What’s the best way to invest £20k?

first_img Our 6 ‘Best Buys Now’ Shares Simply click below to discover how you can take advantage of this. See all posts by Roland Head I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. “This Stock Could Be Like Buying Amazon in 1997” Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! What’s the best way to invest £20k? Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.center_img Roland Head | Sunday, 19th January, 2020 Enter Your Email Address I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. If you’ve got a large lump sum of money to invest, it’s not always easy to know how to start. There’s always the fear that you’ll make a wrong decision and end up losing it all.In this article, I’ll look at two stock market strategies I think are relatively safe ways to start investing.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Can you spare the cash?Let’s start with a couple of safety checks.Do you have any high-cost debt, such as credit cards or store cards? If you do, it usually makes sense to pay these off first. Otherwise any gains you make on your investments will probably be wiped out by high interest payments.Secondly, do you expect to need the money in less than five years? If so, I’d avoid the stock market. If you invest for short periods, you run the risk of being forced to sell during a market crash.How I’d invest £20k in stocksInvesting in the stock market doesn’t come with any guarantees. You can lose money. But according to research by Barclays, the UK stock market has consistently delivered bigger gains than cash or bonds over the last 100 years.If you’d like to invest in stocks, the first thing I’d do is open a Stocks and Shares ISA. These tax-free accounts allow you to invest up to £20,000 each year.Option #1: Buy the marketThe simplest way to invest in the stock market is to put money into an index fund, also known as a tracker fund. In the UK, FTSE 100 index funds are the most popular choice. These low-cost funds track the returns of the FTSE 100 – the 100 largest companies listed on the London Stock Exchange.At the time of writing, the FTSE 100 offers a dividend yield of about 4.4%. That’s double the 2% interest available today from the best fixed rate cash ISAs. In addition, the index has the potential to deliver capital gains over time.Option #2: Go directIf you’d prefer to invest in individual stocks, then this is what I’d do.I prefer to only own stocks which pay dividends, as I think they’re a good indicator of cash generation and management discipline. They also provide a regular stream of cash you can withdraw for income or reinvest in additional shares.To get started you’ll need a list of stocks in the FTSE 100 and FTSE 250, including dividend yields and earnings forecasts. As a rule of thumb, I’d choose 15 to 20 stocks, covering all the main sectors of the market. For example, I’d probably want to own a bank or a large insurance company, a supermarket, an oil stock, a pharmaceutical firm, a utility, and so on.I’d aim to pick stocks with a dividend yield of 4% to 6% and rising earnings forecasts. You may need to be a bit flexible on this. But in my experience, these simple criteria help to rule out companies that look too expensive or have obvious problems.What happens next?You can invest gradually, over 6 to twelve months, or all at once. There are pros and cons to both approaches, as no one knows what the market will do over the short term.Once you’re fully invested, then the hard part starts.To get the best results, you’ll probably need to sit tight and do nothing for at least five years, preferably longer. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Image source: Getty Images last_img

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