Best Ways to Invest

What is the best way to invest money in the UK?

When we invest, we take our hard-earned cash and want to generate returns with as little risk as possible. Since investing inevitably comes with risks, we must find the best way to invest through researching the most successful methods that have worked for past investors. Knowing what to do with your money and where to invest it can be difficult, and this is especially true since rates on typical savings accounts are lower than ever before.

To help get you started, we have created a list of the best investments right now that are sure to generate good returns and leave you feeling confident and secure for your financial future. Whether you’re looking for the best short term investments or something that will last a little longer, it’s essential that you’re prepared and know what is coming your way. Plus, we have also included some advice on what to consider when you’re looking to make the best return on investment and what to consider before investing.

Be Prepared (for the highs and lows)

Both highs and lows are all part of the process when you’re investing money. There are risks with long term investment as it can fall in value at any time, but there is also risk taken on the short term investments too. Ultimately, you have to stay prepared and aware that while you will make a return in the long term, you have to give yourself a chance to overcome any shorter-term dips and humps that might occur before you get there. If you want to maximise your chance of good investment returns, then looking at the best investments to make money is a good place to start.

People often assume that the best way to invest money in the UK is the stock market, and while investing in stocks is a highly profitable strategy, there are multiple other options to consider too. We would advise any potential investor or individual who wants to invest their money to always assess their financial situation before jumping headfirst into an investment.

What to Consider

Risk and time play a role in deciding what type of investment is best for you. The main element we must consider is the risk tolerance of any investment and how it will impact your finances. Those who want the best place to invest money without risk may want to look towards the likes of easy access or fixed cash ISAs, or perhaps property investment as these are both secure and stable markets within the investment industry.

If you’re looking for a higher risk investment and seem to have a stronger stomach when it comes to accumulating funds and growing your portfolio, then you can diversify into the likes of the stock market. High-risk investments are common with those who are looking for the best return on investment as it’s often the case that more risk equals better returns. Regardless of risk, it’s highly likely that you’re looking to grow your wealth significantly within a certain time frame. This must be considered when investing as you don’t want to end up out of pocket.

Best ways to invest

Here are a few of the best high and low-risk investment options to consider, despite the amount you’re planning on investing.

The Stock Market – The Best Return on Investment

When talking about investment, most people assume you’re referring to the stock market and all it has to offer. While we wouldn’t say this is the best way to invest money in the UK (due to high risk), it’s evidently popular with a large number of people across the world. Investing in stocks does have advantages, however, which include:

  • You can invest internationally, meaning there is no need to keep your money in companies that are on your home turf.
  • They’re “paper” investments which means you don’t have to manage a business or property, simply invest and get on with your life as the stocks continue to make you money.
  • You can spread your investment portfolio across multiple different industries and companies with ease.
  • Financial and investment apps make investing in the stock market more accessible than it has ever been.

Despite the numerous benefits of investing in the stock market, it isn’t typically one of the best long term investments as stocks do tend to fluctuate up and down a lot which adds increased risk to losing your money. However, if you’re up to date on the latest stock trends, then it could be a quick fix to financial freedom. We would just recommend staying vigilant and careful when putting a significant amount of money into any stocks.

Easy Access and Fixed Cash ISAs – The Best ISAs to Invest In

Moving onto a more secure and stable way to invest your money, we consider the advantages of ISAs. ISA stands for Individual Savings Account which is essentially an account that you can get tax-free interest payments as long as you meet the minimum requirements of that ISA. With many different ISAs to consider, you may be wondering, “what are the best ISAs to invest in?”. If so, we would suggest either the easy access or fixed cash ISA as the best way to invest money in the UK since they’re readily available and don’t require many upfront fees.

What are the benefits of having an ISA?

Those who are looking at putting their money into an ISA will find that there are a number of advantages:

  • Easy access ISAs are great if you’re only new to investing and want to get started without the risk or instability of other investment markets. However, these types of ISAs can be limiting since the best rate of interest you’re going to get is most likely around 1.3% and that is capped when you get to your annual ISA allowance of £20,000. Easy access does mean that you’re able to withdraw your cash at any time without a penalty and you’re not secured into any contract, hence the name. Keep in mind though, if you get the easy access ISA and can put in the limit of £20,000, at the highest rate of interest you’re only going to get £260 yearly return which isn’t very much at all.
  • Fixed cash ISAs can offer a higher return but do come with more commitment. You’re likely to get interest rates of 1.5% to 1.7% when signing up, and this depends on the provider, but you will enter into a fixed payments contract for a certain number of years. Plus, with fixed cash ISAs, you often have to open them with a sum of money, anywhere from £500 to £2,500 depending on which one you choose.  

Overpay your Mortgage – The Best Long Term Investments

An unconventional and sensible way to invest your money has to be overpaying your mortgage. A mortgage is a huge debt that you acquire as a homeowner when you can’t afford to buy a property outright, and this is typically taken over a number of years (from around 20 to 30!). However, if you find you’ve come into some money and can afford it, it’s definitely the best way to invest your funds. Since you will be paying off a large chunk of your mortgage, you won’t have to worry about the monthly repayments going forward and you can save the money you would be paying for another investment instead.

Using any extra money to pay off your mortgage could save you hundreds or thousands of pounds in interest. While this is a good idea in terms of the money you’d save, it might not be one of the best investments right now for your situation. This is because some mortgage providers charge a penalty fee for overpaying your mortgage on a yearly basis. The penalty figure ranges from 1 to 3% of your payments which could end up costing you more than you thought. Despite this, overpaying your mortgage is a great long term way to save money and invest in your future. If you do this, you could potentially put any remaining savings into a fixed rate ISA to get good returns on what would have been your mortgage payments. Essentially it is one of the best long term investments as you’re saving yourself money but still have your home as an asset.

Invest in Property – The Best Way to Invest

Arguably the best way to invest is to look into the property market. Property investment is a highly lucrative and profitable way to make money and is often considered to have the best return on investment too. Depending on how much capital you have available, investing in property could be a great way to make returns on the money you already have. What is ideal about property investment, especially buy to let opportunities, is that you have rental repayments coming in every month, but you also have the increasing value of your asset.

Savvy investors who research the property market will find that they can reap the financial rewards of owning an investment property. There are various types of property investment, which include:

  • Buy to let properties

Buy to let investment is one of the best investments right now as the market is booming with opportunity. With the younger generation choosing to rent rather than buy their homes, investors can expect high amounts of rental income as well as their property gaining value over time. If you’re knowledgeable about the property market and what areas are the best for buy to let, you can easily make huge returns. According to Totally Money’s Buy to Let Yield map, L1 (in Liverpool), FK3 (in Falkirk) and G52 (in Glasgow) come out on top in terms of rental yields as all of these locations boast yields of 8.7% and above. You will want to keep rental yields in mind when looking into buy to let investments as this is an indication of the level of return on investment you will receive. The higher the rental yield, the better your returns.

  • Buy to sell properties

Buy to sell are a little different than buy to let as most of the time people will buy a certain property, renovate it, and then sell it with the intention of getting a higher price (which means they will make a large sum of money). Buy to sell is also known as house flipping and is often referred to as one of the best short term investments. This is because you will acquire the return after you sell, which could be in a short time period. Depending on what needs to be done to the property and the issues it has, you could turn around a buy to sell property within a matter of months. With this in mind, it’s still essential to consider the area you’re buying in and the typical selling prices of properties within this location to ensure you’re not buying above the average cost and will make a good return.

With any property investment, you will need a large amount of capital upfront, Otherwise, you’re not likely to get accepted for a mortgage. Buy to let and sell mortgages require at least a 25% deposit of the amount you’re requesting but if you have more capital than this and can afford the property outright, it would be worth avoiding a mortgage altogether as the interest rates can be high.

Anyone interested in learning more about property investment, or any type of investment, should read UK investment blogs or books to clarify any confusion and find out more about the market they’re interested in. Doing research is essential for success!

Government (Glits) or Corporate Bonds – The Best Investments to Make Money

Companies and governments sometimes use fixed interest securities from investors to raise money for something they need. These interest securities are known as bonds and loan stocks, but the most popular in the UK are bonds. UK government-issued bonds are known as “glits” while those issued by companies are known as corporate bonds.

When investing, an individual will be given a nominal value which is a standardised unit for the fixed interest, price and other details of their investment. The nominal value is typically £100 and if you hold the interest security until the end of its term, you will get this nominal value back. In order to make money on your investment, the company or government will have a security rate (such as 6 or 7%) which will be added to your bond at regular intervals.

The reason people see these bonds as one of the best investments is because they’re safer than shares. For those investors who prefer low-risk investment types but still want to utilise the best way to invest money, UK government bonds are a popular and secure choice. However, due to how safe the investment is, it means that returns will be relatively lower than other options. You should also keep in mind; this is a long-term investment strategy and you won’t gain huge financial rewards quickly – this type of investment is ultimately more suited to those who don’t mind playing the long game.

Those who want to take a leap of faith and invest their money should keep up to date with our latest blogs which cover everything you need to know about the best short term investments and the best ways to invest as well as financial tips and tricks to keep in mind.

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