If you have a lump sum you won’t need to touch for some years, investing it is likely to produce better returns than leaving it in a savings account.
Despite this, there are around seven million UK adults sitting on £10,000 or more but not investing it, according to City watchdog the Financial Conduct Authority.
So if you have £10,000 to invest, where should you begin?
A global tracker is a simple starting point. This is a low-cost fund that tracks thousands of companies worldwide. They keep costs down by copying a chosen index, such as the FTSE 100 or S&P 500, rather than having an expert manager cherry-picking where to invest.
Holly Mackay, founder of investing website Boring Money, says they are an easy way to get instant diversification – spreading your money across lots of different regions and industries – something that is particularly important when the stock market is unpredictable.
She suggests the iShares Core MSCI World UCITS ETF as a good option. It charges just 0.2 per cent a year – equivalent to £2 per £1,000 invested. The fund tracks the MSCI World Index, a basket of more than 1,300 companies across the globe including familiar names such as Amazon, Apple and Nvidia. It has returned 75.7 per cent over five years.
A global tracker is a simple starting point for investors... it keeps costs down and is an easy way to get instant diversification
Those willing to take on more risk could consider Scottish Mortgage, an investment trust that seeks out businesses shaking up their industries, such as Elon Musk's Space X
The Fidelity Index World Fund is another highly rated choice, says Rob Morgan, chief investment analyst at wealth manager Charles Stanley. It follows the same index and charges 0.12 per cent. The fund has returned 76.4 per cent over five years.
With a tracker fund as a core holding, investors might look to add some interest around the edges of their portfolio with smaller amounts in funds that target specific themes or regions.
With these more targeted holdings, so having no more than 5 to 10 per cent of your portfolio in each is a good rule of thumb. You may want to stick to the lower end of this scale for riskier funds or consider investing a small amount then building it up over time.
Holly Mackay, founder of investing website Boring Money
Morgan suggests a global equity fund, JO Hambro Global Opportunities, which invests in the shares of dividend-paying companies. This gives investors the prospect of growth as well as a steady income stream, which can either be withdrawn or reinvested.
The fund has some differences to the global index, bringing some variety to an investment portfolio. Top holdings include the German stock exchange group Deutsche Boerse, US utilities firm Sempra, and French defence company Thales. The fund has returned 44.7 per cent over five years.
For more cautious investors, the Troy Trojan Fund has a focus on preserving wealth from inflation by investing in a mix of company shares, bonds, gold and cash.
Don’t expect stellar returns but a steadier ride during times of volatility. The fund has returned 24.7 per cent over five years. ‘Performance can seem pedestrian when markets are racing away, but it is worth considering as a defensive holding,’ says Morgan.
Those willing to take on more risk could consider Scottish Mortgage, an investment trust that seeks out businesses shaking up their industries that could be the leaders of tomorrow. The fund was an early investor in Amazon, for example.
Today it invests a chunk of its portfolio in private companies that are not yet listed on the stock market, which can bring more risk but the potential for greater rewards later on. Its largest holdings include Elon Musk’s space exploration company SpaceX and TikTok owner ByteDance. Performance can be bumpy and investors need to hold this one for the long term. Over five years it has returned 18.6 per cent, but over three years is up 131.6 per cent.
Those who don’t feel confident could opt for a ready-made option, says Mackay. Plenty of investing apps and platforms offer ‘one-stop shop’ investment funds tailored to different risk levels.
Vanguard LifeStrategy funds are a good place to start, ranging from a mix of 20 per cent shares and 80 per cent bonds (Vanguard LifeStrategy 20% Equity Fund) to an option that is 100 per cent invested in the stock market (Vanguard LifeStrategy 100% Equity Fund). ‘These are good choices for beginners who want an expert to manage their money,’ says Mackay.
It is also important how you invest. Nervous investors might want to drip-feed £1,000 chunks over ten months rather than all at once. Mackay says: ‘This will smooth out the price at which you buy into markets and can minimise the risk of buying at a high before a stock market dip.’