{"id":305648,"date":"2020-05-07T15:18:51","date_gmt":"2020-05-07T14:18:51","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=305648"},"modified":"2024-12-19T07:55:48","modified_gmt":"2024-12-19T07:55:48","slug":"how-to-invest-100000","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/share-trading\/share-trading-guides\/how-to-invest-100000","title":{"rendered":"How to invest \u00a3100,000"},"content":{"rendered":"

Before you invest, think about it<\/h3>

Before you start investing<\/a>, you should have a firm idea of why you are doing so. Many investors start without any understanding of their overall financial goals, which can lead to poor investing decisions down the line. \u00a3100,000 is a lot of money, and if invested correctly, can make a significant difference to your financial situation, and even serve as a source of income.<\/p>

Having a clear plan about what you want to get out of your investments will make it a lot easier for you to recognise when (or if) you should be taking profit, when you should be reinvesting, and when to rebalance your portfolio. More importantly, it will help determine the types of investments that are most likely to help you reach your financial goals.<\/p>

Before you start investing, you should keep the following in mind:<\/p>

  1. Financial goals.<\/strong> Is this money meant to fund your retirement, go towards purchasing a house, or are you looking to use your investments as an ongoing source of income? Having a clearly defined financial goal is the central guiding factor when it comes to investing your money correctly.<\/li>
  2. Expected return on investment.<\/strong> Are you looking to get a steady, reliable return or happy to take bigger investment risks<\/a> in the pursuit of higher returns? Some forms of investing may offer guaranteed but lower yielding profits, whereas others offer substantially higher potential gains, but also the chance that you may lose money.<\/li>
  3. Your risk appetite.<\/strong> More risk can get you higher returns, but you\u2019re also more likely to lose your money. A lot of providers have a quiz that takes you through your knowledge and experience in investing which often gives you an inkling of what risk profile you ought to go for. It can feel a bit of a faff answering a bunch of questions with loads of words you don\u2019t recognise, but these are pretty helpful. Also, don\u2019t just decide to go with the riskiest option just because you want to make the most out of your money. Do research first and get an idea of how much money you\u2019d realistically be willing to lose.<\/li>
  4. Timeframe.<\/strong> Are you investing for the short or long term? If you\u2019re likely to need access to the money in the near future, you\u2019ll probably want to avoid riskier investments, whereas if you\u2019re investing \u00a3100,000 for your retirement, you\u2019ll be less exposed to short-term fluctuations in asset classes like stocks and property.<\/li>
  5. Personal circumstances.<\/strong> If you have a family or dependants who rely on your income, you may want to be cautious with how you invest your money. While it may not seem significant at the moment, a change in your personal situation can have a big impact on how you view your money. For example, if you lost your job tomorrow and would then need to rely on the \u00a3100,000 to cover your living expenses, it would be irresponsible to lock it up in a long-term bond that you then can\u2019t touch.<\/li><\/ol>

    Getting independent financial advice<\/h4>

    It can be daunting to know what to do with such a large sum of money, so it\u2019s probably worth speaking to a financial adviser before you start investing \u00a3100,000. There are platforms that offer advice with their packages or for an additional cost, like Hargreaves Lansdown<\/a>, Nutmeg<\/a> and Moneyfarm<\/a>.<\/p>

    Financial advisers will be able to help you make decisions as they can offer personalised advice. While it can be easy to find general investing advice, it\u2019s unlikely to be perfectly aligned with your own financial and personal situation and investing goals.<\/p>

    By seeking independent advice from a financial planner, you\u2019ll be able to get tailored advice that may better help you reach your financial goals. You can also hire financial advisers to manage your investments for you if you\u2019d prefer not to have to do it yourself.<\/p>

    Best types of investments for \u00a3100,000<\/h3>

    When it comes to investing \u00a3100,000, there\u2019s a huge range of asset classes that you can choose to invest in. All offer potential benefits and drawbacks, and deciding on which type of investment best suits you will largely depend on the factors listed above. We\u2019ve detailed some of the most common investment assets below:<\/p>

    1. Equities (stocks and shares)<\/h4>

    One of the most popular retail investment vehicles is buying company stocks or shares<\/a>. When you buy shares in a company, you\u2019re effectively buying a small portion of the company. Depending on how the company performs, its share price will go up or down over time. If it goes up, you make a profit on your investment, if it goes down, you lose money.<\/p>

    When it comes to investing in stocks and shares, you have three main options:<\/p>

    Trading account. <\/strong>Opening a trading account<\/a> is the most straightforward way to invest in stocks. Once you\u2019ve found a broker or trading platform<\/a> you want to use, you\u2019ll need to create an account and deposit funds in order to start trading.<\/p>

    Stocks and shares ISA. <\/strong> Also known as an individual savings account, a stocks and shares ISA<\/a> lets you buy and sell stocks as you would with a general trading account, but you won\u2019t have to pay tax on any profits you make.<\/p>

    Pension. <\/strong>A self-invested personal pension<\/a> (SIPP) lets you invest your income or savings in order to save for retirement. While you won\u2019t be able to touch the money in your SIPP until you reach retirement age, you\u2019ll benefit from government tax contributions in the meantime.<\/p>

    Build (or choose) a portfolio<\/h4>

    One of the best ways to manage your risk and reward balance is to build a diversified investment portfolio. A portfolio is basically just a collection of investments, and you can either build your own from scratch, invest in a pre-built portfolio, or use the information in a pre-built portfolio to create a personalised version.<\/p>

    Many pre-built portfolios are diversified. This means that they have a variety of different types of assets that carry different amounts of risk. Think of it like throwing a Van Gogh (pretty wild in the art world) into your portfolio as well as a (maybe safer) Leonardo Da Vinci piece. It just means not putting all your eggs in the same basket.<\/p>

    Choose a low-fee option (big tip!)<\/h4>

    One of the hidden dangers of investing large amounts of money is the erosion of your capital due to fees, whether it\u2019s account fees, trading fees or fund fees. Even a small reduction in your fees can mean a huge difference in your overall profits, especially over the long-term.<\/p>

    Research by the London Business School found that a portfolio with an annual fee of 2.1% would return 35.5% less over a 40 year period than the same portfolio with a 0.5% fee. When it comes to investing \u00a3100,000, this could mean a difference of tens-of-thousands of pounds.<\/p>

    2. Commodities<\/h4>

    You may also want to consider investing in commodities<\/a> like oil<\/a> or gold<\/a>, either directly, via exchange-traded funds<\/a>, or using derivatives like futures contracts<\/a>.<\/p>

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