In page navigation

How to invest £100,000 to generate the best returns

If you have £100,000 lying around, it could be doing a lot more for you than sitting in a bank account earning minimal interest. This guide explores the best way to invest £100k.

By:

Updated: Oct 12, 2022

Listen

If you have managed to save £100,000, that money should be working as hard and effectively as you are. This helpful page explores how you can put £100,000 to work for the best possible results. Read on this learning guide to get started.

DISCLAIMER:

This is not financial advice. Always do your own due diligence.

How should I invest £100k?

There are many different ways you can choose to invest £100,000 to generate good returns, and the strategy you choose to adopt mainly depends on your own financial goals.

It is worth noting that £100,000 is a lot of money, and as a result, you have access to investments that someone with less capital wouldn’t be able to afford. However, you don’t actually have to spend all of it to achieve positive returns.

There are a variety of key factors to consider including the level of risk associated with each investment and the expected timeframe for returns. We delve into these subjects later on, but first, we have provided an overview of the different types of investment that are available to you.

Asset type	Level of risk	Potential returns
Stocks	Medium	High
Cryptocurrency	High	Very high
Bonds	Low	Medium
Forex	Low	Medium
Commodities	Medium	Medium
Real estate	Low	Medium
ISAs (and other savings accounts)	Very low	Low

Compare the best place to build a £100k portfolio

To start building a portfolio you will first need to register with a broker. Below you’ll find some of our expertly selected platforms. Offering low fee’s and easy to use interfaces these are some of the top brokers around. Click on any of the links to get started right away.

Building a £100k portfolio

This section provides some directives that should help you build a strong, diversified investment portfolio.

How much to invest

While there is no one-size-fits-all approach to investing, are a few popular rules of thumb when it comes to setting a budget that we feel are quite effective. The first tip is to keep 100 minus your age as a percentage of your investment portfolio in stocks and cryptocurrencies. So, if you are 40, aim to allocate around 60% of your £100k – £60k.

Another golden rule that a lot of investors stick to is to establish an emergency fund. Life always has the ability to throw up unforeseen surprises, so it is important you have money set to one side for such circumstances. With £100k, you have enough money to establish a solid financial mattress should you unexpectedly fall.

Be aware that if your £100k is not purely disposable income, you should strongly consider saving around half of it in a bank account or as a safe haven asset like gold or real estate that cope well when faced with market volatility and inflation.

What to invest in and why

For any investor who is looking for sustainable, long-term returns, and to minimise their exposure to risk, the majority of your portfolio should be low risk. This means considering mutual funds, large-cap/dividend stocks, real estate, and physical commodities. These are the assets that tend to hold up best in the event of market crashes.

For the minority of your portfolio, you can afford to expose yourself to more risk. So, small-cap stocks with good growth potential, derivatives, promising cryptocurrencies and obscure altcoins can all feature prominently. These are assets that have serious growth potential with the added compilation of enhanced risk.

Now, bringing these two segments of your portfolio together presents the key strategy to incorporate: diversification. Whatever you invest in, it is crucial that you diversify. This is the process of building a well-rounded portfolio consisting of assets with different catalysts and market dynamics. If you put all of your eggs in one basket, negative market conditions can cost you huge amounts of money, whereas spreading your capital out can increase your chances of success.

Should I see a financial advisor?

If you have the relevant experience and expertise to make your own financial decisions, you may not need a financial advisor. However, if you lack confidence in your own knowledge or investing ability, they can be a valuable asset to professionally bolster your investing setup. You should also think about whether you have enough free time to spend monitoring your investments closely.

The cost of a financial advisor’s services in the UK typically ranges from £75 an hour to £350, although the average rate is around £150 an hour. If you have £100k, this advice seems affordable and likely useful to facilitating a successful investing journey.

While it might feel like you can get all of the answers for free online, and you might have faith in your own investing abilities, hiring a financial advisor is always something you should consider.

The different types of investment

Below is a selection of the different assets you can choose to invest in along with a brief description of what they are.

Stocks. A stock is a portion of ownership in a publicly traded company. In general, stocks offer a medium level of risk with a substantial ceiling for returns. If you want less risk and are happy with more modest returns, you can invest in blue-chip or dividend stocks, whereas if you want very high returns and are comfortable with significant risk, you may want to consider penny or small-cap stocks. You can also invest in an ETF, which is a collection of stocks from a particular industry.
Bonds. A bond represents a loan made by an investor to a borrower – typically a company or government. The borrower receives the capital to fund its operations, and the investor receives interest payments. Bonds offer one of the most favourable risk profiles of all investment types, and they can still deliver solid returns.
Derivatives. A derivative is a form of financial contract that represents the value of an underlying asset. Popular derivatives include futures, options, forwards and swaps. The main reason you would consider a derivative is because it offers increased flexibility and is often cheaper than the asset the contract represents.
Cryptocurrencies. A cryptocurrency is a form of digital currency that uses something called blockchain technology, which is effectively a public ledger that stores information about transactions. With some of the largest cryptos, like Bitcoin and Ethereum, your level of risk will be lower, but the market will remain volatile. However, because of regulatory concerns and the threat of events like rug pulls, altcoins are a risky category of investment.
Forex. The word forex stands for foreign exchange, and is sometimes denoted as FX. The world forex market allows investors and traders to swap between fiat currencies like GBP, USD and EUR. While you can invest in currencies to speculate on long-term economic activity, they are most commonly traded with things like leverage to speculate on short-term price movements, market dynamics and geopolitical events.
Commodities. A commodity is a raw material or agricultural product that can be bought and sold. The most popular commodities for investors and traders include crude oil and gold. You can purchase a commodity physically and store it yourself, use a derivative to gain exposure to its price, invest in stocks of companies that produce the commodity, or invest in an ETF that carries the commodity.
Real estate. A piece of real estate is a property, all the buildings on it, and its land and natural resources. Investors can purchase real estate to speculate on its value, and they can also rent it out for consistent returns. You can also invest in real estate for yourself, or invest in a fund known as a real estate investment trust (REIT).
ISAs and other savings accounts. ISA stands for Individual Savings Account. They come in different forms, but they are essentially a way of earning interest on your savings, and they have an annual tax-free allowance of up to £20,000. In addition, you can save your money in a regular savings account, though interest rates are currently extremely low.

What to consider before you start investing

When designing an investment portfolio, there are a variety of things to consider. Here are some of the key factors to take into account.

Your finances

Before making any investment, it is crucial that you assess your own financial situation. Any money that you invest needs to be disposable income that you can afford to lose, and you also need to take into account any debts or ongoing financial obligations.

Is the £100,000 you have set to one side your entire savings, or is it extra on top? If it isn’t money that you would readily spend, this is a sign that you should exercise caution.

How important this level of money is to you will vary based on your own circumstances. So, for some, they will be happy to plow it into risky ventures, whereas others will want something more predictable. It is worth noting that £100k is sufficient money to generate solid returns without having to take big risks.

Why are your investing goals?

At the heart of any investment decision is your own goals. Why exactly are you investing? Are you saving for retirement, a new car, or for your child’s university fund?

If you are saving for something you regard as crucial, risk is the enemy. By contrast, if you aim to be able to afford a luxury good or service, risk is substantially more tolerable.

You also need to take into account how long you are willing to lock your capital into an investment, and how long to plan to wait for returns. Once again, this will vary based on the level of returns you desire, changes to your financial circumstances, and any time-specific financial objectives you have.

How much money do you want to make?

This consideration is quite self-explanatory. How much money you want to make from an investment will affect how long your capital is set to one side for, as well as the type of investment you go for.

If you are looking to make sizeable returns, small-cap stocks and cryptocurrencies have exhibited the potential to turn smaller investments into major gains. While blue-chip companies and real estate may have less growth potential, they are more consistent performers.

While everyone wants to get rich-quick, it is pretty much impossible, so it is important to be realistic and adopt a balanced approach to building your 100k portfolio.

Your risk tolerance

Risk tolerance is crucial when building a portfolio. When making any investment, there is always a degree of risk; even a giant multinational corporation like Amazon could unexpectedly go under, no matter how unlikely.

Different assets have different kinds of risks. For instance, cryptocurrency has regulatory risks because of its status as an emerging asset class, real estate that you invest in could gave structural issues, and the company you have obtained a bond with could go under.

As a result, it is important to be honest with yourself about how much risk you find acceptable. Once again, this is a personal call, and you should never feel pressured into investing your money. Never jump into an investment with a fear of missing out, because despite £100k being a lot of money, this figure can quickly dwindle.

How long are you willing to invest for?

If you are investing in something for the long term, you won’t have access to that capital for a while. There are benefits to this, such as potentially creating favourable tax conditions, but the main drawback is your options become more limited.

With £100k, you can afford to spread your money around more. Therefore, your risk will be mitigated, and your investments will be more liquid. It is best to balance long-term investments with short-term plays for a well-rounded portfolio that benefits from different catalyst moments and consolidates for specific market declines.

How are you going to invest?

It is extremely important to consider how exactly you want to invest. You could use a mobile app or your desktop, and for assets like cryptocurrencies, you can choose between brokers and exchanges.

The best way to look at this is to think about what style is likely to lead to the best returns. For example, if you are on the move all day but want to keep a close eye on your investments in the short term, a mobile app will provide flexibility and convenient access to your portfolio. However, if you are typically more stationary, you may want to set up several monitors so you can track multiple markets at once, especially when monitoring something as delicate as the forex market.

Furthermore, you should consider whether you want to be an active or passive investor. If you have a lot of time on your hands, you can afford to be more hands-on and spend more time monitoring and managing your portfolio. However, if you don’t have this time on your hands, or if you simply don’t want to spend your time staring at a screen and want your money to be working for you in the background, a more passive approach may be superior.

Once you have taken these factors into consideration, it’s time to start investing.

How to start investing

To get started investing, you need to sign up to a trading platform for assets that are available online, or you can purchase physical assets – commodities like gold coins and bars, or real estate – from a suitable vendor.

When signing up to an online platform, you will typically be choosing between a broker – which supports stocks, some currencies, some cryptocurrencies and commodities – or a cryptocurrency or forex exchange.

There are many options out there, but handily, we can help you cut through the noise with our in-depth reviews. Each platform has different fees, minimum deposits, supported assets, and customer support services, and our reviews help identify the best options, listing all of the unique features, advantages and disadvantages that you need to be aware of.

A quick recap of what we’ve learned

Fundamentally, building a balanced portfolio is key with £100,000. You want the bulk of your portfolio to be a strong blend of the top-performing stocks – some of which pay dividends – and other lower-risk assets, with some higher-risk options like cryptocurrencies.

While the most lucrative returns on the market can come from things with minimal fundamental value, such as meme stocks, these are assets that should be generally avoided unless you are happy to gamble your money with extremely low odds.

There are a wide variety of assets you can invest in that we covered, and there are numerous considerations you should make regarding your own circumstances and personal financial goals.

The most important thing to remember is to take your time and carefully conduct your own research. Never rush into an investment for fear of missing out, and never panic sell an investment if its price begins to unexpectedly fall.

Investing and trading courses

Stocks Courses

Stock Markets 101

More about this course Are you tired of investment courses that use too much insider jargon, trying to sound clever rather than actually educating investors on how to succeed in the stock market? We’ve got the solution for you!…

Stocks Courses

Long-term Stock Investing

If our Stock Markets 101 course was your introduction to stock market investing, think of the Stock Investing course as the next step, your intermediate-level guide to investing. Just remember, this is not a get-rich-quick scheme and takes time, patience, and emotional stability.

Stocks Courses

Short-term Stock Trading

Luckily, it’s far easier to begin trading than it was in the 90s when Wall Street and big money were the only options. Get started with our introduction to stock trading. You’ll come away feeling more confident about the task ahead, while acquiring a base knowledge of all the most…

More investing & trading guides

Sources & references

Risk disclaimer

Charlie Hancox

Financial Writer

Alongside his passion for trading, Charlie has represented Great Britain and won national championships as a water polo player, and as a budding film director, has... read more.