How would you invest £50k?

[springruns]

Just that really, I’ve come in to some money just over £50k which id like to invest.
we have a £240k left on our mortgage with affordable monthly payments so not looking at paying a chunk off. we have adequate savings and a large amount of disposable income each month so no holidays, home renovations or new cars needed.
We live North Yorkshire so investment property in the north east is an option but we are both higher earners (£70k each) so would 40% tax on an income from that unless we paid it in to our pensions.

When doing your rental calculations - don't assume you'll always have tenants to generate rental income.

I'd dump it in the mortgage to reduce the term, assuming I had some cash buffer liquidity in our rainy day fund for if we lost our jobs etc.

Also remember when the tenants wreck the place you need to find people to fix it and block out the time before you can move people back in - so you will have a month where you have to replace the carpets/paint/fix leaks/walls/kitchen cupboards where people won't be renting. It can take at least a month to get any deposit back at all and around that to get all of the trades lined up with dates they can do. If you have work on your house try to imagine that cost happening every year. Tenants often don't care that you just spent a few £k on new carpets and will happily leave an iron face down on it, dye their hair on it, paint nails on it; carpets are "wear and tear" so have to replace for every new tenant.

is this satire?

I would go for a combination of stocks and shares ISA ( invested in tracker funds, with a platform with low ish fees like Vanguard), and a bit of ‘pay more into your pension’.

i would absolutely avoid buy to let too.

50% in S&P 500, 50% in a Vanguard retirement investment fund. S&P 500 returned 8% interest to me last year.

Pension - nowhere else will you get the tax back. If not a lot in savings I'd probably put 10k in savings.

I'd stick it in Stocks and Shares ISAs or LISAs, on a low cost platform, invested in a low cost 100% global all-cap equity tracker fund.

I’d pay it off the mortgage. Clear debts first.

Premium Bonds.

S&S ISA if you’re sure you’re happy with your pensions (over a few years- just use a GIA until then). Lots to be said for having a bit of both pension and ISA (flexibility, being able to access at any age esp if you might retire early).

I wouldn’t touch BtL with a barge pole.

Er no, why would it be ?

How’s the tax 75%?

BTL is really difficult these days not great profits from rents and can be a lot of hassle from tenants.

If you haven't already I would max out ISAs and then fixed rate bonds, as high a rate as you can find or the same in an S&S, but markets are a bit unpredictable now and for the foreseeable future I think. Premium bonds for fun, regular small wins and the chance of a big win? Remember the FSCS protection limits if you already have savings in some banks and building societies.

As many have said, if you put it into your pension you're getting the best possible return as 40% taxpayers, however you won't be able to get at it until you're 58. If you're looking at more flexibility then go for a stocks and shares ISA with low fees in a global ETF. Mine have averaged around 11% return tax free over the past 5 years and no doubt many will have achieved better than that although they can of course go down as well as up. I'd put the remaining 30k into premium bonds and then drip feed into the ISA over the next 2 years (or use your partner's allowance). Anyone who has said you should overpay a mortgage at 2% is crackers, there are way better returns to be had. I would caution away from the investment property unless you are very very confident that you can add capital value with improvments- quite simply having profits taxed at 40% would put me off on its own. Good luck!

Max out your pension contributions if you’re certain you won’t need to access it before retirement age. Bear in mind, though, that the annual allowance is £60,000 for the current tax year (so make sure your regular contributions won’t exceed £10,000 if you plan to put in the whole pot).

If you’re left with residual funds after maxing pension contributions - or you are likely to want to access funds sooner than retirement age - then maxing ISA contributions would be more tax efficient than investing in property. Income is tax-free.

Absolutely would do a S&S ISA, fed in over a couple of years as explained by other posters.

Assuming a growth rate of 5% each year, which is quite conservative, your £50k would be worth around £81,000 in ten years time.

Whereas assuming a 2% interest rate, it would be worth basically £61,000 in ten years.

A 7% growth rate each year would give you £98,000 in ten years. This isn’t ridiculously optimistic - my S&S ISA has averaged a return of around 11% each year over about eight years.

There are obviously no guarantees with investing, but as long as you’re investing for the long term and using well-diversified funds, investing should beat savings rates.

You have to consider risk and volatility. Also the potential term of the investment.

Would you be comfortable with the fluctuations in value that stocks and shares will bring? Do you want to be able to access the monies?

Deposits will inevitably offer a below inflation level of growth so the capital will devalue. Stocks and shares will have a degree of risk but should outperform over the long-term.

If your mortgage was £190k it would be madness to suggest increasing it to £240k to have £50k to invest.

Repay the mortgage and pay the monthly savings into something with volatility. Then you will benefit from pound cost averaging. Alternatively keep paying the same mortgage payment to repay the debt quicker. This brings in options for early retirement as outgoings will sharply reduce at an earlier age.

This makes no sense. My mortgage is at 1.19%- if I could borrow more at this rate to invest with an average return of 11% then I absolutely would- it's just maths. Instead I'm paying the minimum and investing what I could potentially overpay- I'm about 15K up after three years on what I would have saved on the mortgage and this will likely go up due to compounding. If rates have gone up when I come to remortgage which they almost certainly will have done, then I will consider changing strategy, but a 2% mortgage is a gift in terms of leverage.

I’d stick it in the VWRL fund and forget about it for a while.

Hi OP - would you be buying the rental property with a mortgage?

I have a rental property and a good pension. I'm tax resident in two places by nature of citizenship and worry about what either will do for taxing me at any given year/ new government. Saying that, I'd probably do something less secure like crypto that I'd feel guilty about on my current income.

Wouldn't it be wonderful if we could all borrow money at 1% and get a return of 11% per annum. Surely everyone would do it as it is free money?

The reality is that the average mortgage rate is in the region of 5% and the 11% per annum is not guaranteed. In fact the investment could have several years with capital losses. How would you feel if the £50k invested dropped to under £40k?

Stocks and shares isa all day long

This is what we did when we inherited £40k from a share of a house sale 15 years ago. We carried in overpaying the mortgage and were mortgage free around 45. We now pay into stocks and shares isas and fixed term savings accounts plus premium bonds .

You'd still have to pay tax on the profits before you could pay into your pension.