How to invest 30K. Five ideas from a financial planner

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.

Have you recently received a windfall, such as an inheritance, and are wondering what to do with it? Perhaps you wonder how you might invest a lump sum if you ever received one. In this article, our financial planners offer some ideas about how someone could invest £30,000 in 2024. We hope these insights are useful.

If you want to discuss your financial plan with a member of our team in Murcia, please get in touch to arrange a no-obligation financial consultation at our expense:

+34 966 460 407
info@scottsdale.eu

How much of £30,000 should I invest?

Investing £30,000 requires a lot of careful thought. Firstly, it is wise to consider how much of it you want to use now and how much you should set aside for the future. Here, your unique financial goals and needs are crucial.

If you have a large debt to settle (e.g. an expensive personal loan), then the debt interest is likely to exceed any returns you can realistically achieve from investing. Therefore, clearing the debt first likely makes financial sense.

However, if you have little/no costly debt but lack an “emergency fund” (3-6 months’ worth of living costs), then allocating some of the £30,000 to easy-access savings could be prudent.

Secondly, there is nothing wrong with enjoying some of the money now if your financial plan is already in good shape. Maybe this is the perfect opportunity to take the family on that faraway holiday you have all dreamed of. However, assuming you want to invest at least some of the £30,000, what are your options?

What should I invest £30,000 into?

Many people make the mistake of jumping to investing without carefully considering what they want to achieve. Do you have a goal for your portfolio, and is it realistic? What do you want your investments to “do”? For instance, one person might wish to build up their future retirement fund. Another may be more interested in creating a portfolio which provides another source of income – e.g. via dividends.

These questions are important because they will influence which assets may be suitable for your portfolio. To take an example, “growth” stocks are typically characterised by low/no dividend payouts to investors. Rather, profits are reinvested in the business to fund expansion. These stocks (and funds containing them), therefore, often lend themselves to the first investor above. By contrast, “dividend stocks” may have less growth potential because profits are primarily distributed to shareholders.

Another key factor is your time horizon. When are you likely to need your £30,000 back? Again, the answer will influence the suitability of different investment options. As a general rule, the nearer your investment “horizon”, the less “risk” an investor should take with their choice of investments. This is because they have less time to recover if the market falls or crashes. By contrast, a longer time horizon (e.g. 10, 20 or 30 years) allows for more opportunities to recover and surpass their previous values when price volatility occurs in the short term.

This brings us to a third factor to consider – your risk tolerance. Here, investors will differ, and there is no “correct” tolerance. What matters is that you are true to your own unique investor profile. This is where a financial adviser can offer great value, helping you ask yourself the specific questions required. For instance, an adviser might ask you: “If your £30,000 portfolio suddenly fell by 25% tomorrow, how would you feel and what would you do?” If you know you will face a strong urge to get out of the market to avoid further losses, perhaps a more “cautious” investment approach is required.

Building and monitoring a portfolio

Once you have invested your £30,000 with the help of an expert, what next? Here, a balance needs to be struck. It will likely be unhelpful to check your portfolio too often. This can create anxiety and lead to impulsive investor decisions.

Yet, it will be appropriate to review your portfolio periodically and make strategic adjustments to your holdings where necessary. This is where an annual review with a financial adviser can be useful. A professional can discuss the performance of your portfolio with you, how your asset allocation might have changed and which action(s) may be necessary to keep you on track towards your goals.

A financial adviser can also assist with building a tax-efficient portfolio in light of changing rules about capital allowances (etc). In 2024-25, for example, the tax-free allowance for a UK tax resident (the Annual Exempt Amount) has been reduced to £3,000. This makes other tax-efficient “vehicles” even more important in 2024, such as the Stocks & Shares ISA, to minimise needless taxes on your capital gains, dividends and interest.

Invitation

If you are interested in discussing your own financial plan or inheritance tax strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:

+34 966 460 407
info@scottsdale.eu

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