How should I invest a £50k lump sum?

Moneywise believes in helping you save money so you can focus on taking your first steps on the investment ladder. Over the long term, investing money will produce far greater returns than you'll get from high street savings accounts.

With that in mind, our "How should I invest..." column aims to help beginner investors of any age and any financial background plan for their family's future by offering hints and tips from the UK's leading independent financial advisers on how and where they should invest their cash.

In this edition, it's how to invest £50,000 as a lump sum.

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"How and where to invest £50,000 is very dependent on a number of factors – time horizon, attitude to risk and objective – whether that's income, growth or a bit of both," says Sheridan Admans, investment research manager at The Share Centre. "These variables will help determine what strategy an investor might follow to achieve their goal," he adds.

Patrick Connolly, a chartered financial planner at Chase de Vere, adds it is very important not to make any hasty decisions and to be mindful of spreading risk, too.

"If you don't have many, or any, other investments, then you shouldn't take too much risk. If you take big risks and your investment falls by 20%, which is entirely possible, then your £50,000 investment will be worth only £40,000," he warns.

Connolly believes the best way to spread risks, and so help to protect your money, is to invest in different investment types. "So perhaps put some money in shares, some in fixed interest and some in property.Then also spread risks within each of these assets by picking different types of investment in different geographical regions. So, for example, with shares you can invest in large and small companies, in different types of businesses and in different parts of the world," he says.

You also need to be mindful of your timescale when deciding how and where to invest, Darius McDermott, managing director of IFA Chelsea Financial Services, points out. "Assuming the investor has a time horizon of a minimum of five years, they could get some nice diversification by investing the money across five to 10 different funds."

You should also look to hold your investment as tax efficiently as possible. Admans says: "If the investor has not made use of their Isa allowance, I would suggest this as a priority."

However, Connolly adds that for many people, a combination of pensions and Isas can be suitable. Pensions give initial tax relief, and stocks and shares Isas can be tax efficient and provide far greater flexibility as you can get hold of your money when you want.

McDermott urges those looking for a home for a significant lump sum to avoid cash. "Cash rates are very poor across the board, with only a small percentage of accounts beating inflation, so I wouldn't assign any portion of this investment to that asset class."

Finally, if you're not sure what you should do, then you should take independent financial advice.


Connolly suggests those looking to spread risk by diversifying could consider investing through one multi-asset fund such as Cazenove Multi Manager Diversity, Fidelity Multi Asset Strategic or M&G Episode Balanced.

Alternatively, McDermott recommends they consider Chelsea’s balanced growth Easy Isa portfolio, which includes AXA Framlington American Growth, JO Hambro UK Opportunities, M&G Recovery, Rathbone Global Opportunities, Threadneedle European Select and L&G Dynamic Bond. He suggests Newton Absolute Return could also be added to the mix.

However, for those looking for income, he suggests a diversified income stream from a mix of property, strategic bond and equity income funds that use covered call options to enhance the income provided.“I like the Henderson UK Property fund, which has one of the highest yields in the sector; Invesco Perpetual Monthly Income Plus, which again has one of the highest yields in its sector; Fidelity Enhanced Income; RWC Enhanced Income (both of which use covered call options) and Newton Asian Income.

Admans suggests investors seeking income and who are prepared for a bit more risk in the hope of generating growth could consider the M&G Global Convertibles, Newton Global Higher Income and Legg Mason ClearBridge US Aggressive Growth funds.