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Want to know how to invest £10,000? The stock market can offer much higher returns than leaving it in a savings account.

While you should make sure you have an emergency fund of between three and six months’ earnings, after that you might want to consider investing.

In this article we explain:

  • What to consider before investing
  • The best way to invest £10,000
  • Where is the best place to put £10,000?
  • How to invest £10,000 wisely
  • Ways to spread investment risk
  • How do you double up £10,000?
  • Checklist for investing £10,000
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Investing a lump sum – rather than keeping it in a bank account – can help your money grow faster

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Should I invest?

The decision to invest will depend on what else is going on in your life, so here are some things you should think about:

If investing ticks the boxes, read on.

Is £10,000 a good investment amount?

Yes, £10,000 is a good amount to invest. But you should be prepared to leave your money invested for at least five years.

This will give it enough chance to grow.

Learn more: Beginner’s guide to investing

What is the best way to invest money?

To get a decent return, you should invest for at least five years.

The longer you invest your £10,000, the longer you have to:

  1. Accrue returns on your investment portfolio
  2. Ride out any market downturns
  3. Let your returns compound (grow in a snowball effect over time as returns get reinvested)

Saving towards a goal like retirement (20 years or longer) is classed as a long-term investment.

Find out: How to invest £50,000

Where should I invest £10,000?

You should use a tax-efficient wrapper to protect your investment returns from the taxman.

There are different types of tax-free financial products for you to consider, such as:

Within these products, you would then choose what to invest in. Here are tips on how to choose investment funds.

Where is the best place to put £10,000?

If you are investing money for the short term (of five to ten years), one of the best ways to invest £10,000 is in a stocks and shares ISA.

Otherwise, the best way to invest £10,000 for the long term is in a pension. It comes with substantial tax perks that will increase your pot size.

Invest £10,000 in a pension and you get tax relief from the government, as well as free cash from employers for those in workplace pension schemes.

You can’t get your hands on a pension until you are 55 (rising to 57 in 2028). Check out our Pensions guide for more on this.

If you’re self-employed, consider a self-invested personal pension or ready-made personal pension. Ask your pension provider if you’re allowed to increase your contribution, or even pay a one-off sum into it.

Find out: How to invest £50,000

Top rated ready-made personal pensions

Our independent star ratings highlight the cheapest ready-made personal pensions

Vanguard

Vanguard Asset Management

Vanguard Target Retirement portfolio

Halifax

Halifax

Halifax portfolio

Fidelity

Fidelity Personal Investing

Fidelity Personal Investing Cost Focus portfolio

How to invest £10,000 wisely

Invest according to your attitude to risk. To work this out you need to consider your “capacity for loss” and your “risk appetite”.

  • Capacity for loss = how much you can afford to lose
  • Risk appetite = how you feel about losing money

You should ask yourself these questions first:

  1. Are you happy for your £10,000 investment to fall in value every now and then?
  2. Do you want higher returns compared to if you’d left your money in cash?
  3. Can you resist the urge to panic and sell your investment if it falls below what you paid for it?

If you answered yes to the above, it sounds like you would be comfortable investing.

How to spread investment risk

Many investment experts recommend a 60/40 mix. That is an investment portfolio invested 60% in equities (company shares) and 40% in bonds.

For higher returns the best investment for £10,000 are shares or equity funds (which are made up of shares). Remember these are higher risk than bonds.

The best way to invest £10,000 is to diversify it across:

  • Different asset classes: like shares and bonds
  • Different sectors and countries: developing countries (for example China) are higher risk than developed countries (like the UK)

Spreading your investments this way can help level out any fluctuations or falls in prices, so you weather the bad times and benefit from the good.

One of the best ways to invest money in a diversified way is as a lump sum in a single, cheap multi-asset investment fund.

Find out more: our five-part beginners course to investing

Which ISA is right for me?

ISAs work best when you pick the right one for your savings goal. Take this short survey to find out which ISA is right for you.

  • It only takes a couple of minutes
  • No personal details required

Types of investment

Shares

This is where you buy a piece of a company. You earn money when:

  • The value of your shares go up, if the company does well
  • Or by receiving a portion of the profits that these companies make, known as dividends

Find out more: How to buy shares

Investment funds

Investment funds are a pool shares that are chosen and managed by a fund manager. They will offer a mix of investments.

Find out: How to choose investment funds

Bonds

You lend a lump sum to a company or country. You will be paid a set amount at the end of the period, when the bond “matures”, as well as regular interest payments known as coupons.

Bonds are considered lower-risk than shares.

Other traditional asset classes

You could also invest smaller amounts in other asset types, such as:

  1. Property: property funds may own or invest in offices, warehouses and shopping centres, for example, or shares in property companies such as housebuilders.
  2. Cash: you may want to hold a small amount of cash in your investment portfolio. Make sure you choose the best savings account in 2021 with our ratings.
  3. Precious metals: precious metal investments can help diversify your portfolio (if stock markets fall, you may find that the price of gold rises) . You can invest via an exchange traded fund, which tracks the price, or via a fund.

Find out more: our guide to investment trends 2021

Are Premium Bonds a good investment?

You won’t earn interest on your £10,000 but there is instead a monthly prize draw for tax-free prizes of up to £1m.

Find out more: Are Premium Bonds a good investment?

How can I invest ethically?

If you don’t want to invest in companies involved in industries like gambling, tobacco or alcohol production, consider ethical investing.

Find out more: our guide to ethical investing and vegan ethical investing 

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You can choose to invest more in line with your ethical values

How do you double up £10,000?

The best way to double £10,000 is slow and steady, rather than trying to get rich quickly.

Consider what returns you are looking to make and over what time period – but be realistic, you’re unlikely to double £10,000 in a year or two.

As tempting as it may be when you see some of the promised rates of returns on high-risk products or the rise of bitcoin, these are best avoided unless you absolutely know the risks and are happy to take them on.

Find out more: Should you invest in bitcoin?

Can you turn £10k into £100k?

Yes, this is possible. However, it’s highly unlikely you could make £10,000 turn into £100,000 in a short amount of time.

The key here is to remain invested for a long period of time and invest in assets with a high chance of return (like shares) in order to grow your pot to £100,000.

Another tip to consider is to drip feed money into your pot over time to give it the best chance of growing.

Find out: Beginner’s guide to investing

The best way to invest £10,000 in property

You could put a £10,000 windfall towards a deposit to buy a property.

But if you’re looking to invest in property as a buy-to-let landlord, £10,000 probably isn’t enough.

Property funds could be an option. Fund managers buy up properties then pass on the income and capital growth to the investors who buy into those funds.

Most property funds invest in commercial property, such as retail parks and office blocks.

Find out more in our guide to property investment

DIY or ready-made?

Do you want to pick your own investments, or let a fund manager do it for you?

DIY: This approach is really for those who are confident enough to buy and sell investments themselves. You can choose your own shares or pick a fund.

Robo-advisers: Platforms like Nutmeg* or Wealthify, so-called robo-advisers, will make all the decisions on how to invest for you. You just have to briefly outline your timeframe, risk profile and investment goals.

Robo-advice can be one of the best ways to invest £10,000 because it is cheaper than the DIY approach.

Find out more: Best robo-advisers

Top rated fund & share accounts (for high frequency trading)

Vanguard

Vanguard Asset Management

General Account

Santander

Santander

Investment Account

Barclays

Barclays

Investment Account

How to review your investments

Markets go up and down, so investors should check their portfolio occasionally. But only make alterations if their circumstances change, or to rebalance their portfolio.

Rebalancing might mean buying more shares when stock markets fall to be in a position to benefit when markets bounce back.

Find out more: Investing for beginners course: module one

Is it worth paying a financial adviser?

A financial adviser would rebalance your investments for you. Advisers charge a fee, but the advice should be worth it in the long run.

Unbiased.co.uk is a good place to find independent financial advisers, or ask friends and family for their recommendations.

Find out: How much does financial advice cost – and is it worth it?

Checklist for investing £10,000

  1. Know your goals – Are you investing £10K for the long-term, perhaps for retirement, or a short term saving like for a house deposit?
  2. Do your homework – Have a look at the track record of the fund manager or investment platform you are considering using
  3. Check the costs – Platform fees and fund costs are one of the few things investors can control. Every pound you pay in fees is a pound less for your investment to earn a return.
    • According to Vanguard, if you invested your £10,000 for 30 years, and at a 2% fee, assuming investment growth of 5% a year, you would end up with just over £24,270.
    • With a 0.5% fee the fund would be worth over 50% more at £37,450.
    • Watch out for early exit charges to access money within a few years of investing. These can run into the hundreds of pounds.
  4. Invest tax efficiently – Pay into an ISA and you’re free from income and capital gains tax. Pay into a personal pension and you get tax back from HM Revenue & Customs. A workplace pension gets you three bites at the cherry: you contribute and it gets topped up by both your employer and the taxman.
  5. Diversify – Spreading your cash across different asset classes, sectors and countries, you can help level out any fluctuations in prices.
  6. Keep it simple – A well-diversified portfolio of shares and bonds is all most investors need.
  7. Keep a calm head – Investors have to manage their emotions. Once you’ve set up your low-cost, diversified portfolio, it is a matter of being patient and staying the course.

Should I save or invest?

If you are concerned about the risk involved with investing £10,000, remember most banks offer paltry rates on savings accounts below the rate of inflation.

Regular savings accounts tend to offer higher interest rates than fixed or easy access savings account. So you could trickle some of your £10,000 into an account each month.

Find out more: Should I invest in a cash ISA or stocks and shares ISA?

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