a company is liquidated, they have to pay investors. Bondholders are paid first over shareholders in such an event. 

Likewise, the market for bonds is less volatile. While the value can change based on interest rates, they don’t wildly change day to day as stocks do. 

On the other hand, a fixed investment, while beneficial, can also be damaging. 

With stocks, you may run the risk of losses, but there is ample room for mammoth gains. 

However, with bonds, you are getting exactly what you expect, with little growth. 

Similarly, bonds can require large sums. Bonds can be bought at a low cost like £1,000 but can range far higher. 

Of course, with a million in your back pocket, it is unlikely for that to be a problem, but again, bonds seem far riskier than property investment. 

4. Save With Savings Accounts 

Return Potential: ★ ★ ☆ ☆ ☆

Risk: ★ ☆ ☆ ☆ ☆

While some people have luxury purchases on their minds, many consider the possibility of placing their imagined millions into savings accounts and living off the interest. 

One million pounds isn’t as much as it used to be, and it’s unlikely you could thrive off the interest based on the average interest rate. 

However, savings accounts are still a smart decision as they can generate interest and keep your money safe.  

While it won’t earn remotely near as much for you as property investment, it is still something worth considering. 

On the surface, savings accounts are simple: You put money in the account, you generate interest. 

However, there is a nuance to choosing accounts, as some come with extraordinary benefits. 

One such benefit is tax advantages. 

Taxes aren’t fun. But It’s something we all have to pay, and they have an annoying knack of biting chunks out of earnings. 

Luckily though, there are ways to legally avoid paying tax, with the government promoting many methods. 

There are several savings accounts that aren’t taxed and are worth considering if you want to put some of your millions away. 

5. Invest in Cryptocurrency

Return Potential: ★ ★ ★ ★ ★

Risk: ★ ★ ★ ★ ★

The new kid on the block, cryptocurrency has shot up in popularity in 2021 thanks to the lucrative returns on offer. 

But what exactly is it? 

Well, cryptocurrency is a digital asset that functions similar to traditional forms of currency. 

You can trade the currency or buy more on online platforms, with the purpose to cut out banks and middlemen from taking cuts in transactions. 

If that sounds confusing to you, then you aren’t alone. 

Cryptocurrencies such as Bitcoin are notoriously confusing, with many investors struggling to get their head around the concept. 

However, that hasn’t stopped some investors earning over 500% returns in 2021, according to The Times. 

Like stocks, though, cryptocurrency is incredibly volatile with prices dropping heavily and frequently. 

In an article from Time, one financial expert said about Bitcoin: “You have a high chance of losing it all, but a small chance of winning it big.” 

While you can certainly put some money in this asset, stay clear of putting too much into an investment, especially if you’re new to cryptocurrency.  

Otherwise, you run a substantial risk of losing out completely on your cash.  

If you’re asking how best to invest 1 million pounds in 2021, or want to know the best investment for 1 million pounds, cryptocurrency is likely not the answer for you. 

Are You Ready for the Risk Involved With Investing? 

It’s a word we all dread to hear when it comes to money, but risk comes part and parcel with investing. 

Most investment opportunities pose a risk, and your attitude to risk is essential. Knowing how much trouble your financial situation can face is vital. 

It may sound stupid, but can you afford this investment? 

With such a large sum of money burning in your back pocket, the answer is most likely yes. However, could you survive losing your investment? 

Would £100,000 or £50,000 disappearing overnight ruin your financial situation completely? 

Like the stock market, some forms of investment can be wildly temperamental, making losing vast amounts of money possible on any given day. 

Risk profiling is crucial, and if financial ruin is just a small step away, then perhaps don’t spend the lump sum.  

How to Minimise Investment Risk 

While investing can be risky, especially when investing large sums, there are tried and trusted ways to minimise the risks involved. 

If you use a third-party platform, such as a property investment company, you should ensure the company is reliable. 

You can do this due diligence by checking out company reviews and their track record portfolio. 

Another way to reduce risk, and perhaps the most important, is splitting up your investment into multiple assets. 

Asset allocation is critical for ensuring you make as much money as possible. 

In whatever way you choose to invest your funds, ensure it is spread around, so it is not concentrated in one area.  

Buying a property worth one million or investing in one company with a lump sum is incredibly dangerous, and you will be minimizing your gains. 

This is a sure way to turn your one million into one thousand. 

A successful investor will ensure they make different types of investments to keep their bank account secure.  

What Is the Best Way to Invest 1 Million Pounds in 2021? 

Now that we’ve looked at 5 ways you can invest 1 million pounds in 2021, it’s time to address the main question. 

What is the absolute best way you can invest 1 million pounds? 

For our money, the best way to invest is likely real estate, due to the shining market data and reliability during times of uncertainty.  

However, for the absolute best investments, it’s a smart idea to invest in all the strategies mentioned to gain a varied and sustainable portfolio. 

For instance, you can place the bulk of your 1 million into real estate, and buy property in different cities to diversify your portfolio. 

And for the remaining cash, you can place some in savings accounts, while purchasing stocks, bonds, and cryptocurrency to fill out the rest of your portfolio.

Diversifying your portfolio in this way will minimise the risks involved and ensure the bulk of your cash is safe and growing for a successful investment. 

Where to Invest 1 Million Pounds in Property? 

So, let’s say you have decided to try buy to let investment. 

The first question you may ask is “where to invest 1 million pounds?” 

With real estate, there are a few characteristics you will need to think about to help evaluate the investment potential of an area. 

Ideally, your focus will be rental yields. This is a percentage that shows the return on your investment generated via rental income. 

If the rental yield was 5%, for instance, this would mean that you would be seeing a 5% return on your investment every year through rent without factoring in expenses. 

But there are other factors you need to think about. The main three to keep an eye on are: 

1. Affordability 
2. Market growth  
3. Rental yields 

With this in mind, let’s look in detail at perhaps the best region to invest in for 2021. 

What Could a £1 Million Investment Look Like? Example Portfolio  

So, what could a perfect £1 million portfolio look like? 

Using our prior logic, we’re going to give an ideal example portfolio that is as diverse as possible and is geared to generating the highest returns and the lowest risk. 

The properties in this list will exclusively be off plan. 

Off plan property is the perfect way to save thousands on property purchases and get the most bang for your buck. 

To see a full guide to off plan property, and why you should invest, be sure to check out our off plan property guide. 

Now that the explanation is out the way, let’s get right into it. 

Disclaimer 

This guide was updated in September 2021. At the time of reading, some data may no longer be accurate. We are not sharing personal finance or financial advice. This is simply a guide. If you want to see more information regarding personal finance or financial advice, be sure to seek expertise from a financial adviser or a fund manager/wealth manager.