The Best Way to Invest £50k: Six Things to Think About
If your financial situation is healthy, and you feel like now is the perfect time to invest 50k, then here are six key questions you should ask yourself before investing.
1. What Are Your Financial Goals?
Are you dreaming of early retirement? Do you want to buy your perfect family home? Or are fast sports cars more your thing?
Whatever your goals, these will have a huge impact on exactly what type of investment you’re looking for.
If you want more cash in your pocket, then an income-focused investment could be more your thing.
On the other hand, those thinking of retirement will be more suited to investments with long-term growth.
2. Are You a Short-Term or Long-Term Investor?
Do you need your money soon, or are you willing to wait for decades for the ultimate cash pay-out?
Helping decide your timeframe is important, as the longer you leave your money in an investment asset, the more your money will grow.
Short-term investments are under the five-year mark, while longer-term investments can be 10 years or more.
It’s important to note that shorter-term strategies often involve more risk, as investment markets are more likely to fluctuate in the short term.
3. What is Your Risk Tolerance?
Risk is a word that can cause any investor to shudder.
But understanding your attitude to risk is important for a successful investment.
You need to ask yourself how much money you can afford to lose and how you would feel if you lost thousands overnight.
Emotions can run high in an investment, and you don’t want to let them takeover to make rash decisions.
4. Should You Use a Tax Wrapper?
If you’re investing in stocks, it may be a good idea to use a tax-free wrapper to hold your investments.
Like a SIPP or ISA, these investment vehicles will protect your investments from taxes.
Once you’ve opened a tax wrapper available from sites like Barclays, you can then pick and choose the types of investments you want inside your wrapper.
5. DIY or a Ready-Made Investment Portfolio?
Do you have the chops needed to go it alone, or are you a beginner considering their first investment?
Whatever you are, you have two options when it comes to investing money:
- DIY
- Ready-Made Investments
DIY investing is when you go it alone. You’ll have complete control over what assets you choose to invest in.
This can include:
On the other hand, ready-made investments allow you to invest in investment portfolios provided by Robo-advisers that pick investments based on your risk tolerance.
You can also consider a hybrid approach and invest through a fund.
By doing this, you’ll pick a fund that buys and sells investments for you.
These funds will be typically managed by a fund manager who actively manages the fund and picks the stocks.
You can also consider the cheaper passive funds that track investment markets like the FTSE 100.
6. Should You Save or Invest?
If you’ve just inherited 50k, you may feel compelled to invest as you’ve been told it’s the right thing to do.
You aren’t alone in these thoughts either:
A poll from The Times found that around 51.9% would invest a £50,000 windfall.
However, this may not be the right decision for you.
If you have a low-risk tolerance and want to keep your money as safe as possible, then putting your cash in a savings account may be the wiser choice.
Although the rewards will be greater if you put your money into an appreciating asset like property, you should only invest at a time that you feel is right.
If you have doubts about how you want to spend your money, be sure to seek out the support of a financial advisor to determine what’s the right decision for you and your needs. You can also read our blog post on saving vs investing for more insight to help you decide which route to take.
