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What is the best way to invest £10,000?

£10,000, invest, portfolio, savings, ISA

With £10,000 sat in your bank, you’re in a good place – but what on earth do you do with it now?

Whether you’ve inherited it, saved hard, or had a winning streak at the races, the chances are you are looking to either spend £10,000 or invest £10,000 and get your savings working harder for you.

It’s no longer financially savvy to keep your savings in cash. The top flexible savings account is currently paying around 1.15%, according to Money Saving Expert, but inflation is running higher at 2.3% (data accurate as of 19 April). In other words, your £10,000 is losing value if it’s stuck gathering dust in a cash ISA.

Investing gives you a better chance of beating inflation, although it does come with the added risk that the value of your investment can go down as well as up.

That’s why, whether you’re a seasoned investor or a complete novice, it can be daunting investing a lump-sum of £10,000 in one go. Follow these simple tips to take the smoothest path to investing.

What is my risk level?

Before you choose where to invest £10,000, it’s crucial you understand the risk and return trade-off. Essentially, investors looking for big returns need to be prepared to take on more risk. Deciding the best way to invest £10,000 shouldn’t be a quick process, so you definitely don’t want to fall at the last hurdle when looking to maximise your returns.

Investors have to balance this risk and return trade-off to try and reach their investment goals – understanding your risk profile is a crucial step in getting there. All portfolios should be diversified – more on that later – but you should tailor your portfolio to reflect your individual profile.

If you’re hunting for blockbuster returns on your £10,000, you’ll likely have a big exposure to equities in your portfolio. The value of the shares you invest in can go up and down and there’s no guarantee you’ll get your initial investment back.

Those who don’t want to take on much risk will opt for a higher exposure to bonds, which are typically seen as ‘safer’ investments. Traditionally, bond investors get regular income from their bond coupon and get their initial investment repaid to them at maturity.

We know how important your attitude to risk is for your financial wellness. After completing a questionnaire, we match each investor to a portfolio that reflects their individual risk profile to take them one step closer to reaching their investment goals.  

Time in or timing the market?

As the goals behind each investment journey differs, so does each investor’s time horizon. It’s important to know when you’ll want to access your cash, as this influences the assets you hold in your portfolio.

If you’re saving for retirement 30 years away, you can afford to be riskier with your asset choices. If you’ll need this cash for next year’s summer holiday, you’ll maybe play it a bit more conservatively. It’s important to remember, however, that time really is your friend.

The financial benefits to long-term investing are well documented; portfolios benefit from compounding over longer periods (when an asset’s earnings are reinvested to generate their own) and a longer time horizon encourages investors to take more risk, as short-term losses aren’t as crucial.

Remember, it’s time, not timing, that maximises returns. For example, if an investor had stayed invested in the S&P index from 1994-2014, they’d have generated a 9.85% annualised return, research from asset manager JP Morgan shows. If this investor had missed the 10 best days of performance, however, they’d have made just 6.1%.

Looking at the long-term picture takes the emotion out of trading and prevents investors from falling into the common trap of buying high and selling low, allowing them to ride the natural ups and downs of the market instead.

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By making an investment, your capital is at risk.

Rainy-day fund

Even if you’re the poster child for long-term investing with the very best of intentions, you might need to access your funds in an emergency. You need to know you can turn the taps on if the time comes and if you will be penalised for doing so, especially if you’re building up a rainy-day fund.

We know how important accessibility is, so make sure you can cash in your investment within seven working days, and you won’t have to pay for the privilege.


Although investors use risk to flirt with high returns, this doesn’t mean portfolios should be left exposed to a sudden swing in sentiment.

Using a diverse range of investments is one of the best ways to reduce risk within a portfolio. As the performance of the three main asset classes – equities, bonds and cash equivalents – are rarely correlated, you should look to use these as the building blocks of your portfolio. A truly diversified portfolio looks to smooth out the negative performances with the positive.

But it takes a lot of time and a decent chunk of cash to successfully diversify, and the work is never ending; portfolios need to be rebalanced as trends change. This is why exchange traded funds (ETFs) are so popular.

A low-cost and transparent option, an ETF is a fund that’s traded on the stock exchange and tracks an underlying asset, like an index, by mimicking its investments. For this reason they are a great way to get diversified exposure to mainstream markets, and those that are a little more obscure.

Hands-off investing

Building up £10,000 of savings requires hard work, dedication and sacrifice. Once you’re sitting on a sizeable cash pile, it’s time to flip the switch and make your money work hard for you.

Managing your portfolio can provide an unnecessary strain on top of your career, family life, and social life. Most investors want to grow their wealth but live their life at the same time, so want someone to do the hard work for them.

This is where digital wealth managers like Moneyfarm come into play. Armed with the expertise and experience, it’s our job to monitor the markets and maximise your returns.

Management fees

The no-hassle, hands-off approach to investing comes at a cost, though. Management fees are constantly under scrutiny, but they can still easily eat into your profits.

For example, you’re charged management fees of 2% each year. If your £10,000 portfolio grows by 6% to £10,600, you’ll have to pay out £212 in charges this year. Your £600 profit is instantly slashed by a third from £600 to £388.

At Moneyfarm, you pay just 0.7% in management fees on portfolios worth up to £20,000, after which investments up to £100,000 are charged at 0.6%. We chose to invest in exchange traded funds to keep fund charges low, at an average of 0.3%.  In this example, you would pay just £106 in one year including both the management fee and underlying fund charge.

Use your annual allowance early

Deciding how to invest £10,000 shouldn’t be a quick process, so you definitely don’t want to fall at the last hurdle when looking to maximise your returns.

You can now put up to £20,000 in a stocks and shares ISA each year and all the income and capital growth you earn on your investments will be shielded by a tax-free wrapper. It’s one of the most simple ways to maximise your returns each year, yet many leave it too late to make the most of their annual allowance.

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