If you have £100,000 to invest, then here's the good news: you have plenty of options.
Being in the six figure club keeps most investment doors open, but also gives you more to consider.
The right investment strategy for you will be affected by:
Your personal and financial circumstances
Your goals
Your appetite for risk
How hands-on you're willing to be
We can't provide financial advice, but we can provide some ideas and things to think about. £100,000 is a considerable investment war chest, so speaking to a qualified financial advisor would be a good idea.
Lower risk / lower effort ways to invest £100k
First thing to say - all investments have risks. These investments are only lower risk when compared to the other options we list. This is also a generalisation - risk is not absolute, and can change over time.
For most people, investment portfolios are best kept mostly low risk.
We've grouped our investment ideas into three very rough risk categories.
A suitable investment portfolio contains a diverse range of assets and risks.
This diversity allows you to manage your risk in a way that aligns with your goals.
Index funds
When most people think of investing, they think of the stock market. Index funds can be a great way to get exposure to global markets, without having to manage a more complex portfolio.
You can add up to £20,000 per year into an investment ISA - any profits from this will be sheltered from income and capital gains tax. Take a look at the best stocks and shares ISAs on the UK market.
You can also buy index funds and other equities as part of a self-invested personal pension (SIPP), which comes with a number of tax benefits.
Higher risk / higher effort ways to invest £100k
Moving up the risk spectrum. These opportunities come with more risk and more potential reward. For most, these should not be the majority of your portfolio.
Individually selected stocks and shares
Compared to index funds, picking individual shares is riskier. Why? Well, index funds will contain far more shares than those you buy individually. This means the risk tends to balance out.
Depending on how you pick your stocks, your portfolio could be highly exposed to changes in business or the economy.
Google, Amazon and Netflix shares performed much worse than most index funds in 2022-23.
Hand-selecting a well-balanced share portfolio takes plenty of effort and expertise.
Highly speculative ways to invest £100k
These highest risk investments should make up a very small percentage of your portfolio.
You should be willing to see these investments go to zero. In fact, you should expect it and budget for it.
These are moonshot investments that could lose out greatly, but could also explode in value if the stars align.
Cryptocurrencies
Crypto has both made and squandered many a fortune. Better-known tokens like Bitcoin and Ethereum are relatively safe bets, only relative to other cryptocurrencies. They're still hugely volatile compared to many traditional assets.
Charlie Munger, one of the world's most respected investors, has described cryptocurrency as 'crazy', 'stupid' and 'worthless'. 👀
At the time of writing Bitcoin has lost 11% of its value in just five days. That's not unusual. Cryptocurrency is a high variance bet. There's a case for every portfolio containing some - lower single digit percentages could be more than enough.
Take a look at our guide 'How to invest in Bitcoin' to learn more.
NFTs
Non-fungible tokens usually take the form of digital art. Their popularity exploded during the Covid era. Cryptopunks and Bored Apes exploded in value - well into six figures for a JPEG.
Like their cryptocurrency siblings, NFTs are very risky assets and nobody knows whether they'll stand the test of time. Tread carefully here!
Early stage investing
Fancy investing in the next Facebook or Google? Your odds are slim, but it's not impossible.
Crowd funding platforms make it easier to get exposure to the thrill and risk of startups. You can also find investment funds that accept private investors.
There are tax benefits available here too, if the investments qualify for Seed Enterprise Investment Scheme relief, for example.
Other wise ways to use £100k
Investing may not be the best way to make use of £100,000. Consider these alternatives before jumping on the investing bandwagon:
Top up your emergency fund
If the £100,000 is all the cash you have, it isn't wise to invest it all.
Experts are always recommending that you keep 3-6 months of expenses in cash. This would help you pay the bills if you lost your regular income, and give some time to get back on your feet.
As an example, a household with £50,000 annual gross income would need a £15-20k emergency fund.
Get savings interest
Technically, investing in cash. Lock up your savings for better rates. Try a low-cost online-only bank for good savings rates & minimum fuss.
Wrap your cash in tax efficient ISA products to keep more at the end of the day. It's one of the lowest risk options out there, although of course comes with an opportunity cost.
When inflation is high, you may also be losing more spending power than you're gaining.
Remember that £100k is above the £85k FSCS protection limit for individuals. So if you're planning on keeping the full amount in cash, it's a good idea to split it across two different bank accounts to be safe.
Pay off debts
Interest on debt can sometimes exceed your expected investment returns. This means you could be better off by eliminating the debt.
Imagine you're paying 10% APR on outstanding credit card debt. You find yourself with £100k in cash. You believe you can make 8% per year by investing in index funds.
8% would be a very strong return, however it's less than the interest you're paying on your debt. And that's before considering any tax deductions on investment profits.
Paying off the credit card might be the less interesting, but better, option.
Grow your skillset
Why not invest in yourself? £100,000 would go a long way towards supercharging your qualifications. This could open doors for career progression.
Over the span of a 30 year career, this investment could prove unbeatable.
You could also gain the skills needed to start your own business, which would remove any ceilings on your earning potential.
See the world
Wealth includes wealth of life experience. Not every investment has an easily measured return.
Taking 6 months off work and enriching yourself through travel and culture could be exactly what you need to set up the next phase of your life.
Invest in youth
If you have children, you've probably thought about their financial future. There are tax efficient ways to pass money on to your kids - Junior ISAs for example.
Donate
A well-deserving charity might be a reasonable shout when allocating your funds.
Ultimately, what is the best way for me to invest £100k?
There's no simple answer, sorry! Only you can decide. We recommend you do plenty more research, take your time, and get advice from those you trust.
Don't be seduced by promises of turning £100k into £1m by this time next year. As you build wealth, protecting it becomes just as important as growing it.
Good luck!
