How would you invest £5-10k

[AlexaShutUp]

I am very bad at managing my money effectively (adhd) but earn well, have paid off mortgage and have decent savings.

I have a fairly substantial amount of money sitting in my current account at present, and I'm aware that it isn't really doing anything for me there. I want to retain some funds in the current account as a financial buffer for unexpected costs etc, but I want to invest around £5-10k in something with a slightly better return.

I'm pretty risk averse, so not looking for high returns. Just something better than my current account.

I already have an ISA but don't pay into it regularly. Should I? I also have a so called high interest savings account but the interest is pretty crap tbh. Have wondered about premium bonds? Or private pension? (I am currently only paying 6% into my work pension as this is all that my employer will match, but I do have a decent chunk of pension from my previous employment when I was in a very generous final salary scheme).

If I only invested £5k - £10k, I wouldn't need to worry about instant access. I could potentially invest more if I knew that I could lay my hands on the money straight away if needed.

Does anyone have any advice or suggestions for me?

I would use a S&S ISA so the money is still accessible, and that the growth is tax free.

I would use a very simple fund within the S&S ISA whilst you learn about investing. Something from the Vanguard LifeStrategy range, or Blackrock MyMap range. These funds of funds are useful as they have large number of stocks within them and the fund manager is rebalancing the fund so it stays within it's defined bond to equities proportions. They are also quite low cost, often under 0.3% fund fee.

For a small amount like £5-10k you want to use a percentage based platform, so they charge a fee based on how much your investment is worth. So if their fee was 0.15% and your investment was £10,000 then the platform fee would be £15. In reality you will pay a bit differently to this as fees are typically paid every 3 months and I think are calculated daily, not once per year.

Vanguard Investor and Hargreaves Lansdown are two of many percentage based platforms.

Investments are long term, you want to avoid accessing them for at least 5 years. Within an ISA you can access them whenever you like but you lock in a loss if you sell the investment when it's value is less than you paid. A withdrawal from a S&S ISA can take a couple of weeks, it's not instant, as the units in the funds need to be sold, then that money needs to come to the platform, then the platform needs to get the money to you.

You could also look at paying more in to pension, which gets the benefit of tax relief, but that locks away the money until retirement age.

Some books that might help:
The Meaningful Money Handbook - by Pete Matthew
The Simple Path To Wealth - by JL Collins
How To Own The World - by Andrew Craig

Why would you need to lay your hands on the money quickly?

Do not invest your emergency fund. Have a pile of money in instant access savings, for those little and big emergencies that may come up in your life. 6 months of expenses is not a bad figure to go for. I have a bit more than that as it makes me more comfortable.
Your emergency fund is like your weighted blanket - it helps you sleep at night, lower anxiety. Think of it as being insurance, it costs you - little to no interest rate so it loses against inflation.

Money beyond the emergency fund you can invest, knowing you won't need it for many years. Getting started is the hardest thing, try not to spend too much time wondering about what platform, what fund. Just get started and then see how it goes. Avoid day trading!
Something nice and simple... personally I use a Vanguard Lifestrategy 80% equity fund. It has been a bit up and down, especially recently, but then has the whole market.

Looking at a chart you can see that the trend is generally in an upwards direction: www.trustnet.com/factsheets/o/acdt/vanguard-lifestrategy-80-equity-a
There was a big drop in March 2020 and there was a small drop in March 2022. Think of it like a rollercoaster, it goes up and down and as long as you hold on you get to the end. Avoid selling when it goes down.

Thanks. To be clear, it wouldn't be my emergency fund as such that I would be investing - I would still have enough set aside to cover a generous 6 months or so of living costs. I don't actually know why I would want to know that I could access most of my savings quickly if I needed to...just my risk averse nature, I suppose, and some sort of deep seated fear of not having enough if some sort of expensive emergency arose? Maybe it's best to start small with £5-10k that I know I'm unlikely to need in the short to medium term.

I will have a look at the suggestions made above, thank you. Will also look at the books that have been mentioned.

Yes, start small.
You could open an account for say £500 and then set it up such that you automatically put in £200 a month. You could then increase the monthly amount after say 3 months, and then increase it again after another 3 months, and keep going like that until you get to a point where you are confident that you understand how it works.

Being an ISA, you can always take money out again. It's not locked away, unlike a SIPP (Self Invested Personal Pension) or your workplace pension.

If you like Podcasts, YouTube videos, there are many good ones about starting to invest.
meaningfulmoney.tv/UG4 is a good starter podcast episode - it is also available on YouTube if you prefer to watch... though watching podcasts is not that exciting!

Vanguard life strategy

Agree with Vanguard LS, I have this in my SIPP.

You don't mention if you are a higher rate tax payer - if so, then pension is a better option as you reduce your current tax burden. The aim is to stay under the higher rate tax while earning really. Yes, you pay tax (bar the 25% tax free) when you draw, but you presumably would not have enough to be a higher rate tax payer in retirement, so would benefit overall.

But yes, you can't withdraw until 55 (about to go up to 57) so some of this depends how old you are now - since my later 40's I just started to consider my pension to be a medium term tax efficient savings vehicle and I currently pay 35% of my salary in (employer pays another 15%).

If you have, say, £200 pm to 'invest' I would take a balanced approach and put £100pm into the pension and £100pm into a S&S ISA in a low risk fund (Vanguard, HSBC FTSE All Share or, depending on the platform you use, their own cautious fund - I use YouInvest and they have a cautious fund, I split new investments half in that and half in their 'responsible' fund - the latter does better!)

Thank you, this is all very useful.

I do pay tax at the higher rate, so will look at putting more into my pension. Does it have to be the workplace pension to qualify for the tax relief, or can it be a private one? Is there any advantage to one over the other? (My current employer won't match additional contributions like my old one did.)

Should add, I'm late 40s.

@AlexaShutUp

Thank you, this is all very useful.

I do pay tax at the higher rate, so will look at putting more into my pension. Does it have to be the workplace pension to qualify for the tax relief, or can it be a private one? Is there any advantage to one over the other? (My current employer won't match additional contributions like my old one did.)

It doesn't have to be the workplace one and you can have two at once.

Four advantages I can think of for the workplace one

1. ease of having it in one place
2. tax relief at source (outside work scheme you have to claim back the HR tax, though either will give the 20% rate at source)
3. it may be salary sacrifice which means you save NI too
4. workplace schemes often have lower fees, but you'd need to check

Another vote for Vanguard. Low fees, great service, brilliant company.

@MissConductUS

Another vote for Vanguard. Low fees, great service, brilliant company.

The service really is great if you use their platform. I use them and YouInvest, both have good service but Vanguard is better, it's amazing.

I use their American platform, which is very good indeed, but I was referring to the live customer service when you ring them. Their customer service people are very knowledgeable, helpful and pleasant. OP, Google the history of the company, it's fascinating.

I have recently opened up a stocks and shares ISA with Vanguard for the very first time after reading posts on here. I had always put my savings into premium bonds and didn't really understand anything about S&S ISA's, but now I've got a healthy amount in premium bonds which I can access if needed, I wanted to put some money away for the longer term.

I have have the vanguard life strategy 60% fund and it's very simple to set up and use. I'm putting about £500 a month into it at the moment. I'm also going to open up junior S&S ISAs for my children on the same platform. I save into another account for them which I can access myself if needed which I like (I don't particularly want to lock away their savings and for it all to be transferred to them when they're 18) but I'm hoping to put £50 each a month into a S&S ISA for them which will add up over the years

Echoing others, vanguard fund's and read up about vanguard

I know you said that youre risk averse and what Im about to say sort of goes against the grain but.....we are heading for quite a rocky period. Equities are not a safe bet at the moment, ask anyone who has a S&S ISA and they'll tell you their value has dropped significantly over the past 6 months. There is much more pain to come so traditional investments are not as safe a bet as they once were.

I suggest you do some research on Bitcoin (specifically Bitcoin not all the other crap) once you fully understand what it is and where its headed I'd suggest now is an really good time to get in while its as low as it is. I appreciate its not for everyone but thats mainly because of a lack of understanding.

Bitcoin is trustles - it isnt controlled by anyone, nor can it be manipulated by anyone. Its pretty much nailed on that it will be regulated fairly soon which will allow institutional investors to jump on board. At that point it is likely to increase in valve massively.

Bit radical, yes. But if you choose traditional investments their value can and will be manipulated by governments and central banks to suit their own objectives. The whole system is at breaking point in my opinion...just an alternative view on things

Ive just read a post above which advises you to go to a financial advisor....the result of which is you'll have less money to invest and the advisor will be a bit better off. Do your own research....read books and educate yourself....its actually quite empowering....dont listen to so called experts who are likely to get a kick back on any product they advise you to invest in....their main interest is usually themselves

Equities are not a safe bet at the moment, ask anyone who has a S&S ISA and they'll tell you their value has dropped significantly over the past 6 months. There is much more pain to come so traditional investments are not as safe a bet as they once were.

You shouldn't have any money in equities that you anticipate needing in the next five years. We've always had bear markets. Stocks are a long-term investment.

Bitcoin is trustles - it isnt controlled by anyone, nor can it be manipulated by anyone.

It also has no intrinsic value, generates no earnings, and pays no dividends. It will always be highly speculative.

Ive just read a post above which advises you to go to a financial advisor....the result of which is you'll have less money to invest and the advisor will be a bit better off. Do your own research....read books and educate yourself....its actually quite empowering....dont listen to so called experts who are likely to get a kick back on any product they advise you to invest in....their main interest is usually themselves

Spot on. The only exception I would suggest is that there are some financial advisors that don't take kickbacks or receive incentives for recommending certain investments. They are called fiduciaries (their fiduciary duty is to you) or fee only advisors. You pay for their work by the hour like you would an accountant or attorney. There are many resources on the internet to learn about managing your own investments. Here's one.

www.reddit.com/r/personalfinance/wiki/index/

I'd look at solar, insulation, or some other fuel efficiency saving method.

ask anyone who has a S&S ISA and they'll tell you their value has dropped significantly over the past 6 months

Ooh, I can do this one, ask me, go on, ask me!

Mine hasn't gone down over the past 6m. It's doing pretty well actually.

I put a tiny amount in an S&S ISA just to see what happened. It’s gone down 47%.

I’d put it in premium bonds. That’s what we are doing with our savings right now.

@nannynick

Although not in the same situation, I have listened to the podcast you were recommending and I really found it useful - so Thank You!