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.
Coming into a substantial amount of money can be exciting, however, it’s also important to consider the best ways to use it.
If you have £10k in your bank account, you can either choose to transfer it to a savings account or invest it to maximise its potential.
This guide will help you understand the risks and benefits of investing £10k, where to invest it, and if investing is right for you.
So, what to do with 10k, let’s get into.
Table of Contents
What Should I Do With My £10k?
Whether you’ve saved or come into money, you will usually have three options when deciding what to do with it. With your £10k, you can:
- Save it – You could set up a savings account with your bank or building society. Placing your money in a savings account will protect it in the event of collapse through FSCS protection. You will also be able to access your cash whenever you like, which is important for emergency funds if life throws you a curveball.
- Invest it – You can choose to invest your money to generate income from your lump sum. Investing your money can result in great profit, however, there is always an element of risk. If the asset you invest in fails, you could end up losing some or all of the money you invested.
- Do nothing – You can do nothing with your money and leave it in your bank account, even withdraw it and store it in a safe place, however, you won’t earn any interest and your money won’t be protected in the event of a collapse.
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Should I Save Or Invest?
When deciding whether to save or invest, you should carefully consider your financial situation and personal preferences.
Saving your money is safer than investing as your funds are protected and may be a better option if you’re opposed to taking risks.
If you’re not comfortable with making a decision yourself, then you should consult a financial adviser before making any decisions about your £10k, as they can ensure you won’t make any mistakes, especially if you intend to invest.
Regardless, you should ask yourself the following questions when considering making an investment:
- Am I happy to restrict my access to my £10k while it’s invested?
- Would it make more sense to make overpayments on my mortgage to avoid paying extra interest?
- Do I have any outstanding debts that should be paid off instead?
- Am I planning a big life change, such as getting married, buying a house or having a baby, for which I might need money?
How To Invest 10k
There are lots of ways to invest 10k but the most popular way will always be the stock market.
You can set it up and let your money grow over a long period of time.
It does however require you to understand your financial goals, your tolerance to risk and your timeframe to reach those goals first.
Once you have this you can then place your money into investments which match up with your goals and risk tolerance.
Is £10k A Good Amount To Invest?
Investing with £10k is a good starting point when it comes to investing. The same principles will always apply if you’re investing £20k or more if you have it.
Your money should grow, however, you’ll probably need to invest it for at least five years to hope for a good outcome.
This is because the value of you investment can always go down and in the short term that probability is much higher.
If you pick a company that is growing, however, over time this will be realised in the stock price so therefore turning your initial investment into a profit.
In the short term, the stock market can be volatile, as stocks even fluctuate minute by minute. Despite the unpredictability of the stock market, your investments will generally maintain a positive incline if left for a long period of time and the right investments are picked.
So, instead of putting all of your 10k in right away it makes sense to ease into the market using a technique called dollar cost averaging.
For example, you could split this is 10k up into x10 1k payments and put it into your chosen investments at the same time each month.
Over the course of the 10 months you will have bought at many different prices which eventually if you keep adding will mean you get a much better average essentially by spreading the risk.
What’s The Best Way To Invest £10k?
What you decide to invest your 10k in is completely up to you, but you should always keep in mind that investing comes with risk.
It can be overwhelming for those who aren’t knowledgeable about investing and the different types of investments you can make.
With all investments you’ll need to find a broker that you trust and are comfortable using. You do this either directly through a financial advisor or if you want more control then there are some fantastic companies like Moneyfarm, Wombat and Wealthify that help you with this.
If you’re an investing novice, then you can refer to the information below about the best ways to invest your money.
Pension
If you put £10k into your pension pot, you will not only receive government tax relief but also free cash top-ups from your company if you participate in a workplace pension plan.
You should also consider a self-invested personal pension if you are self-employed. No matter what you do as a profession, investing in your pension is vital for safeguarding your future.
That being said if you do want the money sooner investing in your pension means it’s locked there until you reach retirement or you become gravely ill.
Stocks And ISAs
For tax efficiency, stocks and ISAs are great for short-term and medium-term investments.
You can lower your tax bill by investing in stocks and ISAs as you aren’t required to pay income tax or capital gains tax on £20,000 a year so you’re covered for 10k no problemo!
Some of the best stocks and shares ISAs are part of our best investing apps list which you can find here.
Bonds
Government or corporate debt is represented via bonds. When a business or the government issues a bond, they are borrowing money from you and promising to pay you interest on that loan.
They often repay their debt while accruing yearly interest. In general, and particularly for short-term investors, bonds are viewed as a safer investment option than stocks.
Shares
When you invest in a business, you’re hoping that you will profit as its value increases over time. Buying shares is a great way to invest your money, but equally requires some knowledge into the company you are buying, its dealings and growth plans.
This obviously carries some risk because the value of the firm could also decline, but if the business does well, you reap the benefits of the profits which increases the share price and also any dividends that the company might payout to its shareholders.
ETFs, Indexes & Mutual Funds
These are essentially baskets of stocks that either track an index like the FTSE 100/250, a country, sector and even a handcrafted selected.
Buying funds allows you to spread your risk and as with some funds like the Vanguard Total Stock Market Index you a small portion of the 5000 biggest companies in the US.
Check out our post on ETFs, indexes and & mutual funds.
Commodities
Investing in commodities like precious metals, oil, and stones is another way you can invest your £10k. However, just like other assets, these are vulnerable to fluctuations.
A form of investing in commodities is also placing your money in a savings account that pays a competitive interest rate.
You would do better to put your money in savings accounts with competitive rates of interest if you want to diversify your investment portfolio and maintain some access to your cash.
Property
Most people consider real estate investment, especially in the buy-to-let market, to be one of the safest types of investments as it produces steady income from rent.
However, you must also take into account the dangers associated with the housing market and make sure to balance your mortgage payment against your expected earnings.
If you’re thinking about buying a house for the first time or putting the 10k away to save for a house deposit then make sure you speak to a mortgage advisor to learn exactly what you can afford and what you’ll need to save.
Making money from property with no money is still possible but it’s useful to have some funds tucked away so your options are widers.
Final Thoughts
Finances can sometimes be challenging to comprehend, especially with all the options for your money.
Regardless of whether you decide to save or invest your £10k, you can refer to this guide to get the best possible outcome for your assets.
We hope this helps you answer what to do with 10k and gives you some options. If you’re thinking about investing but don’t know where to start check out our beginners academy.
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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.
