3 smart investment ideas for £100k

With £100k to invest, investors have plenty of options today. Here, Edward Sheldon highlights three ideas for this kind of money.

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Working out where to invest £100,000 isn’t easy. Today, investors are spoilt for choice when it comes to options. Here, I’m going to highlight three ideas for £100k. These are the kinds of assets I’d be considering if I was looking to invest this amount of money (for the long term) right now.

Financial goals

Before I look at the investment ideas, I want to stress that the first thing I’d do if I was planning to invest £100k (or any amount of money for that matter), is think about my financial goals and risk tolerance. These would impact my investment strategy.

Minimising tax

I’d also think about how to invest my money tax-efficiently. One way I could do this is by investing in a Stocks and Shares ISA. Within this type of account, all gains and income are tax-free.

Every adult in the UK has a £20k annual allowance, meaning that over two tax years, a couple could potentially invest £80k tax-free.

Another solid option for tax-efficient investing is a pension. Here, investment gains and income are tax-free too. Meanwhile, contributions come with tax relief.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A solid investment

As for the ideas, the first I want to highlight is investment funds. These are a solid option for a lot of investors because they provide diversified exposure to the stock market (the greatest wealth creation machine of all time) and tend to provide solid returns over the long term (returns are never guaranteed though).

If I was looking to invest £100k, I’d allocate some capital to both passive tracker funds (which simply track the market for a low fee) and actively-managed funds (which are managed by professional fund managers).

One fund I’d certainly invest in is Fundsmith Equity. It’s an actively-managed global equity fund with a fantastic track record.

Low-cost investing

Next, we have investment trusts. These are similar to funds but they are traded on the stock market like regular shares and often have very low annual fees.

There are investment trusts for growth, income, and everything in between.

One that’s popular with growth investors is Scottish Mortgage. It typically invests in disruptive technology companies. Over the last decade, it has done very well.

Meanwhile, one that’s favoured by income investors is Murray Income. It has registered nearly 50 consecutive dividend increases now and currently has a yield of around 4%.

Potential for big gains

My final idea for £100k is individual stocks. Investing in stocks directly has several advantages over investing in funds and trusts.

One is that investors have far more flexibility. They can invest in the companies they love, and avoid companies they don’t like.

Secondly, there’s potential for big gains. For example, investing $10,000 in Apple shares five years ago would now be worth close to $40,000.

On the downside, stocks are riskier than funds and trusts. However, risks can be reduced by investing in a range of different companies and holding them for the long term.

Building a portfolio

It’s worth pointing out that these three investment ideas aren’t mutually exclusive. They can be combined to build a top portfolio.

If I was investing £100k today, I’d be looking to incorporate all three in my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has positions in Apple, Scottish Mortgage Investment Trust Plc, and Fundsmith Equity. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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