Is there a way to invest £5k in savings

[Aoap78]

As the title says, any options rather than just in bank account, that is actually worth it ?
TIA

Stocks & Share ISA.

Read this…

https://www.moneysavingexpert.com/savings/guide-to-funds/

and this:

https://www.vanguardinvestor.co.uk/investing-explained/index-tracker-funds

For any investment, consider where you are in your life, what your risk tolerance is and how much you are in a position to lose what you invest.

If you're near retirement you have less time to recover financially if the shares don't perform well than if you have decades of earning potential ahead of you.

A fund spreads your risk better than a single company stocks and shares ISA

a blue chip company tend to be more stable and predictable than a high risk biotech where the gains you can make could be significant but they are subject to fluctuations in value. A blend of low and high risk can give you a balanced portfolio.

Thank you for the replies, looking into the links. Mid 30s and wasn’t really in this type of position before.

Premium Bonds are worth a look at

It’s basically the first time that I have a bit set aside for which I can ask myself, is there a better way to manage than just sitting in bank account, if that makes sense - so it’s not the emergency fund or similar. But I guess I’m feeling a bit clueless therefore also.

If it makes any difference I rent and am trying to save towards a deposit.

If you are saving for a house, a LIsA makes most sense to make the most of the government top up. Open it now so you can deposit £4k before the end of the tax year and the remaining £1k in April.

What about a LISA? You can put £4k in straight away then wait for the next tax year to put in £1k. You get government bonus too. Take the money out for a house deposit or when you’re 60yo

Only invest if this is money you won’t need for 5+ years in case of market fluctuations.

A world tracker fund will diversify your risk for you. Once invested you need to hold your nerve if the market drops - losses aren’t real until you sell and an all world tracker will recover over time.

eg here is the performance graph for a Vanguard FTSE All World Exchange Traded Fund (ETF Tracker). If you had bought three months ago then by 15 December your investment would have been worth 2% less than you bought it for which might make you panic you’d done the wrong thing. But by today after 3 months it would be up 4%.

The same fund if you’d bought a year ago would now be worth 20% more. That is a much better return than 3% on a savings account.

The second way to diversify risk is to drip feed your money into the market over time so invest, say, £500 a month for 10 months instead of £5,000 all at once so you get the benefit of investing when markets drop and this smooths out the fluctuations of investing when the market is high. Although with the world uncertainty right now I might go all in if a fund is worth less now because of world events than a few weeks ago. That friends on your tolerance to risk.

Ah I posted before your buying a house comment. If you want to do this within 5 years then investing in the market is riskier as you want a 5+ year horizon ideally.

The 25% top up on a LISA is most likely your best option.

Thanks so much for the replies. Lots to read up on.

Perhaps the worst financial advice ever given out to an OP. Premium bonds are absolutely not the right option for the OP in this situation. A premium bond is literally a lottery ticket which stays in the monthly draw until you take out your money. It is likely to return less than the average savings account and is likely to be completed eroded by inflation.. It is ONLY worth considering if you’ve used up all your tax free savings options and you don't want to invest in the stock market or if you have some burning social desire to give below market rate finance to the government.

I agree - Premium Bonds give very poor returns

OP have a look at https://ukpersonal.finance/flowchart/ for what you need to consider in what order.

Perhaps look at a personal finance course or listen to podcasts - Meaningful Money is good and has a huge back catalogue - Season 25 (ish?) a year or two ago went through the flow chart in detail as to what you needed to consider at each step.

But as a prospective FTB, you need to save in a cash LISA and also make the most of your money (minimise bills, spend mindfully etc) so your money goes as far as possible. 'Investing' as such can wait for now, although you should consider what your pension looks like but you might be best prioritising your house deposit in the short term.

Thanks a lot, I think I do need to read up on this type of thing (when I said ‘invest’ I basically meant unsure of best return). Budgeting day to day part is fine though, all bills are minimised as much as possible.

LISA is the best return, 25% but you can only use as a house deposit
or retirement and nothing else.

This.

@Aoap78 are you planning to invest on a regular basis or is this a one time windfall that you're looking to grow?

Will you need access to the money at short notice? Are you likely to panic if your investments go down during a market crash or would you be willing to ride things out?

If you don't plan to make regular investments, avoiding ongoing charges would be desirable.

Most ISA providers charge either a management charge or a funds charge or both.

Interactive Investor charges a set monthly fee no matter how much you have invested - but you don't have a huge investment, so it might end up being quite high as a percentage of your holdings. They have free regular investments, which is good if you're investing each month.

AJ Bell charges a percentage of your holdings, but it's capped. They also charge a percentage of any funds holdings, but not for stocks and shares. They charge £1.50 for any regular investments.

iWeb (now Scottish Widows) are free to open an account. They have zero ongoing charges for stocks and shares. They charge £5 a trade, but don't offer a regular investment option. They charge a percentage for holding funds.

If you're planning to just buy a global tracker ETF (I invest in a legal & general ETF LGGG), iWeb might be best. You'd pay £5 to buy £5000 (which is 0.1%) and then you'd have no further ongoing platform charges. It could sit there for years and you wouldn't have fees eating away at your capital.

If you're planning to make monthly contributions, then Interactive Investor or AJ Bell might work out cheaper over the year. You'd have to work out the likely annual fees and make a decision.

This is the Global ETF that I invest in. The ongoing charge is 0.1% per annum, which is very competitive.

Op some already great advice already.

Just start ,great ideas so far vanguard etc...if your worried just put a grand in. See how it goes.

I will caveat this by first saying that I have held PB's since I was a baby and have had FH for many years..... I used to love them.
Now however, they are not giving anything like the returns they used to and for someone buying just £5k worth (I e. the OP), the chances of your money maintaining it's value are minimal.
Of course there is the chance you will win big but that chance is minimal and not worth relying on.
If you have enough spare money for FH, are able to accept the fact that you may not see a good return but want your money to be completely safe, easily accessible and for any winnings to be tax free, PB's may be for you

They really aren't. Premium bonds are not investments. There are some circumstances that they may be worth having e.g if you have used your full ISA allowance for the year and are a higher rate tax payer. Neither of these seem to apply to the OP. Even sitting in a normal savings account is likely to give far better return than 5K in premium bonds.
Really cant understand the obsession with Premium bonds on here.

Be careful with LISAs...it's been reported that quite a lot of people have found they have been caught out by the rules around this:

You'll have to pay the government withdrawal charge if you:

• Take the money out within 12 months of your first payment (12-month rule)
• Withdraw the money for anything other than your first home or for life after 60
• Use your lifetime ISA for a home above the property cap of £450,000 (or buy without a mortgage)

The withdrawal charge isn't even just the 25% bonus paid by the government, you actually end up worse off.

Premium bonds - dh has some (no idea how many) and in 50 years has received not a single penny from them.

I'd look into a standard ISA - either Stocks and Shares or Cash depending on how long you think you might leave it.

I wouldn't. The return isn't worth it. I've had PBs for years and haven't won a penny.