Best way to invest £10,000 | What to do with £10k - Finder UK

Best way to invest £10,000

£10k has just fallen into your lap and you don't know what to do with it? We give you some ideas.

If you’re reading this, there’s a good chance you have £10,000. Lucky you! Maybe you’ve saved and squirrelled away and now are wondering what to do, maybe you got a generous bonus at work, won it on a scratch card, inherited it, got a compensation payout. It doesn’t matter how you got it, this guide’s about what to do now you have it.

There are a few obvious homes for £10,000: a new car or a luxury holiday. However it should give you pause for thought, £10,000 is money that can, to a small extent, change your life. Specifically, it can buy you protection in the event that you get ill, are made redundant or simply decide you hate your job and need a change; it can get you started on long-term investment; or it can be used to create an income that can give you a little extra each month or pay for much-needed repairs. Of course, you could blow it on a holiday, but it may be worth considering whether you could learn a few useful skills while you’re there.

Here are some smart ways you might consider spending £10,000.

Buy yourself peace of mind

Most financial advisers say that people need at least three, and preferably six, months’ worth of expenses in cash to see them through in the event of a rainy day. This gives them the flexibility to find a new job, retrain or just have a little breathing space if their career is disrupted. The pandemic has shown how important it is to have a plan B.

Unfortunately, as this needs to be in cash, there isn’t very much you can do with it. The rates on savings accounts are, universally, unexciting and you will struggle to find anything higher than 2%. Your aim, as far as possible, is to find an account that helps you stay ahead of inflation (currently running at 0.5%). This stops the real value of your capital falling over time.

Think robo

Rather than heading to some fusty stockbroker offices in Mayfair, investors can now get a similar-ish service via an app. The fusty stockbroker may beg to differ, but in practice, the fees are lower and in many cases, the financial outcome won’t be very different.

There are a lot springing up, so it can be worth sticking with those that have been around a while like Nutmeg, Moneyfarm or Wealthsimple. The beauty of these offerings is their simplicity. Usually, you just answer a series of questions about your age and plans for the future and it will give you an appropriate portfolio. In that respect, it is a good option for someone who doesn’t want to think too hard but wants their money to work a little harder than it would in a bank account.

Split it up

It can be tempting to think that all the money needs to be invested in one idea. However, it is a good strategy to split it up into three or four pots. One pot can be used to back your higher risk ideas – that artificial intelligence ETF, frontier market fund or micro-cap companies. Another can be used for more gentle options – a well-diversified global fund, for example, while the remainder can be in a safer option – perhaps cash or near-cash.

This is a sensible strategy for another reason. If you put all your money into one market in one go, you risk investing at the peak of the market only to watch it gently slide. All markets go through cycles. There are also strong behavioural reasons why this might happen. When investing, human beings tend to be reassured by following the crowd. If everyone else is investing in a particular area, it can seem like a good idea. Unfortunately, this will often be the peak of the market. Spreading your money into different pots avoids this problem.

Take a grown-up gap year (or month)

With a comfortable retirement looking more elusive for many, the “grown up gap year” has emerged as a way to travel, volunteer or retrain at a time when people are still young enough to enjoy it. A whole industry has emerged catering to this nascent market, offering options for sabbaticals or “golden gap years”, learning languages in remote corners of the globe.

While it can take a notable bite out of your finances, it can also be an opportunity to gather new skills, meet new people and see new countries. It is also the type of CV garnish that can impress employers, showing initiative and drive. However, the best ones tend to cost money. Go with a reputable organisation and you may come back energised, with a host of new accomplishments that can help your career.

Invest to create an income

£10,000 is not going to generate a life-changing amount of income. That said, the income available from a broad-based UK stock market investment would currently be a little over 4%. That’s significantly ahead of a savings account, giving you a tax-free £400 a year if you hold it in an ISA (which it is certainly worth doing). That’s half way to a decent holiday. You may get some uplift in the capital value as well if stock markets go your way, though you will be taking a risk that the capital value could fluctuate.

Not all investments pay an income, so you need to pick carefully. Index-tracking funds and ETFs, for example, may give you an income, but it will vary depending on the index they track. For example, the FTSE All Share and FTSE 100 tend to pay a relatively high income, while the US market tends to pay a lower income. In general, more established industries – think pharmaceuticals, industrials or mining – pay higher dividends to their shareholders, while areas such as technology pay lower dividends.

You can also choose an “equity income” fund. These are funds managed by a fund manager (rather than tracking an index) who will aim to pick companies that offer the best combination of income and capital growth potential. In each case, the fund factsheet should give you an idea about the historic yield of the fund.

Bottom line

£10,000 may not change your life, but it can help you take some tentative steps to build yourself a better financial future and if you leave it invested for long enough, it has the opportunity to grow into a significant amount. Consider the options that are available to you and don’t be afraid to divide the money into several different choices. Consider spending a little on yourself, too. We’re not saying you should blow the lot on a holiday, but you’ll be more motivated to do good with your money if you give yourself a little bit.

Compare trading platforms

Table: sorted by promoted deals first
Data updated regularly
Name Product Price per trade Frequent trader rate Platform fees Brand description
UK: £2.95
US: $3.95
EU: €3.95
Your first 100 trades are free with Fineco (T&Cs apply)
Fineco Bank is good for share traders and investors looking for a complete platform and wide offer. The minimum deposit with Fineco is £0. Capital at risk.
eToro Free Stocks
Capital at risk. 0% commission but other fees may apply. The minimum deposit with eToro is $200.
Hargreaves Lansdown Fund and Share Account
Hargreaves Lansdown is the UK's number one platform for private investors, with the depth of features you'd expect from an established platform. The minimum deposit with HL is £1. Capital at risk.
Degiro Share Dealing
UK: £1.75 + 0.014% (max £5)
US: €0.50 + $0.004 per share
Degiro is widely seen as one of the best low-cost share brokers, for people who are looking to trade regularly. The minimum deposit with Degiro is £0. Capital at risk.
interactive investor Trading Account
£7.99 (with one free trade per month)
£9.99 per month
Interactive Investor offers everything most investors need. Its flat fees makes it pricey for small portfolios, but cheap for big ones. The minimum deposit with ii is £0. Capital at risk.

Compare up to 4 providers

Data updated regularly
Name Product Minimum deposit Maximum annual fee Price per trade Brand description
Moneybox stocks and shares ISA
0.45% and £1 monthly subscription fee (free for first 3 months)
Moneybox offers a smart and simple way to invest. Sign up in minutes and start investing with £1 via their award-winning app. Capital at risk.
interactive investor stocks and shares ISA
Any lump sum or £25 a month
Interactive Investor offers everything most investors need. Its flat fees makes it pricey for small portfolios, but cheap for big ones. Capital at risk.
Nutmeg stocks and shares ISA
Nutmeg offers three types of portfolios. Choose the one that goes with your investment style. Capital at risk.
Hargreaves Lansdown stocks and shares ISA
Hargreaves Lansdown is the UK's biggest wealth manager. It's got everything you'll need, from beginners to experienced investors. Capital at risk.
InvestEngine stocks and shares ISA
Offer - £50 welcome bonus for new customers. Subject to minimum investment. T&Cs apply. Capital at risk.
Moneyfarm stocks and shares ISA
Moneyfarm helps you meet your investment goals with fully-managed portfolios designed around you. Capital at risk.
Fidelity Stocks and Shares ISA
£1000 or a regular savings plan from £50
Fidelity is another good all-rounder, offering a good package at a decent price. Not suited for trading shares. Capital at risk.
Legal & General stocks and shares ISA
Legal & General stocks and shares ISA
£100 or £20 a month
Legal & General is a big financial services company which offers insurance, lifetime mortgage, pensions and stocks and shares ISAs. Capital at risk.
AJ Bell Stocks and Shares ISA
AJ Bell is a good all-rounder for people who to choose between shares, funds, ISAs and pensions. Capital at risk.
Saxo Markets stocks and shares ISA
No minimum deposit requirement
Saxo Markets offers a wide access to a range of stocks, ETFs and funds. Capital at risk.

Compare up to 4 providers

Data updated regularly
Name Product Minimum investment Choose from Fee for a £50,000 pension pot Brand description
Interactive Investor Pension
Any lump sum or £25 a month
Over 3,000 funds
Annual fee: £239.88, fund fees: £50-500
interactive investor is a flat-fee platform, which makes it cost effective for larger portfolios. Capital at risk.
Moneyfarm Pension
£1,500 (initial investment)
7 funds
Moneyfarm has pensions that are matched against your risk appetite, goals and planned retirement date. Capital at risk.
AJ Bell Pension
Over 2,000 funds
Annual fee: £125, includes fund fees
AJ Bell has two different pension options, a self managed pension and one that is managed for you. Capital at risk.
PensionBee Pension
No minimum
9 funds
Annual fee: £250-475, includes fund fees
Pension Bee is a newbie in the pension market. It helps consolidate your pension plans into one place. Capital at risk.
Hargreaves Lansdown Pension
£100 or £25 a month
2,500 funds
Annual fee: £225 (£200 cap if holding shares), fund fees included
Hargreaves Lansdown is the UK's biggest wealth manager. It's got three different retirement options. Capital at risk.
Saxo Markets Pension
Saxo Markets Pension
Over 11,000 funds
No annual fee
Saxo Markets gives flexibility and control over your investment strategy. Capital at risk.
No minimum
4 portfolios
Annual fee: £375-455, fund fees included
Moneybox Pension
3 funds
Annual fee: £225, fund fee: £60
Manage your money with an easy-to-use Moneybox app. Capital at risk.

Compare up to 4 providers

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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