Expert Tips: How to Invest Smart from £50 to £50K

Whether you’re looking to put £50 a month aside for a rainy day, or you’ve got a lump sum to invest, it’s important to make the right decision. In this Trading Education article, we take a look at financial expert Mark King’s investment tips from £50 to £50,000.

It’s not necessary to have huge amounts of cash to invest in forex. No matter whether you have a few pounds a month, or a windfall of several thousand, there’s no time like the present to start making your money work harder for you.

Looking at the long term, investing in the stock market will generally bring you a higher level of returns than possible from even the best savings accounts. For beginners, though, the key question is often, “how should I invest?”

To answer just that question, Mark put together four different investment situations and asked financial experts what they would do with the cash in each case. Hopefully, the answers will help people with all amounts of money and from any financial background start to plan for their and their family’s future.

You might also like: 8 Reasons to Start Investing Your Money

Of course, these are only hints and tips, and we can’t offer formal advice. If you are at all in doubt, make sure you seek independent financial advice from a qualified advisor to help you make the best decisions.

 

£50 a month

Never more so than if you’re starting with a few hard-earned pounds, where you should invest, when, and for how long depends on the level of risk you’re willing to take with your investment.

With monthly investments like this, it’s best if you can have a clear understanding of why you’re saving the money.

If you’re looking to build up a rainy day or emergency fund or trying to save up for a large purchase in three or five years, then a savings account or ISA is probably the right way to go.

The idea is to make regular cash deposits into an ISA, where all the interest paid will be tax-free.

Director of Candid Financial Advice, Justin Modray, reminds us that the golden rule doesn’t change, though, no matter the value of your investment: don’t take on more risk than you can handle.

One advantage of stock market investments is that they are – as a rule – less vulnerable to potential downturns that some of the alternatives. Monthly investing is also a good way to help smooth the potential ups and downs of the markets.

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£250 a month

According to Mr Modray, £250 a month is a large enough sum of money to begin diversifying your investment into a range of asset types which are less likely to all move in the same direction at the same moment in time. It’s also possible to add some extra safeguarding to your investments by combining low-cost stock market tracker investments managed in different styles. His key suggestion, though, is that at this level of funds you can begin to invest in the UK and overseas stock markets, as well as fixed interest and commercial property, with a view to generating a higher return.

Darius McDermott is the managing director of Chelsea Financial Services. He suggests that more cautious investors who might be making their first forays into assets other than straightforward cash look into a mix of more defensively managed UK equity income, alongside a targeted absolute return fund. Mr McDermott points out that equity income is a way of generating the potential extra returns that can come from exposure to stock markets, without the volatility of a more growth-oriented fund.

Whatever investment you go for it is, of course, important to review your fund choices at least yearly, and preferably every six months, to make sure that your money is always in the right place.

£10,000 lump sum

All of the experts that Mark spoke to agreed that risk is the most important thing to consider before deciding how to invest your £10,000. Mr McDermott suggests three questions which every investor should consider:

  1. How much risk are you prepared to take?
  2. What length of time are you investing for?
  3. What is the goal you are aiming to achieve?

According to Mr McDermott, a medium risk investor looking to grow their capital over 10 years would do well to consider a portfolio weighted 40% towards the UK, 20% in the United States, and 15% in Europe, with 5% spread across Asia, Japan, and other emerging markets and the final 10% set into so-called absolute return funds.

There was agreement, as well, among all our experts that investors' first port of call should be tax-efficient investment options. This includes making full use of your ISA allowance each year - you can save up to £20,000 - as well as considering pensions if you’re able to lock your funds away until you reach retirement age.

See also: Do Ordinary People Make Money from Online Trading?

 

£50,000 lump sum

According to Sheridan Adams, investment research manager at financial consultancy The Share Centre, how and where you should invest a lump sum of £50,000 depends on a number of factors including time, risk attitude, and whether you are aiming to achieve income, growth, or a bit of both.

Mr Connolly also adds that if you are not in possession of many, if any, other investments you should take a more cautious approach to risk, since a drop of 20% in your £50,000 investment (which is not at all unusual) would see your initial investment drop to just £40,000 or even less.

As with most experts, Mr Connolly advocates spreading your risk across different investments so as to protect your money. Putting some money in shares, some into property, and some into fixed interest funds is a good start, he says, especially if you then spread your risk in each of these asset types even further across different geographical regions, or sizes of business, for example.

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