If you’ve £50,000 to invest, you’ve no shortage of options today. With that kind of money, you could potentially purchase real estate, buy gold bullion, invest in funds, or construct an impressive share portfolio.
Personally, I think a mix of investment funds and shares is your best bet. Not only do stocks have a brilliant long-term track record (the S&P 500 index has risen by about 10% per year since its inception in 1926) but they’re far less hassle and more liquid than both property and physical gold.
However, if you’re investing £50k in the stock market, you’ll want to be strategic about your approach to investing it. A few simple moves could make a big difference to your wealth over time.
Protect your gains
The first thing I’d think about when investing such an amount is trying to make it as tax-efficient as possible. The less of your money you hand over to the taxman, the more you keep for yourself, the wealthier you’ll be.
One of the easiest ways to invest tax-efficiently in the UK is the Stocks and Shares ISA. This enables you to invest £20,000 per year in stocks and funds entirely tax-free.
So what I’d do is to put £20,000 into a Stocks and Shares ISA in the current financial year (ending 5 April), followed by another £20,000 next financial year (6 April onwards), and then the remaining £10k the year after. That way, the entire amount could be invested on a tax-free basis.
Note that if you’re married, you could potentially put £20,000 into your ISA and another £20,000 into your spouse’s ISA this year, and then another £5,000 each next financial year to invest the £50,000 tax-free.
Diversify your exposure
Once the money is in a tax-efficient investment vehicle, the next step is to think about your asset allocation and investment mix. Here, the key is diversification. This goes for both funds and stocks. When you’re investing £50,000, risk management is crucial.
Now, everyone’s financial goals and risk tolerance are unique, so I can’t tell you exactly what to invest in. However, I can tell you that if I was investing £50k today, I’d want to have exposure to leading companies listed here in the UK, as well as top companies listed internationally.
To achieve this, I’d put together a portfolio that includes:
High-quality FTSE 100 companies for long-term growth and dividends
A mix of top mid-cap and small-cap UK stocks for higher growth
Top-performing global equity funds such as Fundsmith and Lindsell Train that invest in world-class businesses listed internationally
Specialist funds to capitalise on powerful trends, such as technological disruption
Finally, instead of investing the money all at once, I’d drip feed it into the funds and stocks over time. That way, the risk of investing a large sum at the top of the market would be minimised.
So, that’s my take on how to invest £50k in the UK. If you’re looking for more investment ideas, the free resources here at The Motley Fool could be a good place to start.
Edward Sheldon has a position in Fundsmith Equity and Lindsell Train Global Equity. Views expressed 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.