If you’re looking for the best way to invest 30k or 40k in the UK, you’ve come to the right place. In this Moneyfarm Insights blog, we talk about different ideas regarding what to do with these types of sums of money.
£30K or £40K is a considerable amount of money. Regardless of the ways you choose to invest your money to achieve your financial goals, your decision should be driven by your investor profile.
Your investor profile is determined by things like your tolerance towards risk. For example, your options concerning the best way to invest 30k or 40k include putting it into various investment vehicles such as stocks, bonds, and ETFs. However, you must choose the right one if you aim to access your money without facing a penalty when the need arises.
Is 30k or 40k a lot of money to invest? | Absolutely |
Where can you invest 30k? | Stocks & ETFs, mutual funds, real estate, and alternative assets |
How can I invest 40k? | You can invest in a retirement plan, investment account, robo-advisor or individual stocks |
Where is the safest place to invest 30k? | Gilts |
In this article, we take a look at the best way to invest 30k or 40k as either a 1-off lump sum or as a regular yearly contribution, etc. We will also discuss types of investments, investing in the FTSE 100, investing in the S&P 500, and what sort of other options are open to you.
As an investor, you don’t want to expose your funds to overly risky investments. It’s all about making as much money as possible while minimising risk at the same time. So, let’s kick off by looking at the saving vs investing argument.
Why invest rather than save?
Saving and investing are two different things. Saving is about setting money aside a little at a time toward a specific goal – examples include saving for a new three-piece suite, a vacation, or setting up an emergency fund for unseen expenses such as having to call in a plumber to fix a leak.
Typically, the vehicles people use to hold their savings include current bank and savings accounts, building society savings accounts, and NS&I Premium Bonds.
The benefits of investing 30K or 40K in the UK
Investing is about taking money and putting it into products like property or stocks and shares in the hope that it will appreciate over time. Given the number of choices available, finding the best way to invest 30k or 40k is essential if you want to optimise fund growth.
While saving and investing money earns interest or returns, the interest on savings is typically relatively low. It’s the same old story as reported by the BBC. However, as you the return on ETF investments can easily reach double-figure percentages.
People who decide to invest money rather than save it in low-interest savings accounts that erode the value of their money in real terms still want to invest with as little risk as possible—especially given the hefty increases in UK inflation we’ve had to put up with over the past two or three years. It was only in October 2022 that it reached a 41-year high of 11.1%. The right investment vehicles can give your money a chance to keep pace with and even beat inflation in the long term.
Long-term vs short-term investment strategies
Long-term investing may not appeal to you if you are worried about being able to access your money quickly. If this is the case, the best way to invest 40k for you could be a cash ISA. However, this type of account doesn’t earn much interest. They’re okay for smaller amounts of money tucked away as an emergency fund but are not suitable if you’re looking to outpace inflation.
If you want to try to make a good return on short-term investments, you’ll need to choose products that carry higher risk factors. This approach is not suitable unless you really know what you’re doing.
Long-term investing is the way to grow your funds and beat inflation. However, if you’re interested, there is a sort of “halfway house” the Moneyfarm Liquidity+ option.
Let’s explore some other investment options.
Comparison of investment vehicles for 30k and 40k
You have a wide choice of asset classes from which to choose. They include
- Bonds
- Commodities
- Cryptocurrencies
- ETFs
- ISAs
- Real estate
Which would be the best way to invest 30k or 40k or any other figure?
Investing in government or corporate bonds
Government Bonds (Gilts) are one of the asset classes usually considered relatively stable. But even these have been the subject of nervous speculation following recent political events. So, whereas you might have viewed bonds as one of the ways to invest 30k relatively safely, now you wouldn’t be blamed for thinking twice.
Investing in commodities
Commodities are raw materials that fit into several categories, including foods, metals, precious metals, oil and gas. You can invest in commodities in several ways. For example, you might buy the product itself (more difficult in some cases than others) or invest in the companies that farm, mine or otherwise produce them. You can also invest in commodity futures or ETPs (Exchange Traded Products), which track commodity indices.
Because commodities are subject to the laws of supply and demand and geopolitical situations, they can be somewhat volatile. Therefore, some investors might not consider them the best way to invest 30k or 40k. However, when it comes to investing in mutual funds, ETFs (exchange-traded funds), or ETPs (exchange-traded products), the risk element can be diluted through diversification.
Only a few people genuinely understand commodities. You may need access a trusted, professional financial advice. If you’re not that familiar with them or how they behave and are uncertain that this is the best investment vehicle for your 30k, perhaps you should look elsewhere.
Cryptocurrencies are high-risk
An article recently published on Times Money Mentor highlighted that cryptocurrencies can be highly volatile and therefore considered high-risk. Their high-risk rating can be put down to a combination of four things
- Extreme volatility
- The abundance of scams
- High return exaggeration
- Lack of any compensation schemes
Such is their volatility that you could lose a considerable amount, if not all, of your investment almost overnight.
Investing in real estate
For many investors, real estate has historically been among the best places to invest 40K. However, after the turmoil caused by ex-Chancellor Kwasi Kwarteng’s mini-budget in September 2022, some potential investors are still somewhat nervous. Even though the new Chancellor, Jeremy Hunt, has reversed the majority of the mini-budget elements, the withdrawal of many mortgage products has made many investors think twice about property investing.
Events like the £453m Columbia Threadneedle UK Property fund stopping dealings due to the high number of redemption requests have resulted in many people reconsidering their investment strategies. Even though the situation has changed, some still believe that property might not be the best way to invest 30k short term.
Another possible best way to invest 30k or 40k in real estate that offers inbuilt diversity is through a Real Estate Investment Trust (REIT). If this type of fund is of interest and you’re considering a bigger venture, say, how to invest 75K? you can check out the “Which UK REIT pays the highest dividends?” page on the UK-Reit.com website
Despite the recent turmoil, if you are considering an even bigger venture, say how to invest £200,000, a long-term real estate investment could still be an option, especially if you favour a countercyclical strategy.
Investing in ETFs
Exchange-traded funds, or ETFs for short, have gained in popularity since the first ETF was launched in Canada in 1990. The first ETF in the US (S&P 500 SPDR (SPY) was launched in 1993, coinciding with the introduction of the SPDR. Two years later, in 1995, the second US ETF (MidCap SPDR (MDY B) was launched, and the rest, as they say, is history. In 2024, there are now over 12,000 ETFs globally.
ETFs permit you to buy a broad range of asset classes and create a diverse investment portfolio. The most popular ones track major indices like the FTSE 100 or S&P 500 and can be traded on the stock market throughout the day. They are worth considering if you are looking for the best way to invest 30k, 40k or more. They have become part of many investors’ investment strategies.
Tax implications on investment returns
All of the investment vehicles mentioned above are subject to taxation, both on capital gains and income. But when considering the best way to invest 30k in the UK, there is another option that avoids all types of tax.
Investing in stocks and shares ISAs
All ISAs, including the stocks and shares ISA, are known as “tax-wrappers,” which is why they are one of the most popular investment vehicles with UK investors. This is because you do not pay tax on any gains or withdrawals. In fact, you do not even have to declare ISAs on your tax returns.
But if you are wondering how to invest £100,000, you need to be aware that your annual ISA allowance is limited to £20,000 per annum. You could, however, invest the balance of £80,000 in a General Investment Account (GIA) as there is no upper annual limit with this type of fund. So, if you’re pondering how to invest money in larger sums like this, GIAs are an excellent option.
You can use GIAs to invest in a wide selection of asset classes, including things like bonds, ETFs, investment trusts and stocks and shares, and every year, transfer £20,000 into an ETF or stocks and shares ISAs to make the best use of the tax-wrapper advantage.
If you have a large sum and are looking for an investment strategy to take advantage of your tax allowances, a GIA/ISA combination could be the perfect solution.
We said earlier that ETFs are taxable. There is a way around it, though, and that is by opening an ETF ISA.
Diversification strategies for a 30k or 40K portfolio
There are two acknowledged ways of mitigating risk when investing. The first is long-term investing, which gives your funds a better chance of riding out any declines in stock market values. The other mitigator is diversification.
The more diversification your portfolios have, the better. It works on the theory that while some stock market sectors and individual share prices fall, others will rise. In terms of diversification, a well-balanced portfolio helps to counter the overall risk factor. Vehicles like ETFs and ISAs contain excellent equity diversification.
Evaluating risk and potential returns
When you’re considering investing for the first time, whether you’re wondering how to invest £1,000 or what the best way to invest 30k or 40k would be, one of the most important factors to take into account is your attitude toward risk. If you’re risk averse, you should avoid high-risk investments because, by nature, they are more volatile. These types of investments are best left to more experienced investors.
Risk assessment for investing large sums
Risk assessments are usually associated with physical dangers in the workplace. They are designed to help prevent injury, but they are also relevant when investing. Even choosing the best way to invest 40k in the UK carries a degree of risk—most investments do, apart from gilts, perhaps.
In the same way that risk assessments in the workplace should be carried out by trained professionals, the same applies to investments. Unless you’re a skilled finance professional, you should get the help of an FCA-approved financial advisor.
Understanding the relationship between potential returns and risk is important, and knowing your individual investor profile is key. If you’re an investment newbie, again, it might be best to seek professional advice from an FCA-approved finance specialist
Case studies are interesting, but an overall assessment is more informative
We maintain that the best way to invest 30k or 40k in the UK is with a Moneyfarm investment portfolio. There are seven from which to choose. They vary in terms of risk, allowing you to choose the right risk level for you. If you check out their performances over the last 8 years (from 2016 to 2024), you’ll see that portfolios 3 to 7 have shown returns of from 37.7% to 94.8%, as opposed to the performance of our competitors’ similar portfolios, which only managed 19.4% to 62.2%. As far as an overall case study goes, its pretty impressive, even if we do say it ourselves.
FAQ
Should I save or invest £30k or 40k?
Deciding whether to save or invest your hard-earned money depends on your willingness to take the risks involved with investing. For example, if you’re putting your funds into stocks, you could lose everything if the market crashes. On the other hand, if you’re putting money into bonds, you’ll get a steady return without taking considerable risks. Remember, not every investment is right for everyone.
Should I seek help from a financial advisor before investing £30k or 40k?
If you’re new to investing, talking to an FCA-approved financial advisor might be the best way to proceed. You can get advice which might help you reap better returns. Financial advisors can also help you manage your investments and plan your long-term goals.
Where’s best to invest 30k or 40k?
Depending upon your financial situation, risk tolerance, and goals, there are some good investment opportunities available for people who want to invest their hard-earned cash. Examples of such investments include stocks and shares ISAs, individual stocks, ETFs, mutual funds, bonds, real estate, and peer-to-peer lending (innovative finance ISAs). Some of these investment vehicles are riskier than others, so do your research well or chat with an FCA-approved financial advisor.
*Capital at risk. Tax treatment depends on your individual circumstances and may be subject to change in the future.