Coming into £25,000 can be an exciting event. You may have received an inheritance, or bonus, or simply saved the amount. Whatever the source, investing the money wisely is key to securing your financial future. Here are some tips on how to invest 25k
What are your investment goals for your 25k?
Before rushing into investments, think carefully about what you want to achieve with the money. Do you want to:
- Save for a major purchase like a house, car or dream holiday?
- Supplement your retirement income?
- Earn ongoing passive returns to boost your monthly budget?
- Pay for a child’s future education?
Having clear investment goals will help guide your decisions. Prioritise what’s important.
Investment Goals:
1. Pay Off Any Debt
One of the smartest initial uses for £25k is paying off expensive debts like credit cards or loans. This can save substantial amounts in interest payments over time. Pay off debts with interest rates above 5-10% first. Just be sure to avoid taking on new debt afterwards!
2. Set Up an Emergency Fund
Financial experts recommend having 3-6 months of living expenses set aside in an easily accessible emergency fund. This gives a safety net if you lose your job or face an unexpected crisis. £25k could fully fund your emergency pot or at least make a good start. Keep this in protected savings rather than investments which may fluctuate.
Invest in your pension
Contributing to your pension is a tax-efficient way to invest for retirement. Your 25k could significantly boost your pension savings. Be aware of contribution limits and access restrictions on pension funds before age 55. Consider spreading contributions over tax years to maximize tax relief.
3. Invest in stocks and shares
Investing directly in stocks, bonds, ETFs and other securities can potentially achieve higher returns long-term than cash savings. But only invest money you won’t need access to soon, as values rise and fall. Research asset allocation strategies for your risk tolerance. Seek advice on constructing a balanced portfolio.
4. Think about how you might use the cash in the future
Assess whether you may need to access some or all of the £25k within the next few years. If so, more liquid investments like cash savings may be preferable over less accessible options like pensions. Consider setting some aside as an emergency fund in case of unexpected need.
5. Invest in Tax-Advantaged Accounts
Some investment account types offer valuable tax relief. For retirement, pensions give upfront tax relief on contributions. Investing in a stocks and shares ISA shields gains and income from tax. Other options like Lifetime ISAs support saving towards your first home or retirement.
6. Consider a Diversified Portfolio
Experts recommend diversifying – spreading money between different assets and markets. This reduces overall risk. Assess your risk tolerance level. For moderate risk investors, a diverse portfolio might include:
- 40-50% in shares (across sectors and geographies)
- 20-30% in bonds and fixed income
- 15-25% in cash
- 5-10% in alternative investments (commodities, property etc)
Regularly rebalance this asset mix as markets change. Diversification improves the risk-return profile.
7. Consider Working with a Financial Adviser
While the points above can help guide your plans, making optimal decisions for your situation often benefits from financial advice. Regulated advisers have the expertise to review your full financial picture and risk appetite. They can then provide tailored guidance on using your £25k lump sum to help meet your investment objectives and life goals. Take time to find an affordable adviser you trust.
Alternative Investment Financial Advisors
Oakmount and Partners are award-winning alternative investment specialist based in London, Essex and Dubai. For over a decade, we have helped clients maximize returns on their capital through diversified alternative investment portfolios.
Our experienced investment advisers take the time to understand your risk preferences and goals. We then guide you in allocating capital across a range of carefully selected alternative assets and innovative funds.
These include venture capital, managed futures, structured products, cryptocurrency, fine wine, and more.
At Oakmount and Partners, we believe diversification into alternative investments can substantially enhance investor outcomes. To discuss your options, contact our advisers today to arrange your free initial consultation.
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