£500pcm investment options

[mealideas2024]

After a promotion last year, and with my spending habits not really changing much since, I have about £500 "spare" each month. I'd ideally like to invest it, or at least £250 of this, into somewhere I can make a somewhat passive income.

I have looked at ISAs (my brother is forever harping on about them) but the return doesn't seem that great for the ones I'm seeing.

I know that there are also stocks and shares ISAs which may be worth further investigation.

I do have some premium bonds (I like these as you can access your money if needed, and tax free I think!) but obviously no guarantee of a return.

Do you have any other savings/an emergency fund? If not then you definitely ought to keep the money somewhere accessible in case needed, until you've built up 6-12 months of living expenses after which you can consider longer term options. I'd go for either a regular easy access savings account or a cash ISA (not fixed term). Not sure what ISAs you have been looking at that offer poor internet rates because there are various products on the market offering 5% which is pretty good for a very low risk instant access option. If you want a higher return than that you're going to have to go higher risk and/or lock up your money for a longer period which would not be advisable if it's your only savings.

Premium bonds are an ok option but average ROI is I think only around 4% which is worse than just a normal saver, albeit I guess with the very small chance you'll win big, but again as your first/only savings not really worth it IMO.

Stocks and shares ISAs are a good option if you are happy to take more of a risk - your investment will likely fluctuate over time. I wouldn't advise putting your own portfolio together if you don't know what you're doing, I would pick a managed account with something like Hargreaves Lansdowne, nutmeg etc which will walk you through assessing your risk appetite and recommend/manage a balanced portfolio for you so all you have to do is put the money us every month. Although if the money is intended to generate 'income' IE be money you intend to live off in retirement you may well be better off putting it into a pension rather than an ISA

A couple of simple resources I'd really recommend you read, Martin Lewis's money saving expert pages on savings which talks you through all the options in a very accessible way with best buy recommendations https://www.moneysavingexpert.com/savings/

And this flowchart which while not a rigid guide is a pretty sensible way of thinking about and planning your investments https://flowchart.ukpersonal.finance/?_gl=11o06suy_gaMTQyNzI1MDU3LjE3MTEwMTczMDQ._ga_TYXK2X3WJT*MTcxMTAxNzMwNC4xLjAuMTcxMTAxNzMwNC4wLjAuMA..

This is so helpful!!! Thank you so much

How's your pension? Upping your pension contributions would gain tax relief too & is almost always a good idea.

Pension or Stocks & Shares ISA. Can put money into a managed fund rather than trying to pick the shares yourself.
If not got an emergency fund would recommend building up one of those too.

I'd spread it around. Increase pension contributions and if you're under 40 look into a LISA. You can pay in up to 4k per year and government will top up by 1k.