How To Invest £20K – The Ultimate Guide

how to invest 20k
Sammie Ellard-King

Sammie Ellard-King

I’m Sammie, a money expert and business owner passionate about helping you take control of your wallet. My mission with Up the Gains is to create a safe space to help improve your finances, cut your costs and make you feel good while doing it.

Finding yourself with £20k in the bank and ready to invest is not a bad situation for most people, but it could be better. 

Working with this amount of money for us is no different to those starting with £10k or £100k. We understand the importance of picking a strategy with a risk profile that works for you before you start allocating the money accordingly. 

In this article, we’ll discuss how to invest £20k and what are the things you should look out for.

Table of Contents

How To Invest 20k?

If you have £20k ready to go you may be wondering what is the best thing to do with it. 

Firstly, you’ll an investment account either via an investing app or a stocks and shares ISA.

Then you’ll need to decide where you’re putting it. Are you allocating it to a selection of stucks, funds or bonds. These are all decisions you’ll need to content with.

You probably know that putting it into a savings account is pointless with inflation rising. Every year your money will devalue because of inflation. If that is your first time hearing it, get out from under that rock!

With inflation in mind, you need to find ways to beat it. It really is your only option, as leaving it essentially devalues it by the day.

The best option and only option to defeat inflation are to invest your money!

A lot will depend on how quickly you want to see a return on your money, either long or short-term. Of course, the faster the returns usually, the higher the risk.

Investing is not an overnight solution to your wealth goals, and you should treat it with care. This means choosing the investment option that best suits your timeframe. 

Most investments will take years to see good returns, so you will need to be patient. 

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30 million users worldwide enjoy social investing with a wide selection of stocks, funds, trusts and cryptocurrency available.

  • Low Trading Fees
  • Social Investing
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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
Best For Hands Off Investors
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Award-winning investing app providing free financial advice. Moneyfarm offers a selection of funds handpicked by their experts.

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Is £20K A Good Investment Amount?

The answer to this question is yes, but with provisos. As mentioned briefly earlier but we’ll stress it again. 

You need to be patient when investing, the longer you can leave your money invested the better the return will be. 

So as long as you’re not expecting your £20k to double in six months it is a good amount to invest. 

The difference between short and long term investing may be longer than you think, however. 

Short term investments for us should be viewed as between five and ten years. A medium term investment can be anywhere between ten and thirty years while a long term investment will be thirty years plus. 

A good short term investment vehicle is something like a stocks and shares ISA as it will allow you to access it at any time. 

It’s also a good option for longer term investments but those are typically held in personal pensions where you can receive tax relief from the government.

Check out some of our best investing accounts below.

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Is Investing Right For You?

When you start investing you will need to determine your attitude to risk. In order to do this you first need to assess your capacity for loss or how much you can afford to lose.

To do this you need to ask yourself a few questions. First are you comfortable with your £20k investment falling in value on occasion? 

Unfortunately, the stock market and other investments like property don’t always go up!

Now you should consider if you want your returns to be higher than if you had left your money as cash, for example, in a cash or lifetime ISA. 

Finally, you have to ask yourself if you are able to resist the temptation to panic and sell your investment if the value falls below what you paid for it. 

Once you’ve established this, you’ll be able to put together a profile for yourself. Generally, younger people could take more risks as their timeframe is longer, and they’re not looking to retire anytime soon. 

For the older generation, you need to be aware of capital preservation and so taking fewer risks might be the wiser thing to do. 

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What Is The Best Way To Invest Money?

There are many ways to invest and the right one for you will depend on the term of the investment. 

Example investments:

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When making an investment in anything, you will need to decide if you are investing for the short, medium or long term. 

For example, you might just be looking to buy a property or business for a few months or a couple of years to make some improvements and flip it. 

Your options are open, but knowing what your end goal is is very important.

The good news is that nowadays is that investing in the stock market is much easier than it used to be before with the rise in digital banking and investing apps.

Anyone can choose to invest with as little as £1 in some cases and there are a tonne of apps which just take all the stress of learning how to trade away from you by giving you easy to manage, ready made solutions.

Opening a brokerage account is almost the same as opening a bank account, and you can manage it from your phone or laptop anywhere in the world.

You will have access to an online broker and be able to trade in stocks, shares, commodities and currencies. 

So really, it’s totally up to you what you invest in but whatever you do pick make sure you do your homework.

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How To Spread Investment Risk

Most experts recommend spreading your investment in a 60/40 split. 60% goes into stocks and shares, and 40% goes into bonds. 

Whilst that’s been the mantra for the last 30 or 40 years, a lot of people are forgoing bond investments as the returns are slow and often much lower than you can make investing in stocks and funds.

To lower your risk, you could invest in a tracker fund which tracks the performance of the FTSE 100 or S&P500.

This spreads your risk by you investing in 100, 500 or in some cases 5000 stocks in one go. You then benefit from all the companies that do well within that list. 

The most famous one is the Vanguard Total Stock Market Index.

It’s important to note that individual shares carry a higher risk than funds or bonds.

Bonds are a type of security where the issuer owes the holder debt and is obliged to repay it by a set date along with any interest along the way. 

Lastly, you also spread the risk of your overall investment portfolio by diversifying geographically and/or sector. This means investing in regions other than the more popular US or the UK.

Developing countries like India and China are popular, with many investors as these nations have been known to grow quickly as population grows and the lower classes are becoming more affluent.

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How To Invest £20K In An ISA

A stocks and shares ISA is a better investment for £20k than a cash ISA over the longer term and if you pick your investments well should produce higher returns.

However, this type of ISA will also carry greater risk. 

There are several ways that you can take out a stocks and shares ISA. You can do it through your bank or building society, through a professional financial advisor or through an online platform. 

Some examples of fantastic online platforms that have an array of tools to help you are InvestEngine, Moneyfarm and Wealthify.

If you are new to investing, it is advisable to seek the advice of your bank or an independent financial advisor.

For those confident in their ability to choose a suitable ISA or even an online trading platform are both quick and convenient ways to start investing.  

There are rules and regulations around all financial instruments, so make sure you are aware of those relating to any ISA you invest in. 

It’s possible for you to choose the stocks and funds yourself, or you can have a ready-made ISA that has been selected for you by a broker or robo-advisor.

The great thing about an ISA is that you can put £20,000 a year tax free and not be subject to capital gains tax. 

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In Conclusion

The decision to invest £20k is one that should not be taken lightly nor without some careful thought first. 

Consider your investment strategy, your goals, the timeframe you are hoping to realise returns in and also your attitude to risk before investing. 

If you are in doubt about how to proceed you should first speak to a financial advisor.

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Disclaimer: Content on this page is for informational purposes and does not constitute financial advice. Always do your own research before making a financially related decision.

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