If you have a lump sum to invest, whether £1k, £5k, £10k or more, then lucky you. However, it is also a responsibility.
I’d avoid cash for a start
You need to find the right home for your money, one where it will grow in value over the long run. If you put it in a Cash ISA, you will get little interest these days, which means the value of your money will fall in real terms after inflation. This is not the place to build long-term wealth.
The gold price is rising, gaining around 15% last year, and you might consider that instead. However, gold does not pay any interest, so you are dependent purely on the price rising. The price has been driven higher by US-Iran tensions and concerns over the trade war with China, but if those worries recede, the price can fall back quickly, leaving you sitting on a loss.
Shares beat crypto-currencies
The price of Bitcoin doubled last year and is still growing, but I would be wary, because it is extremely volatile and could fall rapidly at any point.
Over the longer run, I would prefer to leave most of my wealth invested in stocks and shares, taking advantage of my annual £20k ISA allowance. This allows you to invest in thousands of individual company stocks and collective investment funds, and take all your capital growth and dividend income free of tax.
If I had £10k to invest today, I would consider putting £5k of it in a low-cost tracker fund, to get it to work right away. A FTSE 100 tracker spreads your money across the UK’s top 100 companies, giving you access to all the growth on the blue-chip index, as well as their dividends. Currently, the index yields an income of 4.34% a year, far better than you can get from a Cash ISA.
Alternatively, you could split your £5k between a FTSE 100 tracker and FTSE 250 tracker, which gives you access to the next 250 largest UK companies. If you want international exposure, consider a tracker following the US S&P 500 index.
Buy a balanced spread of shares
I would invest the remaining £5k in a spread of individual stocks, again using my Stocks and Shares ISA allowance. This gives you the opportunity to be in the stock market, and build your wealth faster over time.
I think now could be a good time to invest in the UK stock market, as the political uncertainty of the last three years or so is starting to lift. Global investors have been avoiding UK stock market due to Brexit fears, but now they may return in force.
Finding the right balance of stocks can take a bit of time, but this site can help. It is worth doing your research, because £10k is a lot of money. Invest wisely and it could soon be worth a lot more.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.