Originally published at: The best way to invest £10,000: A comprehensive guide to investing £10k – InvestEngine Insights
Whether you’ve received a lump sum or you’ve been saving for a while, having £10,000 in your savings account is commendable. With such a large sum, however, you’ll want to put it to work to avoid it being eaten away by inflation over time.
In this guide, we’ll explore why people might want to invest their hard-earned savings, as well as the best way to make sure that £10k is being put to good use.
Why invest instead of save £10,000?
So, you’ve managed to save £10,000. It can be tempting to leave the money in savings, but investing it also comes with a number of potential benefits over the long run.
Saving is secure, but the value of the cash is unlikely to significantly increase over time. When inflation runs high – and, depending on your bank’s interest rate, even when it doesn’t – the real value of your cash is diminished over time.
This is where investing offers one key benefit: the potential for higher returns. It does come with risks, but investing puts your money in a position to have a chance to outgrow your interest rate.
Is £10,000 a good amount to invest?
The short answer is yes, £10,000 is a great amount to invest with. Having this much means you can take full advantage of diversification and you could also see some significant returns if your strategy is sound.
Long-term investing is the key here. Over a long enough time frame, you can ride out any market fluctuations and aim for long-term growth. So, make sure you have a buffer (a rainy day fund) before you start investing, so that your £10k can be left to grow over time.
How to invest £10,000: the key steps
Understand your goals and circumstances
Your risk tolerance and your investment goals will shape your strategy.
For example, those with long time horizons will be able to take on more risk and aim for higher growth – they have more time to ride out any negative fluctuations. Those investing for shorter periods will favour a low-risk approach to avoid unfortunate market timing.
Other factors like your financial goals should also be taken into account. Are you targeting high growth and are comfortable taking on a little more risk to achieve it? Do you prefer a more slow and steady approach to your finances?
If you’re unsure, InvestEngine’s Managed portfolios will pair you with investments that are right for your circumstances. You just answer a few questions and we’ll do the rest, all for just 0.25% a year (ETF costs also apply).
Diversify your portfolio
Diversification is key to effective long-term investing. Naturally, when you invest £10,000, it involves risks. So, to minimise these risks as much as possible, investors can diversify their portfolios across different asset classes, geographies and industries.
Theoretically, this broad spread means that if one area of the portfolio performs poorly, another will perform well to balance those losses out. This is what many believe to be the key to long-term growth when investing.
Consider your fees
Like diversification, fees can have an enormous impact on the long-term value of your investments. Paying too much can mean having your returns eroded continually over time.
So, do your research before you start investing. Pick a provider that offers value for money as well as a powerful and easy-to-use platform. At InvestEngine, for example, our DIY portfolios are entirely commission-free so you can keep more of what you make in returns. Similarly, our Managed portfolios cost just 0.25% (plus ETF costs) per year, meaning you can enjoy all the benefits of expert management without the high costs.
Use your tax-free allowances
Investing in the UK comes with a couple of options to protect your returns from the taxman. The first is the ISA, a tax-free wrapper that means you can investing up to £20,000 each financial year and pay absolutely no tax on the returns.
Similarly, you can invest up to £60,000 each year (or your annual salary, whichever is lower) into a personal pension and benefit from generous tax relief. Pension contribution tax relief is a little more complex than that of an ISA, but you can read all about it in our guide here.
Use automation to your advantage
Investing has never been easier than it is today. In 2024, digital investment platforms allow you to invest easily and automate your regular top ups so you can focus on what’s important in life.
Take InvestEngine’s Savings Plans as an example – you can invest on a weekly, fortnightly or monthly basis from as little as £20 each time. The platform will also invest this cash automatically for you, based on the weightings you choose for your portfolio (or the portfolio we choose for you). This means you can set and forget your investments, while your portfolio keeps on ticking over in the background.
Invest with InvestEngine
At InvestEngine, we offer a range of investment options to suit your needs:
- ISAs: Tax-efficient savings for mid to long-term goals.
- General Investment Accounts: Flexible accounts for various investment strategies.
- SIPPs: Build a pension pot with control over your investments.
Start your investment journey today with InvestEngine and enjoy all the benefits of our award-winning platform. Your financial future is just a few clicks away – start investing today.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.