Investing £50,000: at a glance
- What do I need to know? There are different investment and saving options for large sums, each with unique considerations in risk, access, and tax.
- What does it mean for me? How you invest £50,000 will determine whether it grows in value or erodes over time.
- Why does it matter? With £50,000, you could invest to generate returns that can strengthen your finances. But there are risks involved.
If you’ve earned or inherited £50,000, it could become so much more than a lump sum. Investing your money can be the key to generating a significant passive income. But while higher returns might be tempting, they often come with greater risks.
Taking a balanced approach could mean you grow your wealth while protecting yourself against the unexpected. This might include some options you may not have considered, like high-interest cash savings or bonds.
In this guide, you’ll learn how you could grow £50,000 with a portfolio of investments and cash that balances risk, predictability, and growth.
What to consider when investing £50,000
When you invest, you’re effectively lending your cash to banks, businesses, or projects, with the hope of getting a bigger return. The risk you take - and the potential returns - vary by the investment type.
Each investment has strengths and weaknesses, which is why it can be useful to structure your money across a balanced portfolio.
The exact balance of how you invest your £50,000 will likely depend on how much risk you feel comfortable taking, and the kind of returns that you want to generate.
When deciding how to invest a significant sum, you might consider:
- Inflation: Whether your returns are likely to grow the purchasing power of your cash.
- Risk: If the potential for higher returns is worth the chance that you might lose money.
- Access: You might be limited in your investment options if you want to withdraw money at short notice.
- Tax: Investments have different tax rules, depending on whether you grow money in the account or withdraw your earnings.
How to invest £50,000
Below, we look at some of your options for investing £50,000 if you were to put it in one place, so you can learn why investors usually prefer a portfolio approach.
Stocks
Stocks refer to your slices of ownership in one or more companies, or even a collection of investments. A share is a singular unit of stock. You effectively invest in the success of a business, and if it performs above expectations, you can sell the individual shares you bought for a profit once their value increases.
Like other investments, stock prices can change significantly and sometimes without much warning. This is why many people spread their money across multiple shares of a broader range of businesses, as it’s less likely they’ll all underperform at once.
A £50,000 investment could buy a varied portfolio of shares in companies across different industries, which could spread some of your risk. This strategy is known as diversification.
Individual Savings Accounts (ISAs)
With ISAs, you don’t pay Capital Gains Tax (CGT) or Income Tax on your earnings, making them a highly valuable addition to your savings.
But ISAs do have a £20,000 annual deposit limit per person. This means you would have to split your £50,000 deposit over three tax years if you wanted to invest the full amount in this asset type.
Stocks and Shares ISAs
Stocks and Shares ISAs are a specific type of investment account. You fund the account, then decide which companies and funds you want to invest in.
As you’re investing in the stock market, there’s also a risk you may lose the money you put in.
Property
A £50,000 investment could cover the deposit on a buy-to-let property, letting you earn income through rent.
Property values and rent tend to rise with inflation. This means that in a high inflation environment, you’re more likely to preserve the value of your money than some other investments.
But it’s not quick and easy to access money you invest in property. And there are plenty of costs to consider, including maintenance, insurance, and tax.
You could invest your money in a company that handles the logistics for you, known as a REIT (Real Estate Investment Trust). But REITs have their own set of risks to consider if you choose that route, including:
- market volatility
- interest rate sensitivity
- tax implications
- international investment and Brexit
Taxes on property investments
You pay Income Tax on the profit you make from rental earnings. HMRC charges you at your marginal rate, which is 45% for additional rate taxpayers.
In addition, investment properties are eligible for Stamp Duty, also known as the Stamp Duty Land Tax (SDLT). This is a tax that HMRC charges on the properties you buy when their valuations exceed certain limits. Stamp Duty is higher on properties that aren’t your primary residence.
There are also surcharges for every additional property you purchase, which is usually 5% for residential properties.
You’ll also pay Capital Gains Tax (CGT) if you sell a second home or property for a profit of £3,000 or more. This doesn’t apply to primary residences and is designed to target investment properties.
Your personal circumstances can also impact how much tax you pay. Consider speaking with a financial adviser if you’re unsure how much you’ll pay in tax.
Exchange-traded funds (ETFs)
ETFs let you invest in groups of financial products, like stocks, bonds, and commodities (raw materials that you can trade, such as coffee, coal, or gold). Instead of buying each asset individually, you invest in shares of a fund containing a handful of assets.
There are no guarantees you’ll make a profit when you invest in ETFs. Unexpected events like the COVID pandemic can alter the value of items listed on the stock market in unpredictable ways.
Annuities
Annuities are services where you purchase a fixed, regular income when you retire. You can purchase an annuity using your pension pot. This means you’d need to invest your £50,000 into pension contributions if you wanted to buy an annuity with it.
You can set up an annuity for between three to 30 years. Annuities are tied to pensions, so you can only access them at the age of 55, or 57 from April 2028.
Depending on the annuity, it may be possible to gift your annuity to a partner if you pass away before the end of the term. But it’s important to check the terms and conditions of your annuity in advance to see if this is possible.
You can’t change an annuity once it’s agreed, so it’s important to get financial advice from a qualified professional before making a commitment.
Bonds
Bonds are effectively loans to companies or governments. You invest in a bond by funding an account in return for regular interest payments. As a result, they work similarly to fixed-rate savings accounts, because you lock in a set interest rate over a period of time, known as the ‘term’. Rates generally vary by term length.
Bonds usually pay your interest annually, but you may receive interest monthly or quarterly, depending on your provider. This means you can receive a predictable income on your investment, unlike stock returns that depend on the profitability of companies in your portfolio.
As with all fixed-term assets, inflation can reduce the purchasing power over time. You could lose some of the value of your bond or get charged a penalty if you sell before the term expires. Some bonds don’t let you exit before the term ends, locking your money away no matter what.
Peer-to-peer lending
You could use a peer-to-peer (P2P) lending service to offer some of your £50,000 as a loan to borrowers. Borrowers then repay your money with interest. The interest you could earn may be higher than other investments, given the increased level of risk you’re undertaking.
P2P lending is not reliably protected by the Financial Services Compensation Scheme (FSCS). This means you there’s a high chance you could lose your money if borrowers can’t repay your loan. Lending smaller amounts to multiple borrowers can spread your risk, but it won’t offer complete protection.
P2P lending platforms can also charge lending fees to use their services.
Ethical investment options for £50,000
Ethical banks provide financial security while abiding by a set of principles that are meaningful to their customers.
Types of ethical banks include:
- green banks
- Sharia banks
- challenger banks
These types of banks are run based on their missions or ethical goals. For example, green banks prioritise sustainable practices, and Sharia banks don’t charge or pay interest.
Ethical banks may not always offer the highest interest rates. This means your £50,000 might not grow as rapidly as when put towards other investments. But you may choose to invest in them if they align with your values.
Investing vs. saving £50,000
There are more options than you might think when it comes to protecting and growing a large sum.
If you already earn money from an active investment portfolio, cash savings could let you protect and grow your £50,000 while you decide on your next move.
Depositing your money across different account types can help you manage your returns. For example, instant access accounts let you move your money instantly to secure the best rates, while term deposit accounts let you lock in typically higher rates in exchange for limited access.
This can provide stability while you decide whether you have the appetite to add higher-risk investments to your portfolio.
A savings platform can make it straightforward to invest significant sums. You can spread your money across different accounts to balance high rates with access, while simplifying the process of managing your cash.
Investing £50,000 with Flagstone
At Flagstone, we account for our share of interest upfront. This means the rate you see, is the rate you get. There are no hidden fees or charges.
Your full £50,000 is also protected by the FSCS if the financial institution goes out of business. You can get reimbursed by up to a maximum of £85,000 per person, per financial institution.
Every account you open with Flagstone is eligible for FSCS protection.
Long-term vs. short-term investment strategies for £50,000
You might invest £50,000 differently depending on your goals. Short-term investments are often designed to last between one and five years, while long-term investments might stretch to 10 years or more.
Short-term investments can include a range of fixed-rate savings accounts and bonds, as they offer predictable returns.
Other investments, like stocks, may offer higher returns over a longer period, though there are no guarantees. If you leave your money in savings for the long term, you can benefit from compound interest.
Frequently asked questions about investing £50,000
What are the lowest risk investments for £50,000?
Bonds, annuities, and savings accounts could be considered some of the lower-risk ways to earn money from £50,000, as your returns are relatively predictable.
But there are downsides. For example, if rates rise, you could get stuck with earnings that are lower than if you’d put your money elsewhere.
Are savings a safer alternative to investment?
Savings are generally considered safer than investments, as in the UK, eligible accounts benefit from FSCS protection up to £85,000 per person, per institution.
High-interest savings accounts can often increase the value of your savings above the rate of inflation. This is because you’re earning interest faster than the relative decrease in your purchasing power.
How can I double £50,000?
There is no guaranteed way to double your money, as investment returns vary based on markets and performance. You should be cautious when investing in assets that promise a dramatic rate of return, as they’re usually riskier. In the short term, it’s unlikely you can double your deposit.
Instead, you could grow £50,000 with a varied portfolio that includes spreading your risk across different investment types. This can include high-interest savings accounts paying compound interest, especially if you’re a more cautious investor or plan to take your time to consider your options.
Grow your lump sum with high-interest savings accounts
High-interest savings accounts can provide a low-risk addition to your £50,000 investment portfolio.
Saving your money in accounts paying high interest can buy you time, while you decide how best to grow your wealth for the long term.
Invest £50,000 with Flagstone
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