Where should I invest my money?

So many types of investments to choose from: how do you narrow down the field and decide who gets to hold onto your money?

Start with the key questions:

Why am I investing?

Everyone wants their money to grow, rather than languish earning almost-nothing in a savings account. But being clear about your investment purpose will help you identify suitable investment products for you.

For example: are you saving money for your retirement, or wanting to build up the deposit for a house?

How much risk do I feel comfortable with?

No-one wants to throw their money away. But if you understand that the greatest gains come with the greater risks, and then ask yourself:

  • How will I feel in 5 years’ time if this investment hasn’t made a significant return?
  • How will I feel in 5 years’ time if I actually get back less than I invested?

How long can I invest for?

The longer you can leave your money in an investment, the more chance it has to recover from short-term fluctuations. Five years should be a minimum, 10 years is better.

Stick with the 3 Golden Rules of investing

  • Spread your risk. It’s tempting to put all your eggs in one most-promising basket. But professional advisors and experienced DIY investors will always tell you to diversify your investments across different companies or different investment funds, across different types of business, and in different world markets.
  • Take the long view. You need to invest for at least five years in order to see good returns. You need to expect that there will be short-term fluctuations in value, and prepared to ride them out.
  • Be prepared to change your mind. Don’t just decide on your investment strategy and then leave it frozen in time. Investments are dynamic; international markets change. If a stock you’re holding is performing consistently badly you may need to sell out, take the loss and still have time to reinvest and make a decent return.

 1I don’t want to pay tax on investment income

2 I want to manage my investments myself

3 I want to pay someone more experienced to manage my funds

4 I want my money to earn as much as possible along the way

5 I want maximum capital growth

6 I need my money to be safe

7 I want to invest long-term

8 I want to get into the stock market

9 I want to invest directly in businesses

10 I want to invest ethically

1. I don’t want to pay tax on investment income

Everyone should always make use of their annual £20,000 tax-free ISA (Individual Savings Account) allowance first.

These aren’t just savings accounts. You can spread that £20,000 across a range of investments within an ISA “wrapper,” including instant-access and a range of stocks-and-bonds ISAs:

Property ISAs

Investment ISAs

Income ISAs

Fund ISAs

Stocks & Shares ISAs

Lifetime ISAs

2. I want to manage my investments myself

If you don’t want to pay fund management fees and you’re reasonably confident about your understanding of stocks and bonds, this could be the route for you, if:

  • You understand risk, and how the stock market works
  • You have the time to be actively managing your investments

DIY fund management platforms

3. I want to pay someone more experienced to manage my funds

If you’re a new investor, and you’re not confident about your depth of market knowledge, you will probably want to consider:

  • Saving the time it should take you to manage your investments
  • Paying a management fee to have your funds managed by an experienced fund manager

Managed fund platforms

4. I want my money to earn as much as possible along the way

Everyone wants their investments to make as much money as possible. But if you understand that as a rule of thumb you don’t get higher yields on income bearing investments without taking on greater investment risk, you’ll appreciate this is an important calculation you need to make for yourself.

  • Stick with the 3 golden rules and spread your risk.

Investments focused on high income

5. I want maximum capital growth

As with investments that pay a high income.

  • Again, you’ll need to consider how much risk you’re prepared to take on.
  • Consider the warnings: your capital may be at risk.

Investments focused on growth

6. I need my money to be safe

If you can’t afford to lose any of your capital you’ll be looking for more conservative investments.

Your money will earn less, but you’ll never get back less than you put in.

These are lower-risk investments:

structured deposits

savings accounts

cash ISAs

7. I want to invest long-term

You may just want to apply a longer investment term to the mix of funds you’re considering (following the 3 Golden Rules).

Or you may be particularly interested in pension products, and the specific advantages they can offer.

In a personal pension package your investment can be managed for you:
personal pensions

If you want to manage your own pension fund you would probably choose a SIPP (Self Invested Personal Pension):


8. I want to get into the stock market

You may want to invest additional funds in stocks and shares, beyond the holdings you’ve already invested in the stock market under the umbrella of an ISA.

You can have your investment portfolio managed for you:

managed funds

Or you can actively manage your stock holdings yourself via an online platform:

self-managed funds

9. I want to invest directly in businesses

If you want to “cut out the middleman” and put your money to work directly funding businesses that look promising, you might be interested in the hands-on approach of peer-to-peer (P2P) lending:

P2P investment

10. I want to invest ethically

Increasing numbers of investors are choosing to use the power of their money to support their own ethical choices, by investing in funds that are driven by a range of ethical commitments:

ethical investments

Important Risk Information:

This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.

Different types of investment carry different levels of risk and may not be suitable for all investors. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Written by Jennifer Stevenson ,
2nd July 2019