If you’ve got a spare 5000 pounds to invest, you’ll be lucky to earn more than 1% through bank account interest rates.
Instead, by exploring other asset classes – such as stocks, bonds, index funds, and ETFs – you’ll stand a much better chance of growing your money faster.
You do, of course, also need to factor in the risks – as this is something that all investment products attract.
In this guide, we discuss the best 10 ways of how to invest 5000 pounds UK. We cover a variety of assets with varying risks and potential rewards – so you’re sure to find an investment that meets your financial goals!
Top 5000 Pounds Investments 2021
The 10 best ways to invest 5000 pounds are broken down below – as per our own research and analysis. For a full review of each investment, scroll down.
- FTSE 100 ETF – Overall Best Way to Invest 5000 Pounds – Invest Now
- Tesla – Best Way to Invest 5000 Pounds in Growth Stocks – Invest Now
- iShares MSCI EEM ETF – Invest 5000 Pounds into the Emerging Markets – Invest Now
- Gold – Invest 5000 Pounds Into a Solid Store of Value
- Amazon – Best Long-Term Stock to Invest 5000 Pounds
- Cryptocurrencies – High-Risk Investment Class but Huge Upside Potential
- iShares Core High Dividend ETF – Best Place to Invest 5000 Pounds into Dividend Stocks
- Automated Trading – Invest 5000 Pounds Into a Full-Time Investor
- Stocks and Shares ISA – Best Way to Invest 5000 Pounds Tax-Free
- Permanent Interest Bearing Shares (PIBS) – Best Way to Invest 5000 Pounds for Fixed-Income
Best Ways to Invest 5000 Pounds UK
There are thousands of ways you could potentially considering investing 5000 pounds. This covers a wide range of available asset classes – such as stocks, bonds, ETFs, index funds, and more.
To give you a bit of inspiration, below we discuss some of the best ways to invest 5000 pounds UK.
1. FTSE 100 ETF – Overall Best Way to Invest 5000 Pounds
If you’re based in the UK and are wondering where to invest 5000 pounds – it might be worth keeping things simple by sticking with the FTSE 100. For those unaware, the FTSE 100 is the UK’s primary stock market index. It consists of the 100 largest companies listed on the London Stock Exchange – based on valuation.
Some of the biggest companies that you will find on the FTSE 100 include the likes of Unilever, AstraZeneca, HSBC, Rio Tinto, Diageo, Royal Dutch Shell, British American Tobacco, BP, GlaxoSmithKline, and Vodafone. The key point here is that instead of buying one or two shares, you will be investing your 5000 pounds in a fully-diversified basket of stocks.
This is the best way to approach the investment space, as you won’t be overexposed to a single asset. Instead, not only will you be backing 100 different companies – but dozens of sectors. For example, you’ll be holding stocks in sectors like banking, pharmaceutical, technology, beverage, retail, and more.
In terms of how a 5000 pounds investment into the FTSE 100 works – it is important to note that the index is weighted. For example, let’s suppose that Unilever has a weight of 4%. This means that 4% of your 5000 investment will be held in Uniliver shares – so that’s 200 pounds. If BP has a weight of 2%, then you would own 100 pounds of BP shares – and so on.
We should also note that by investing 5000 pounds into the FTSE 100 – you will also be entitled to dividends. This will be paid to you at an amount proportionate to what you have invested into the respective share. For example, if you hold 200 pounds worth of Unilever shares and it pays an annual dividend of 5%, you would receive a payment of 10 pounds on this stock.
In order to make an investment, you would need to go through an ETF (Exchange-Traded- Fund). The ETF provider will buy all 100 shares listed on the FTSE 100 – at the correct weight. A great example of this is the FTSE 100 ETF offered by iShares – which you can invest in at eToro commission-free and at a minimum of just $50.
In terms of the fundamentals, the FTSE 100 is currently on a recovery journey as per the pandemic. Back in early 2020, the index dropped from just over 7,000 points to down to 52-week lows of 5,000 points. At the time of writing in late February 2021 – the index has recovered to 6,658 points.
Crucially, there’s much to be excited about with the UK economy at present. Not only are the Brexit negotiations finally a distant memory, but the UK has one of the fastest coronavirus vaccine rollouts globally. In turn, this could be a great time to invest in the wider UK stock market.
Your capital is at risk.
2. Tesla – Best Way to Invest 5000 Pounds in Growth Stocks
In the section above, we explained that the FTSE 100 is great for building a diversified portfolio of stocks – meaning that you aren’t over-exposed to a select number of companies. However, there is nothing wrong with adding a selection of individual stocks to your portfolio – as long as you are well diversified.
With this in mind, it might be worth considering Tesla shares. This growth stock – which is now the largest carmaker globally in terms of valuation, is one of the best-performing shares over the past decade. When the electric vehicle manufacturer went public in 2010 on the NASDAQ, you would have paid just $3.84 per share (this price is adjusted for its 2020 stock split).
If we then fast forward to early 2021 – the same Tesla stocks hit all-time highs of $900 per share. That’s an increase of over 23,000% in just over a decade. To put that in real terms – had you invested 5000 pounds into Tesla back in 2010 – your money would now be worth over £1 million.
As a growth stock, Tesla is yet to pay a dividend – and this will likely be the case for many years to come. After all, the firm is still at the very start of its electric carmaking journey. In terms of what the future holds for Tesla, it is also important to remember that the firm isn’t just involved in vehicles. On the contrary, it is behind a full wave of innovative products and services.
For example, Tesla is behind cutting-edge solar panels that can replace conventional roof tiles. Not only does this make the process of installing solar technology to your home easier, but it’s a lot more cost-effective, too. Tesla is also behind the world’s largest ‘mega battery – which again, will drive the future of how we view and consume energy.
The bad news is that at current prices of $800-$900 per share – this isn’t going to cost you around £500-£600 for just one stock. The good news is that when using a broker like eToro that supports fractional shares – you only need to meet a $50 minimum (about £35). As such, this will allow you to invest in Tesla without being overexposed!
Your capital is at risk.
3. iShares MSCI EEM ETF – Invest 5000 Pounds into the Emerging Markets
The emerging markets consist of countries with some of the fastest-growing economies globally. As a casual UK investor, you will find it difficult to gain access to these markets. But, by going through an ETF such as the iShares MSCI EEM – you can invest in this marketplace at the click of a button.
In a nutshell, the iShares MSCI EEM ETF gives you access to over 1,100 large and mid-cap stocks from the emerging markets. Some of the countries that you will be investing in, include China (39%), South Korea (13%), Taiwan (13%), India (8%), and Brazil (4%). You will also have holdings in firms based in Mexico, Russia, Saudi Arabia, Thailand, and South Africa.
This highly diversified portfolio contains some well-known companies – such as Alibaba, Tencent, Samsung, China Construction Bank, and NIO. However, with the ETF holding over 1,100 stocks – there are plenty of firms that you have likely never heard of, albeit, they dominate their respective sector in their home nation.
In terms of performance, this iShares MSCI EEM ETF is up 17% as of the first two months of 2021. Higher returns are targetted with this ETF, based on the rate at which the emerging economies are growing. But, the risks are also much higher – as it remains to be seen how these fast-growing economies will deal with a much broader global recession.
As such, if you do like the sound of this ETF, it’s best to keep your stakes modest. This is possible at eToro, as the minimum ETF investment is just $50. Finally, we should note that at an annual management fee of 0.70%, this ETF will be slightly expensive. However, this does make sense when you consider you will be getting direct access to the emerging nations.
Your capital is at risk.
4. Gold – Invest 5000 Pounds Into a Solid Store of Value
Another way to invest 5000 pounds in the UK is into a store of value like gold. This precious metal has held its own for thousands of years – and will likely continue to do so forevermore. After all, gold is not only demanded globally by central banks, hedge funds, and consumers – but it is a finite asset class.
This means that there is only so much gold that can be mined on Planet Earth, so in theory, its value should continue to rise over the course of time. To illustrate this point further, gold was priced at about £200 per ounce in 1992. Fast forward to early 2021 and this precious metal is worth approximately £1,300.
That translates to growth of 550%. With that said, this strong and solid asset class has performed particularly well over the past 5 years. In fact, the value of gold has increased by over 80% since 2016. The good news is that if you do want to invest in gold, you don’t need to go out and buy physical coins or bars.
On the contrary, you can now complete the process from the comfort of your home. At eToro, the FCA broker allows you to invest in gold commission-free. You do this via an ETF if you want to hold on to your gold investment for several years or opt for CFDs if you’re planning a shorter-term position.
Either way, gold is a highly liquid asset class when you invest online. This is because you can exit your gold position at any given time, so the cash is immediately withdrawable. Perhaps the biggest drawback with gold is that it does not generate income – such as dividends or coupon payments. For this, you would need to consider the likes of dividend stocks or bonds.
Your capital is at risk.
5. Amazon – Best Long-Term Stock to Invest 5000 Pounds
In a similar nature to Tesla, Amazon is an individual stock investment that is entirely justified. In fact, this is potentially a stock that you might consider holding for several decades. Looking back through the history books, Amazon was initially priced at just $1.73 when it first went public in 1997 (adjusted for stock splits).
Fast forward to the all-time high of $3,552 that the stocks recently hit, this translates into gains of over 205,000%. To put these numbers into perspective – had you invested 5000 pounds into Amazon stocks when it first hit the NASDAQ in 1997, your money would now be worth over £10 million!
On the one hand, it’s safe to say that parabolic returns of this magnitude will never be seen again. However, Amazon is still growing at a rapid pace and it continues to outperform the wider stock markets by some distance. For example, in 2020 alone this stock increase in value by over 70% – while the rest of the markets struggled.
In terms of what the future holds for Amazon, there’s much to be excited about. Sure, you might be aware of its dominance in the online retail scene. But, Amazon is involved in a plethora of other core products and services that continue to perform well. This includes its Amazon Prime Video subscription service – which is slowly but surely gaining pace with Netflix.
You then have Amazon’s commitment to cutting-edge technologies like artificial intelligence, machine learning, drones, and augmented reality. You then have the grocery side of things – where Amazon aims to offer same-day deliveries via its drone technology.
Much like Tesla, the bad news with this investment is at over $3,000 per share – you’re talking about a per-stock outlay of over £2,000. But, by using the fractional ownership tool offered by eToro – not only can you invest from just $50 -but the purchase is 100% commission-free.
Your capital is at risk.
6. Cryptocurrencies – High-Risk Investment Class but Huge Upside Potential
If you’re a risk-averse investor that likes to keep things as safe as practically possible – then cryptocurrencies will likely not be sufficient for your portfolio. But, if you’re keen to invest in an up-and-coming asset class that offers huge upside potential, then it’s worth considering a small allocation of funds into cryptocurrencies.
Bitcoin is the largest and still de-facto cryptocurrency in the market by some distance. This includes a crypto-market dominance of over 60% and until recently – a market capitalization of over $1 trillion. This means that just a small selection of companies are worth more than Bitcoin – such as Microsoft, Amazon, and Apple.
In terms of how Bitcoin has performed since it was launched in 2009 – the returns it has generated for early backers make Tesla and Amazon look small fry. This is because Bitcoin was worth just a small fraction of a penny in its first few years. The same digital currency recently hit an all-time high of $58,000 – so this represents 12-year gains of over 5.7 million percent.
In other words, had you invested 5000 pounds into Bitcoin at a cost price of 1 penny, your money would now be worth over £280 million. These returns are uncanny returns that will never be seen again. However, many argue that Bitcoin is still worth a fraction of its true long-term potential.
After all, Bitcoin is a global, border-less asset class that solves many problems of the monetary system – especially when it comes to storing wealth and transferring funds. In more recent times, the value of Bitcoin has increase 10-fold in the past 12 months alone – so it’s one of the best-performing asset classes in the COVID era.
With that said, Bitcoin isn’t the only cryptocurrency in the market. On the contrary, there are thousands of ‘altcoins’ that you might consider. While most of these are small, micro-cap projects that are best left alone – the likes of Ethereum, Ripple, EOS, and Litecoin have held their own for several years now.
It is, however, crucial to note that cryptocurrencies are highly speculative. If you do invest, you need to be comfortable with increased volatility levels and the potential of a prolonged bear market. As such, you are best advised to keep your stakes very modest.
One of the best ways to approach the cryptocurrency scene is to create a diversified basket of digital currencies. You can do this commission-free and at the click of a button, at eToro via its CryptoPortfolio. This allows you to invest in heaps of different crypto assets via a single trade – with the portfolio weighted based on the market valuation of each coin.
Your capital is at risk.
7. iShares Core High Dividend ETF – Best Place to Invest 5000 Pounds into Dividend Stocks
Dividend stocks are great. Not only do you stand the chance to make gains when the respective stock increases in value – but you will receive a dividend payment every 3 or 6 months. As such, this allows you to generate financial returns on two fronts. Plus, if one of your dividend stocks is somewhat stagnant in terms of share price, you’ll still have the quarterly payment to fall back on.
But, rather than attempting to choose individual dividend stocks, why not consider an ETF? In doing so, you are investing in a fully diversified basket of dividend stocks without needing to worry about research or analysis. If this sounds of interest, one of the best ways to invest 5000 pounds is via the iShares Core High Dividend ETF.
Put simply, this ETF will give you access to 75 high-grade dividend-paying stocks – all of which are based in the US. To give you an idea of some of the dividend stocks you will be investing in via this ETF, this includes Exxon Mobile, Pfizer, Cisco, Coca Cola, Verizon, Johnson & Johnson, and Procter & Gamble.
As you might well know, not only are these companies that are highly established in their respective sectors – but some are actually Dividend Aristocats. For those unaware, this means that the company has increased the size of its dividend for at least 25 consecutive years. In fact, the likes of Johnson & Johnson and Coca Cola have been doing this for nearly 60 years straight.
In terms of price performance, this ETF investment has increased by 7.48% over the past five years. Sure, these gains are modest in comparison to the wider markets. But, you are investing in strong and stable stocks that have remained at the top of their respective sector for many decades.
We should also note that the management fees on this ETF are super-low too – at just 0.08% annually. If you like the sound of this ETF, eToro requires a minimum trade value of just $50. Once you complete the investment, you will receive your share of dividends every three months until you decide to cash out.
Your capital is at risk.
8. Automated Trading – Invest 5000 Pounds Into a Full-Time Investor
Make no mistake about it – picking and choosing investments is no easy feat – especially if you’re a complete novice. Furthermore, not only do you need to choose the right investments – but you also need to time the market correctly. With this in mind, sometimes it’s best to take more of a back seat approach and allow someone else to make investment decisions on your behalf.
Thanks to the growth of online trading platforms, it’s now possible to invest your money into a seasoned trader with a verifiable track record. The best product in the market in this respect is the Copy Trading tool at FCA broker eToro. The investment process is very straightforward and begins with you finding an expert trader that meets your financial goals.
There are tens of thousands of verified traders on eToro, so you initially need to do some digging. A good starting point is to see what financial returns each trader has generated over the past few years. You can do this by using the filter button. Then, you should look at what assets the trader specializes in – such as stocks, ETFs, or commodities.
Additional metrics that you should explore include the trader’s risk rating and average trade duration. The latter will tell you whether the individual is a long-term investor or a day trader. Once you find an eToro trader that you like the look of, it’s then a case of deciding how much you wish to invest. The minimum investment per-trader was recently increased to $500 (about £350).
Once you complete the investment, your portfolio will mirror the trader’s like-for-like. If you elected to, all ongoing buy and sell orders will also be mirrored in your own eToro portfolio. For example, let’s suppose that you invested 5000 pounds into a stock trade on eToro.
If the stock trader invests 7% of their portfolio into AstraZeneca stocks, you will do the same. So, on a 5000 pounds investment – this means that you will own £350 worth of AstraZeneca stocks. Then, if the trader cashes out their AstraZeneca investment at a profit of 10% – you would make £35 (10% of £350 investment).
Ultimately, the Copy Trading tool on eToro is ideal if you want to invest in a completely passive nature. There are no commissions or fees involved when using the tool, and you can exit your position at any given time. Perhaps the safest way to invest 5000 pounds this way to diversify across several traders. For example, 5000 pounds would allow you to copy 14 different investors.
Your capital is at risk.
9. Stocks and Shares ISA – Most Tax-Efficient Way to Invest 5000 Pounds
Depending on how much you invest and the size of your financial returns – there is every likelihood that you will need to pay tax on your investment profits. This can come in two forms – capital gains tax and dividends tax. There is, however, a way to avoid paying tax on your investment returns via a Stocks and Shares ISA.
In a nutshell, you can invest 5000 pounds into the financial markets and buy shares via an ISA without any of your gains being liable for tax. In fact, in the 2020/21 tax year, you can invest up to 20,000 pounds and benefit from a tax-free portfolio. This will also be the case in the 2021/22 tax year.
In terms of how a Stocks and Shares ISA works, it is important to note that you will still need to invest on a DIY basis. In other words, you will need to pick and choose which investments you wish to add to your ISA. This covers a broad spectrum of asset classes – including but not limited to UK and international stocks, ETFs, mutual funds, investment trusts, and more.
We should also note that in order to invest via a Stocks and Shares ISA – you will need to go through an online broker. As such, not only do you need to ensure that your chosen ISA trading platform offers your preferred financial instruments, but that it does so at competitive prices. This is because you’ll need to pay a commission every time you trade, as well as an annual ISA fee.
Although at first glance a Stocks and Shares ISA might seem like the best way to go reduce your tax liability – if you’re only investing 5000 pounds it’s likely not worth doing. After all, all UK residents get an annual capital gains allowance of 12,300 pounds and an annual dividends allowance of 2000 pounds.
It’s unlikely that you will generate returns above and beyond this amount. As such, you might be overpaying when opting for an ISA – both in terms of commissions and annual fees. For example, the ISA account at UK broker Hargreaves Lansdown costs 0.45% per year – and you need to pay £11.95 every time you buy or sell an investment.
Instead, it’s much more cost-effective to use a commission-free broker like eToro – outside of an ISA set-up. Not only will you avoid the need to pay an annual ISA charge, but each and every investment that you make is free of dealing fees. Plus, eToro even waivers the 0.5% stamp duty tax you pay UK stocks – which you won’t get when opting for an ISA.
Your capital is at risk.
10. Permanent Interest Bearing Shares (PIBS) – Best Way to Invest 5000 Pounds for Fixed-Income
If you’re looking for the best way to invest 5000 pounds into an asset with predictable, fixed-income – you might want to consider bonds. In doing so, you’ll know exactly how much money you will make on your 5000 pounds investment – as your coupon payments are fixed.
However, corporate bonds are difficult to access as a UK retail investor, and gilts (government bonds) are a yield that is so low that it’s not really worth considering (about 1% annually). As such, perhaps the best option on the table is to consider Permanent Interest Bearing Shares (PIBS). Put simply, PIBs are bonds issued by UK building societies.
The key attraction here is not only because your coupon payments will be fixed, but the yields on offer are often very generous. For example, you can buy PIBs issued by Skipton Building Society at a running yield of 6.1%. National Westminster is paying a similar amount at 6.6%. There are, however, even better yields on offer at the time of writing.
For example, Investec Bank PIBs currently attract a running yield of 8.8%, while Halifax PIBs offer 10.4%. Regarding the former, let’s suppose that you invested 5000 pounds into Halifax PIBs. This means that you would receive an annual interest payment of £520. What you could then do is reinvest this £520 annual payment into other assets.
In doing so, you would benefit from compound interest and thus – grow your money at a much faster rate. In terms of the risk involved in PIBs, this is directly correlated to the yield on offer. For example, the aforementioned Halifax PIBs initially came with a coupon rate of 12%. As this is now at a running yield of 10.4%, it means the risk of default has been reduced.
But, these PIBs are not risk-free by any stretch of the imagination. After all, the yields on offer are significantly higher than the bond market average, meaning that they come with added risk. If you do want to invest in PIBs, you won’t be able to do this directly with the lender. Instead, you’ll need to go through a third-party broker.
Your capital is at risk.
How to Choose Smart 5000 Pounds Investments
Let’s be clear – 5000 pounds is a large amount of money. As such, although it’s great that you are considering investing your hard-earned capital into the financial markets – you do need to tread with caution.
To put it another way – you need to perform lots of research before you make an investment – as opposed to following third-party financial advice. This should include a consideration of the potential risks and rewards, as well as your ability to cash in the investment should you need to.
To help clear the mist, in the sections below we explain what you should consider when thinking about how to invest 5000 pounds UK.
Let’s start with the basics – how much money are you looking to make from your 5000 pounds investment? This figure should be viewed as a percentage of your investment capital. For example, if you were to make 500 pounds on your 5000 pounds investment, then this would represent a yield of 10%.
The returns available in the financial markets will vary considerably, and in most cases – are directly linked to the amount of risk associated with the asset.
- For example, if you were to invest 5000 pounds in a super low-risk asset like gilts or savings bonds – then you will likely struggle to make money than 1% per year.
- On an investment of 5000 pounds, this means that you would make just 50 pounds at the end of year one. For most of us, that’s just not attractive enough when you consider that your money is locked away.
- In the case of stocks and shares, the returns on offer are much more viable. For example, Amazon stocks grew by over 70% in 2020, while Tesla saw annual gains in excess of 700%.
- The FTSE 100 Index itself is up about 33% in February 2021 since it hit 52-week lows in March 2020. You then have the likes of Bitcoin – which has increased 10-fold in the past year.
However, unless you are investing in a fixed-rate instrument like PIBs or bonds – then, unfortunately, there is no sure-fire way to know how much you can make on your investment. Crucially, past performance is not a solid indicator of future returns. In other words, while Tesla might have increased by 700% in 2020, the stocks could just a well make a loss in 2021.
The subject of risk leads on nicely from the section above on potential rewards. As we briefly eluded to just a moment ago, the potential returns that an asset can generate is directly correlated to the underlying risks. This is known as the ‘risk/reward ratio’ – meaning that the more risk you take, the more returns you should expect for parting with your capital.
- At the lower end of the spectrum, while investing in gilts or savings bonds will rarely attract gains of more than 1-2% annually, the risks are virtually non-existent.
- This is because gilts are backed by the UK government and savings bonds are usually covered by the FSCS.
But, if you want to target much higher returns, then you must feel comfortable with the level of risk being undertaken.
- For example, the US stock markets have been moving in an upward trajectory since 2013 – with unprecedented gains in most sectors (even taking into account the pandemic).
- But, the markets can’t continue to rise indefinitely.
- On the contrary, history tells us that there has been a bear market every 4/5 years since the year 1900.
This means that your investment can go up and down. This is why the general consensus is that you should avoid selling a stock market investment for at least five years. In doing so, you’ll stand the best chance possible of riding out volatile market waves.
UK or International
If you are looking to keep things domestic, then you are likely looking to invest in UK-listed stocks, bonds, or ETFs. However, there is no longer a requirement to stick with UK assets, as there are many online brokers that give you access to international markets at the click of a button.
In fact, if it’s shares you are interested in, the US markets have historically performed much better than the London Stock Exchange. With that said, if you’re wondering how to invest 5000 pounds UK in terms of geographic location, it’s worth considering a diversified approach.
For example, you could allocate some of your 5000 pounds to UK-listed investments, and the balance in other regions. This will allow you to diversify across plenty of different markets and thus – not be overexposed to the UK economy.
You could take things one step further by also considering an investment into the emerging markets – covering fast-growing economies like China, India, Russia, and Indonesia. As we covered earlier, you can do this at eToro commission-free via an emerging markets ETF.
Learn how to Time the Markets
Many investors in the UK will simply look to invest in an asset and keep hold of it for several years. Once again, this avoids the need to worry about short-term market trends. But, if you’re wondering how to invest 5000 pounds UK in the smartest way possible – you’ll want to learn how to time the market.
In simple terms, this means entering and exiting an investment at the most favorable time possible. In other words, you’ll want to buy the dip and sell when the instrument is approaching its peak. On the one hand, this is easier said than done. But, there are many recent examples where timing the market well was somewhat straightforward.
- In March 2020 – the vast majority of the stock market crashed – with many stocks losing as much as 50% in the space of a few weeks. This includes some of the highest-grade blue-chip stocks in the market.
- To give you an idea – Tesla went from $159 (adjusted for stock split) to $70 in just three weeks – representing a decline of 45%.
- Was a 45% decline warranted? Absolutely not.
- As such, had you timed the market by buying Tesla stocks in and around the $70 level – you would now be looking at gains of almost 1,000%
At the other end of the scale, it’s important to recognize when a prolonged recession is in the making – like the one we had in 2008. If this is the case, then the best course of action is to unload some of your stock holdings, and instead invest your 5000 pounds into a safe haven – like US Treasuries, UK gilts, or gold.
Dollar-Cost Average Your 5000 Pounds
If you’re thinking about how to invest 5000 pounds UK in a risk-aversed way, then a dollar-cost averaging strategy is going to be your best friend. In a nutshell, this means that rather than parting with the full 5000 pounds in one lump sum – you are going to make steady, periodic investments.
In doing so, this is will allow you to spread out your investments and thus – avoid the risk of buying an asset at its peak.
- Let’s say that you invested 5000 pounds into gold at £1,200 per ounce
- At this point, you are heavily reliant on gold surpassing this price for you to make money
- If, however, the price of gold then goes on a downward spiral, you might not see a financial return for some time
But, by instead dollar-cost averaging your gold investment, you will get a different cost price each time. This means that a downward market isn’t overly unfavorable, as you will be buying the asset at a cheaper price for as long as it remains bearish.
- Let’s s that you decide to invest 500 pounds in gold at the end of each month
- In month one, you might pay £1,200 per ounce
- In month two and three – you might pay £1,100 and £900 per ounce, respectively
- By the end of month seven, let’s say that gold has finally surpassed your initial cost price of £1,200 per ounce
- At this point, we’ll say that your 7 x 500 pound investments has resulted in an average cost price of £950 per ounce
- If you hadn’t taken a dollar-cost averaging approach, your cost price would have instead been £1,200 per ounce
Ultimately, in conjunction with a diversification plan, dollar-cost averaging allows you to invest in a much more risk-averse manner. This is because you will ride out market waves by investing at a different cost price each time.
Explore how Liquid Your Investment is
The final metric that you should consider when thinking about how to invest 5000 pounds UK is how ‘liquid’ your chosen asset is. In other words, if you want to sell your investment back to pounds and pence, how quickly and easily will you be able to do this?
For example, if you invest in liquid assets like stocks, ETFs, and even Bitcoin – you can sell your position at any given time. As soon as you do, the funds will be reflected in your brokerage account – which you can withdraw back to your bank account or debit/credit card.
But, if you were to invest in fixed-rate bonds, then in most cases, you will need to wait until they mature. Some bonds come with a maturity duration of many years, meaning that your money is locked away until they expire. This is often the case with PIBs and fixed-rate savings accounts, too.
There is nothing wrong with having your capital tied-up – as this often results in a more favorable yield. However, just make sure that you are confident that you won’t need to access your 5000 pounds investment before the asset matures.
Best Brokers to Invest 5000 Pounds UK
This guide has armed you with all of the knowledge you will need to invest 5000 pounds into assets that meet your financial goals. Once you know which investments you wish to make, you then need to find a top-rated broker.
The best stock brokers in the UK are regulated by the FCA, offer thousands of tradable markets, and allow you to invest in a cost-effective way. Below, you will find a selection of top-rated trading platforms to consider in 2021.
1. eToro – Best UK Broker to Invest 5000 Pounds 0% Commission
After reviewing dozens of UK brokers, we found that eToro ticks all of the right boxes. You will find an extensive range of asset classes at the provider – which includes over 2,400 stocks from 17 marketplaces. There are also more than 250+ ETFs supported on the platform, alongside 16 digital currencies.
Regardless of which assets you decide to invest your 5000 pounds into, eToro will not charge you any dealing fees or commissions. This is the case across UK and international markets. If buying UK stocks, eToro will even waiver the 0.5% stamp duty tax.
There are no ongoing platform fees either. This allows you to invest 5000 pounds into your chosen assets without getting hammered by unnecessary charges. You will also find eToro of interest if this is your first time investing. This is because the broker is super user-friendly, so no prior investment experience is needed.
Additionally, eToro supports fractional ownership – so you can easily create a diversified portfolio of assets in a cost-effective way. For example, the minimum Bitcoin investment is just $25, and stocks and ETFs require just $50 per trade. We also discussed Copy Trading in our list of investments – which is offered by eToro.
Once again, this allows you to copy a successful eToro trader like-for-like, at a minimum of just $500. There are also CopyPortfolios, such as the previously discussed CryptoPortfolio. Once you go through the 10-minute process of opening an account, you can instantly deposit funds with a debit/credit card or e-wallet, or wait a couple of days to have your bank transfer processed
Due to a recent surge of account sign-ups (which now stands at over 17 million clients), eToro recently increased the first-time minimum deposit to $1,000 – which is about £700. Finally, not only is eToro regulated by the FCA, but your capital is also covered by the FSCS scheme.
Due to eToro’s diverse library of assets and markets it’s the perfect platform for any investment, big or small! If you are looking at how to invest £500 or even if you are interested in the best investments for £200k.
- 0% commission broker
- No stamp duty tax on UK shares
- Over 2,400 global shares and 250 ETFs
- CFD markets also offered
- Social network with copy trading
- Regulated by the FCA
- FSCS partnered
- Withdrawal and inactivity fees
75% of retail investor accounts lose money when trading CFDs with this provider.
2. Fineco Bank – Low-Cost Broker With Thousands of Traditional Assets
Fineco Bank is a low-cost broker that is regulated by the FCA and covered by the FSCS. There are thousands of financial instruments supported on this platform – which includes access to dozens of stock markets. This includes the London Stock Exchange and AIM, as well as markets in the US, Canada, Asia, Australia, and more.
Fineco also supports heaps of index funds, ETFs, and mutual funds. You can also utilize Fineco for its passive investment portfolios. There are many strategies to choose from – all of which are professionally managed. Fineco also supports a good selection of bonds – which is ideal if you are seeking fixed returns.
All in all, if there is a market you are interested in, it’s likely you will find it at this top-rated broker. This doesn’t, however, include digital currencies like Bitcoin – so if you want exposure to the crypto-asset scene you’ll better off choosing eToro. When it comes to fees, Fineco Bank is one of the cheapest brokers in the UK.
While you won’t benefit from a commission-free experience like you will at eToro, you can buy UK shares for just £2.95. This is payable at both ends of the trade. US-listed stocks are also well-priced, costing just $3.95 per order. There is an annual charge of 0.25% of all investments at Fineco. But, there are no deposit or withdrawal fees to contend with.
Unlike eToro, Fineco doesn’t support debit/credit cards or e-wallets, so you will need to fund your account via bank transfer. The minimum to get started is £100, but expect to wait 1-2 days for your account to get verified. Finally, Fineco also supports Stocks and Shares ISA s -should this be an angle you wish to take with your 5000 pounds investment.
- Charges just £2.95 per trade when buying and selling shares
- $3.95 on US-listed stocks
- Access to thousands of UK and international shares
- Deposit funds with a UK bank account
- Heavily regulated, including an FCA license
- Suitable for both newbies and seasoned investors
- Great research and educational department
- 0.25% annual fee
Your money is at risk.
How to Invest 5000 Pounds UK: The Verdict?
This guide has covered the nuts and bolts of how to invest 5000 pounds UK in the smartest way possible. The good news is that you have thousands of potential investments at your disposal – both in the UK and abroad. This includes everything from ETFs, shares, bonds, PIBs, and even Bitcoin.
The challenging part is knowing which investments to make with your 5000 pounds. As we have covered, the best way to invest 5000 pounds is to diversify across many different asset classes, markets, and regions. This way, you’ll be able to mitigate your long-term risks, and thus – you won’t be exposed to a single investment.
If wondering how to invest 5000 pounds UK from the comfort of your home right now – eToro allows you to do this commission-free. You’ll have thousands of markets to choose from – including passive investment tools like the Copy Trading feature. Plus, it takes just minutes to get started with this top-rated FCA broker!
eToro – Best Broker to Invest 5000 Pounds UK
75% of retail investor accounts lose money when trading CFDs with this provider.
What is the best place to invest 5000 pounds?
In order to find the best place to invest 5000 pounds, you need to take a step back and think about what your financial goals are - including the level of risk you are comfortable taking. For example, low-risk investments include UK gilts and savings bonds, while more attractive returns can be found with stocks, PIBs, and ETFs.
Where to invest 5000 pounds risk-free?
If you're wondering where to invest 5000 pounds risk-free, there are very few options on the table. This is because all investments come with an element of risk. With that said, the likes of FSCS-backed savings accounts, Cash ISAs, and UK gilts are as close to risk-free as you will find. These assets do, however, come with a very low rate of interest.
What should I do with 5k savings?
If thinking about where to invest 5000 pounds, you'll want to take a diversified approach. This means investing in various asset classes at different levels of risks. Ultimately, the more asset diversity that your portfolio has - the best chance you have of keeping your long-term risks to a minimum.
Should I invest 5000 pounds in shares?
Stocks and shares are often the go-to place for first-time investors in the UK. You have thousands of stocks to choose from in the UK, and even more when you look at markets in the US and mainland Europe. If you do decide to invest 5000 pounds into shares, just make sure that you diversify well.
How much money can you make from a 5000 pounds investment?
There really is no hard-and-fast answer to this question, as no-two assets are the same. In fact, unless you are investing your 5000 pounds into a fixed-rate instrument like PIBs or bonds, then there is no sure-fire way of knowing how much you can make. The best thing that you can do is look at what the returns the respective asset has generated over the past 10 years.