So, you find yourself with a spare £250,000, and you’re wondering how to make the most of it.
While it’s tempting to splurge on a lavish holiday or a new car, this is a life-changing amount of money, which if invested wisely can set you and your family up for a more secure future.
Everyone’s financial situation is different, but a mix of investments can be the best way to diversify your portfolio, reduce your exposure to risk and maximise your returns.
Here we’ll give you a quick overview of 4 potential ways to invest this amount.
1. Cash ISAs
A positive effect of high interest rates is that savings rates are currently at an all-time high. Cash ISAs are a great way to set aside an amount of up to £20,000 per year. Essentially, they’re just like savings accounts and there are a variety of options available. There are easy access ones where you can withdraw whenever you want, and fixed rate ones where the interest is guaranteed if you lock away your cash for a set period. Unlike other types of investments, they’re quick and easy to open, risk free, the interest is tax free – perfect if you’re a higher rate taxpayer with other savings, and there’s no capital gains tax to pay. They’re a great place to store money as an emergency fund or if you’ll need it in the short term.
2. A SIPP
A Self-Invested Personal Pension (SIPP) is another tax-efficient way of saving money. Operating alongside your workplace pension, or as a standalone, if you’re self-employed, a SIPP allows you to invest in a range of assets – shares, funds, gilts and bonds. You have flexibility over the investments you choose, however, this does mean you will need to be tech-savvy and have some investing knowledge, although there are some robo-advisors which can do the hard work for you. You can contribute up to £60k per year and this is topped up by a minimum of 20% by the taxman, depending on your tax bracket. Similar to a regular pension, it can only be accessed from the age of 55 (rising to 57 in 2028).
3. Investment Funds
Investment funds are a great way to invest in the stock market, without buying individual shares, which can be risky if you don’t know what you’re doing. They are a great investment option for the long term, as they allow you to ride out any fluctuations in the market. Funds often include a variety of shares or assets, often based around a particular theme, such as European markets. They can be either actively or passively managed, with a fund manager doing the hard work. Many investors choose to invest in index funds, such as those which track the FTSE 100, as they have historically provided competitive returns over the long term. By investing in a stocks and shares ISA, with a yearly allowance of £20,000, you are eligible for some tax advantages meaning you don’t pay capital gains or other taxes which are often charged on investments.
4. Investing in Property
Investing in property has long been known as the way to generate long term wealth and is the investment of choice for the wealthy. Why? Because with well-chosen properties, you can enjoy predictable cash flow, excellent returns, tax advantages and the ability to leverage your property to further build your wealth. With a national housing shortage, buyers struggling to get on the property ladder and rental demand soaring, investing in buy-to-let properties will not be going out of fashion any time soon. With the help of a good team, investing in property can be a hands-off process, allowing you to benefit from a monthly passive income and be able to increase your wealth over the long term as your property appreciates in value.
As you can see, there are a variety of different investment options available to you but which one you choose will depend on your financial goals, your timeline and your risk tolerance. Once you have figured this out, you will then be able to make a more comfortable decision.
And remember, this is not financial advice. It is crucial that you conduct your own thorough research and seek professional advice when required.
If you want to find out more information on your property investment options, then why not talk to us on WhatsApp? We can chat through your financial goals and see if investing in buy-to-let property is for you. We can even discuss how our hands-free, end to end service could help you get there.
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