How to invest £10,000

Thinking about where to invest £10,000? The stock market may be your best bet if you want to try and beat inflation.

Before you decide whether or not to invest you should make sure you have enough savings to cover between three and six months’ worth of essential outgoings and have paid off any expensive debt. If after that you have £10,000 to invest, we take a look at your options.

In this article we explain:

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Young woman looking at investing app on phone
Thinking about where to invest £10,000? The stock market is your best bet if you want to try to beat inflation.

Is investing right for me?

The decision to invest will depend on what else is going on in your life, so here are some things you should think about before you start:

  • Do you have an emergency buffer? The recommendation is between three and six months’ essential outgoings in an easy access savings account, so that you can get your hands on it when you need it.
  • Are you planning a big life change such as having a baby or moving house? Make sure you have extra cash in a savings account so that you can access it when you need it.
  • How much expensive debt, such as money owed on credit cards, do you have? You may well be better off putting your money towards that and switching to the best 0% balance transfer credit card.
  • Have you considered overpaying your mortgage? It could save hundreds or thousands of pounds in interest.
  • Are you about to retire soon or in ill health?

To mitigate risk, it’s recommended that you leave your money invested for at least five years.

Investing is a good idea in the long run given than most banks offer paltry interest rates on savings accounts that don’t nearly beat the rising cost of living, measured by inflation.

The rate of inflation is at 10.1%, while savers are lucky to earn more than 4% interest. Many banks still offer paltry interest below 1%. If your earnings are below the rate of inflation then the value of your money is being eroded over time.

The best way to combat this is through investing.

If you have reached the end of this section and decided that investing ticks the boxes, read on. You might also want to read our guide on investing for beginners.

You might want to read: how to invest to beat inflation

Is £10,000 a good investment amount?

Yes, £10,000 is a good amount to invest. But remember: the longer you can leave your money invested, the better.

This will give it enough chance to grow and ride out any fluctuations in the stock market.

If you want to find out more about the basic principles of investing then we have produced a free online investing for beginners course. Check out module one.

What is the best way to invest money?

Here are three top tips to help you get started.

1. Invest for a minimum five years

To get a decent return, you should invest for at least five to ten years. The longer you invest your money, the more time you have to:

  • Accrue returns on your investment portfolio
  • Ride out any market downturns
  • Let your returns compound (grow in a snowball effect over time as returns get reinvested)

2. Choose a low cost platform

Fees can erode your pot over time, so we have outlined some of the best platforms for both cost and customer service

According to investment platform Vanguard, if you invested £10,000 for 30 years, assuming investment growth of 5% a year, your pot would be:

  • £24,270 = 2% fee
  • £37,450 = 0.5% fee

Watch out for early exit charges to access money within a few years of investing as well, as these can run into hundreds of pounds.

Find out the best investment platforms for beginners.

3. Choose a tax-efficient wrapper

You should use a tax-free wrapper to protect your investment returns from the taxman.

There are different types of tax-free financial products for you to consider, such as:

Within these products, you would then choose what to invest in. Here are tips on how to choose investment funds.

Where is the best place to put £10,000?

As mentioned in the previous section, there are tax-free wrappers you should use to invest.

Which one you choose depends on your investment horizon (that is, when you think you might want to cash in the investment):

Short term (between five and ten years):

If you are investing money and think you will want to access it in five to ten years time, one of the best investment options is a stocks and shares ISA.

This is because (unlike a pension), you can access the money at whatever age you want.

Medium term (ten to 30 years):

A stocks and shares ISA is likely to be most suitable. That is unless you will turn 55 within 30 years, in which case a pension might be a better tax wrapper for you.

If you’re unsure about the time horizon, you could invest in both a pension and a stocks and shares ISA.

Long term (30 plus years):

The best way to invest £10,000 for the long term is in a pension. It comes with substantial tax perks that will increase your pot size:

  • Invest in a pension and you get tax relief from the government
  • Workers get free cash from employers if they are invested in a workplace pension scheme

NOTE: You can’t get your hands on a pension until you are 55 (rising to 57 in 2028). Check out our pensions guide for more on this.

If you are self-employed, consider a self-invested personal pension or ready-made personal pension. Ask your pension provider if you’re allowed to increase your contribution, or even pay a one-off sum into it.

If you are shopping for a pension, Fidelity* is one of our top-rated providers. Find out why.

How to invest £10,000 wisely

Invest according to your attitude to risk. To work this out you need to consider your “capacity for loss” and your “risk appetite”.

  • Capacity for loss = how much you can afford to lose
  • Risk appetite = how you feel about losing money

You should ask yourself these questions first:

  1. Are you happy for your £10,000 investment to fall in value every now and then?
  2. Do you want higher returns compared to if you’d left your money in cash?
  3. Can you resist the urge to panic and sell your investment if it falls below what you paid for it?

If you answered yes to the above, it sounds like you would be comfortable investing. Find out more in our beginner’s guide to investing.

How to spread investment risk

Many investment experts recommend a 60/40 mix. That is an investment portfolio invested 60% in equities (company shares) and 40% in bonds.

For higher returns, the best investment for £10,000 are shares or equity funds (which are made up of shares). You could invest in a tracker fund that mimics the performance of stocks listed on the FTSE 100, which is a low-cost way of investing in shares.

Remember shares are higher risk than bonds.

The best way to invest £10,000 is to diversify it across:

  • Different asset classes – like shares and bonds
  • Different sectors and countries – like emerging markets (such as India) and developed countries (such as the UK)

Spreading your investments this way can help level out any fluctuations or falls in prices, so you weather the bad times and benefit from the good.

Why not learn more about investing in our free, online, five-part beginners course to investing?

Should I choose a ready-made portfolio?

If you aren’t confident enough to buy and sell investments, you could let an investment manager do it for you. It’s now possible to invest with low-cost robo-advisers which make all the decisions on your behalf.

Some good examples of robo-advisers include Nutmeg* and Wealthify (capital at risk, tax treatment depends on your individual circumstances and may change in the future). We outline the best robo-advisers.

In order to select a ready-made portfolio, the robo-adviser will ask you a number of questions to establish your:

  • Timeframe
  • Risk profile
  • Investment goals

Robo-advice can be one of the best ways to invest £10,000 because it is cheaper than the DIY approach.

If you have a larger lump sum, check out our article: How to invest £50,000.

Which ISA is right for me?

ISAs work best when you pick the right one for your savings goal. Take this short survey to find out which ISA might be right for you.

  • It only takes a couple of minutes
  • No personal details required

How do you double up £10,000?

The best way to double £10,000 is by investing for the long-term, rather than trying to get rich quickly.

Consider what returns you are looking to make and over what time period. But be realistic — you are unlikely to double £10,000 in a few years.

As tempting as it may be when you see some of the promised rates of returns on high-risk products or the rise of bitcoin, these are best avoided. That is, unless you absolutely know the risks and are happy to take them on.

Can you turn £10k into £100k?

Yes, this is possible but it would take decades.

You should probably expect investment growth of about 4% every year. So at that rate it would take about 60 years before your £10,000 pot grew to £100,000.

The key here is to remain invested for a long period of time and invest in assets with a high chance of return (like shares) in order to grow your pot to £100,000.

Another tip is to drip-feed money into your pot over time to give it the best chance of growing. Here’s how to invest with little money.

Although also bear in mind that if it takes decades for your money to grow then inflation will erode the purchasing power of your cash. So that £100,000 pot would be able to buy you less in 60 years compared to now.

You can choose to invest more in line with your ethical values

How can I invest ethically?

If you don’t want to invest in companies involved in industries like gambling, tobacco or alcohol production, consider ethical investing.

Find out more in our guide to ethical investing.

How to review your investments

Markets go up and down, so investors should check their portfolio occasionally. But only make alterations if their circumstances change, or to rebalance their portfolio.

Rebalancing might mean buying more shares when stock markets fall to be in a position to benefit when markets bounce back.

Checklist for investing £10,000

  1. Know your goals: Are you investing £10,000 for the long-term, perhaps for retirement, or a short term saving like for a house deposit?
  2. Do your homework: Have a look at the track record of the fund manager or investment platform you are considering using
  3. Check the costs: Platform fees and fund costs are one of the few things investors can control. Every pound you pay in fees is a pound less for your investment to earn a return.
  4. Invest tax efficiently: Pay into an ISA and you’re free from income and capital gains tax. Pay into a personal pension and you also get tax back from HM Revenue & Customs.
  5. Make the most of a employer contributions: A workplace pension gets you three bites at the cherry: you contribute and it gets topped up by both your employer and the taxman. Some employers even match your contributions.
  6. Diversify: Spread your cash across different asset classes, sectors and countries to level out any fluctuations in prices.
  7. Keep it simple: A well-diversified portfolio of shares and bonds is all most investors need.
  8. Keep a calm head: Investors have to manage their emotions. Once you’ve set up your low-cost, diversified portfolio, it is a matter of being patient and staying the course.

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