How to Invest £150k - What's the Best Way to Invest £150k?
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As we enter 2023, you may consider investing as a way of earning extra income.
Be it a passive income you earn while freeing yourself up to work a regular job or do other activities, or a more active way of earning money outside of the traditional 9-5, more and more people are looking into investing their money to help make their wallets a little deeper.
If you find yourself looking to invest £150k, then you’re in luck! This is a very versatile amount of money that opens up multiple different investment options for you.
Before we get into the different investment strategies you should consider, you need to ask yourself several important questions. You should also clear any high-interest debts like credit cards, and create an emergency fund of roughly six months’ expenses in case things go wrong. No investment is risk-free, after all, so make sure your personal finance is in order.
Please note, if you want financial advice specific to you, always contact a financial adviser. They will have more in-depth knowledge and will be able to give you advice better suited to your financial situation.
Before you put £150k anywhere, you need to understand that this is a lot of money, and should not be thrown away lightly.
You need to figure out your financial goals for any investments you make, which will help determine your overall strategy.
Do you want to make a consistent passive income, or get one large payout as a lump sum? Are you looking for something you can make money from quickly or an investment that will grow over time?
Figure out how much you want to make, and how long you expect to invest for this to happen, and this will help you understand what you need to do.
Following on from figuring out your investment goals, deciding if you want to invest over a long time or at a faster pace is important. Both strategies have their pros and cons.
Long-term investments usually give out a higher level of returns, but this will take a longer time, as the name implies. So if you are happy being patient and playing the long game, this may be for you.
Alternatively, short-term investments often last no longer than six months. While some investment strategies may bring you a high return, the likelihood of this is low, meaning it is more realistic to assume your returns will be lower than the average long-term investment.
Given the title of this blog post, this may seem like a silly question until you take into account diversifying your investment portfolio.
Diversification means spreading out your money across multiple investments, so if one fails you will not lose as much. If you are wondering how best to invest £150k for income, having a diverse profile gives you the best of multiple worlds.
It is generally recommended to diversify your portfolio if you can, so spreading out your money across multiple investment streams may be the way forward for you.
No investment is risk-free, and there is always the chance, however slim, that you lose the money you have invested.
Make sure you understand this and decide how big a risk you want to take when investing. While some investment strategies such as property offer high returns with relatively low risks, others such as stocks or cryptocurrency could see you achieve massive profits at the high risk of losing money.
Decide what level of risk you are willing to tolerate before putting your money into any form of investment, as you may find yourself biting off more than you can chew otherwise.
With all that out of the way, let’s get into how best to invest £150k in the UK!
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£150k is a very flexible amount of money which opens up a range of investment opportunities for you.
Here are six types of investments which we think would suit this budget, and a range of investment goals and risk tolerances.
One of the most exciting investment strategies as we begin the new year is buy-to-let investment properties.
This strategy involves you owning properties you do not live in and renting them out to tenants, with the rental income acting as a consistent cash flow of passive income for you.
Rents have been rising steadily for several years now, with Homelet’s Rental Index reporting that rent across the UK rose by 9.4% in 2022. This means that you are likely to have more rental income as time goes on.
On top of this, properties will rise in value over time, so when it comes time to sell your investment property you will likely be in line for a substantial profit.
As an example, house prices in the UK rose by 12.6% from October 2021 to October 2022. This means if you bought a property for £150k in 2021, you would likely be able to sell it for £168,900 just a year later, bringing you nearly £20,000 of profit in just one year!
While you will need to pay Capital Gains Tax on this, it will still end up being a sizeable chunk of money in your pocket as an extra monthly income.
If you are wondering how to invest £150k for one year, buy-to-let property might be a better plan than you thought.
However, with the average price of property rising so rapidly, this investment strategy will likely take up the majority of your budget. If you are looking to diversify your investment portfolio right off the bat, this may not be for you.
That being said, there are bargains to be found. If you are interested in learning how to invest £150k in real estate, try looking at some of the best places to invest in the UK, which have prices far lower than the national average. Liverpool, for example, has an average property price of £180,049.
If you are savvy with how you invest in property, such as borrowing a buy-to-let mortgage or using a payment plan to spread out the cost of purchasing your investment, you can buy a property worth more than this using your initial budget of £150k.
Property also comes with a higher level of security than other forms of investment. As a physical asset, it is unlikely to see it lose value rapidly as liquid assets such as cryptocurrency might do. As such, it is a more secure investment strategy for those with a low risk tolerance.
The housing market has proven time and time again its ability to endure tough times where other forms of investment struggle, such as the 2008 financial crisis and the COVID-19 pandemic. After all, how often have you heard the phrase ‘safe as houses?’
With all of these benefits and very few negatives, it is easy to see why many view property as one of the best things to invest in right now, and you can easily find high-quality investment properties for sale with a budget of £150k or less.
Stocks have historically been one of the most popular methods of investing money and for good reason. There is potential to make some massive returns on the stock market, but also a high level of risk that you need to account for.
Buying stocks means buying a small fraction of a company’s ownership, and in return receiving an equal cut of the profits and assets of that company. For example, if you bought stocks worth 10% of a company, you would be entitled to 10% of the company’s earnings.
If a company’s stock rises in value based on how it performs, then you could see yourself able to make a lot of profit in a short time by selling your stocks at a higher value.
Alternatively, you can hold onto the stocks you buy and earn dividends from the companies you own stock. This is when they give you additional stocks based on their performance year-on-year.
To help avoid annoying taxes, you can set up a shares ISA with a bank or credit union. This allows you to store up to £20,000 in stocks and shares, without having to pay tax.
With a budget of £150k, you can establish a solid investment portfolio quickly by investing in multiple companies. This way, if one of them loses value, you are not at as high a risk of losing your money.
Large companies like Apple, Google and Amazon regularly perform well so their stocks are stable, but at a higher price. This stability means they are unlikely to rise drastically in value but means that you are not at massive risk by investing in them.
On the other hand, you can bet on smaller companies in the hopes that they strike gold and their stock rises in value. This is a riskier way of investing in stocks, but one that can have a massive upside if things go well.
It is worth noting that although there is the potential for great returns, stocks are a riskier option for investors. You need to keep an eye on the stock market as fluctuations happen fast, or hire a wealth manager to do the same, so you can pull your money out before you lose it.
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One of the newest and most exciting ways to invest money, cryptocurrency relies on innovative blockchain technology. They act as online digital assets spread out on networks across a large number of computers.
Unlike the Pound or Dollar, cryptocurrencies are not physical currencies, despite the name. Instead, they are decentralised online currencies, with no regulator or central issuing.
This gives them much more freedom than traditional currencies and means you can send and receive large amounts of crypto much faster than you could with regular money.
However, this deregulation has made crypto into something akin to the Wild West of investing. It is common to hear stories of people being scammed or becoming victims of fraud, losing lots of money with no security or way of recovering it.
This is one of the biggest differences between cryptocurrency and stocks, as the stock market is regulated by the Financial Conduct Authority to try and ensure fair play.
While crypto is gaining traction as a non-traditional way of investing money, the risks associated with it cannot be understated. In January 2023, US regulators issued their first-ever joint warning to banks, warning them to be cautious over potential fraud and hacks in the cryptocurrency market.
With that being said, crypto offers the opportunity to earn serious returns in a short period. Bitcoin, the largest, oldest and most well-known cryptocurrency currently has a value of £14,348.30 at the time of writing. In May 2016, it cost around £370. That is a growth of 3,651%, unlike any kind of growth you will find in most other investment strategies.
Other popular forms of crypto include Ethereum and Binance Coin, which are significantly cheaper than Bitcoin but offer similar levels of growth over time.
Much like stocks, you will need to keep up to date with how the crypto you choose to invest in is performing, as it can change in value quickly. Therefore it is not a hands-off investment, and you will likely need a powerful computer to accurately track how the price of crypto changes.
Many investors hold onto their crypto wallets for a long time, biding their time in hopes it strikes gold and shoots up in value. Others will sell their wallets when they begin to see growth, achieving smaller profits in a shorter timeframe. This way, it is a valid option for both short-term and long–term investors.
To summarise, cryptocurrency is a double-edged sword. On one hand, you can achieve returns that are both faster and larger than many other investment strategies. On the other, you can fall victim to fraud, hackers or the currency you chose to invest in crashing just as easily.
For those with an especially low-risk tolerance or investors who are undecided as to how they want to invest their money, savings accounts offer a secure alternative to other forms of investment. They are a kind of bank account designed for depositing large amounts of money long-term.
By depositing your money with a bank or credit union, you can rest easy knowing your money is safe and accruing interest over time. Savings accounts are a hands-free investment strategy which gives you peace of mind.
Savings accounts offer investors an investment option that for low amounts of money is tax-free, as you can get up to £5000 worth of interest tax-free, depending on your income. Naturally, if you are putting £150,000 into a savings account, you will need to pay tax on some interest that you accrue.
You can also deposit some of your £150k in a cash ISA, where you can store up to £20,000 tax-free per year. This goes across all types of ISA, so you could put £10k in a shares ISA and the other £10k in a cash ISA for example.
While this is a very safe way of investing, it is not likely to bring you much profit. The average interest rate of savings accounts in the UK is 0.22% APY. If you were to deposit £150k in savings accounts with this interest rate, after 5 years, you would only see a pre-tax profit of just over £1500.
This means they are not suited to long-term investment strategies, as it will take too long to achieve any real returns. While you can find accounts with higher interest levels, these might have a limit on how much you can deposit in them.
Instead, try and consider savings accounts as a short-term investment strategy to allow you to save for a big expense, or as a way of securing your money whilst you decide on a longer-term investment strategy.
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One of the riskier and more unregulated forms of investing money is peer-to-peer investing.
This is where you use your £150k set aside for investment to act as a lender, cutting out middlemen such as banks to directly lend money to other people.
The profit you make is the interest you will collect on repayments of the loan, and can be quite considerable depending on the interest rates you set. With no middle-man taking a cut of the interest, you will get the total amount as profit.
However, this can be quite a risky form of investing your money. If the borrower defaults on the loan or is unable to pay it back, you will either lose the money or face a troublesome legal battle to try and get back what is yours. This could lead to you spending even more money.
Peer-to-peer lending is not currently covered by the Financial Services Compensation Scheme, so you have no protection in case things go wrong.
With this in mind, it is probably best to diversify your investments by lending out smaller amounts of money to multiple borrowers as this is more likely to be paid back, or not to invest your entire budget into this investment strategy.
The final investment option we are going to take a look at is buying bonds. These are a way for companies and governments to raise funds quickly and can be useful if you are looking to diversify your portfolio.
There are two main types of bonds − corporate bonds and government bonds. Both act in the same way, but each has its advantages and disadvantages.
Government bonds are usually cheaper and more reliable than corporate ones, making them a good option for those looking for a safe investment.
However, corporate bonds are more likely to bring higher returns at a higher level of risk, so if you want something that will bring you more money, this would be the way to go.
Any bond will usually pay out a consistent and regular income, thanks to the interest payments you receive.
Premium bonds are the UK’s most popular form of investment, with more than 22 million saving more than £119 billion with this investment method. They are a low-risk, low-effort way of investing, which is good for diversification and beginners to investing.
Simply put, there is no single way to invest that will work for everyone. Even if you have the same investment fund as another investor, your goals, risk tolerances and experiences will change how you want to invest your money.
We believe property investment offers the best combination of high returns, security and affordability to fit the needs of most investors. If you are wondering how to invest £150k, this is probably going to be a good answer for you, if not the best.
However you choose to invest, remember to organise your personal funds and contact a financial advisor before you put your money anywhere.
Here at RWInvest, we have over 18 years of experience in the UK property investment market, and our dedicated teams work day and night to find our clients the best opportunities in the country.
Contact us today to find out about our range of investment opportunities!
If you want to learn more about different forms of investing, try reading our guide to 20 investments that will get you monthly income for more information about different ways of investing. If you have a slightly different budget available, we also have guides on how to invest other amounts of money, such as:
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