Best Way to Invest £100k
08/08/2024Daniel Fisher
Everyone wants to be told the secret as to the best place to invest their hard-earned cash. Realistically, without the benefit of hindsight, the unpredictable nature of financial markets deems predicting future asset performance as challenging at best.
While options such as property may not be affordable with £100k, this kind of budget does enable access to many alternative investment options. We’ll look at the factors to consider when choosing the best way to invest with a one hundred thousand Pound budget.
Finally, we’ll reveal the best approach to investing £100k into gold to achieve optimum results.
Risk Appetite with Your £100k Investment
When considering the best ways to invest £100k, understanding your risk appetite is crucial. Risk tolerance reflects your inclination and capability to endure the potential ups and downs of your investments. This can cover whether your initial capital could be lost, if you could in fact lose even more than your original investment sum, and the possible volatility along the way.
If you have a high tolerance for risk, you might lean towards tech-based stock market investments, venture capital, or cryptocurrency, which, while potentially offering higher returns, also come with significant volatility.
Conversely, if you prefer stability and preservation of capital, safer avenues like gold, bonds, property, or high-yield savings accounts might be more suitable, providing more predictable but generally lower returns.
Assessing your risk appetite helps in tailoring an investment strategy that aligns with your financial goals and comfort level, ensuring that your investment journey is both financially rewarding and psychologically manageable.
Gold’s Risk Position
Gold holds the esteemed position as a ‘safe-haven’ asset, reflecting the perception of gold as relatively low risk. In fact, the gold price can go down as well as up, meaning that it’s possible to lose some of your initial investment if sold at a lower price.
Not all ways to gain exposure to the gold market are equal. Different types of gold investment represent varying levels of risk. Investing in gold bars or coins will alleviate counterparty risk. Value can never fall to zero, due to its intrinsic worth. Gold futures and options represent the other extreme, using leverage in an attempt to super-charge returns. However, with this leverage comes enhanced risk levels that can lead to investors losing their shirt.
Gold tends to appreciate in value quickest when the global economy is struggling or during times of political unrest. This tends to coincide with stocks, bonds, and property markets plummeting, so combining with gold reduces your overall level of portfolio risk as it balances out market volatility.
Liquidity of £100,000 Investment
When selecting the best investment for £100,000, liquidity is a key factor to consider. Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its value.
If you anticipate needing access to your funds on short notice, highly liquid investments like stocks, money market accounts, or exchange-traded funds (ETFs) may be ideal, as they can be sold rapidly with minimal impact on their price.
On the other hand, if you can afford to lock your money away for a longer period, less liquid options such as property, art, private equity, or certain bonds might offer higher returns, albeit with the understanding that accessing your cash quickly could be challenging and potentially costly.
How Liquid is Gold?
The short answer is that gold is a highly liquid asset and can be sold at the drop of a hat. The speed, price, and convenience of selling your gold coins or bars will depend on how and where you choose to sell them. Electing to cash-in your gold investment with a renowned dealer is a recommended all-round option to achieve the best liquidity. You’ll be able to sell high quantities of gold at competitive prices immediately. Dropping gold at a local high street “cash-for-gold” shop will be super easy but will not achieve the best profits.
Ensuring you buy the best type of gold in the first place will ensure you maximize your liquidity and therefore optimize your investment’s returns. Paying high premiums for obscure and very rare coins will reduce your liquidity considerably. Trying to locate individual collectors who may be willing to pay well can be an arduous task. But sticking to more mainstream bullion coins will considerably enhance your ease of selling at a great price.
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Balanced Approach to Investing £100k with Asset Allocation
When aiming for the most profitable £100k investment, choosing that one killer asset or stock seems like the simplest approach. We can all look back now and say, if I’d only put all my money into Amazon stock when it was trading under $1. But without a crystal ball, allocating your entire £100,000 into one investment depends a lot on getting your choice and timing spot on. For every Amazon or Facebook, there’s a thousand My Spaces, Blockbusters, and Enrons.
Asset allocation plays a pivotal role in optimizing returns while managing risk. It involves diversifying your investment across various asset classes, such as stocks, bonds, property, and cash equivalents. It harks back to the age-old adage about not putting all your eggs in one basket.
This strategy helps in balancing risk and reward by spreading exposure across assets that react differently to market conditions. For instance, while stocks might offer high growth potential, they also come with higher volatility. Bonds, on the other hand, provide more stable, albeit lower, returns.
Timing of your £100k investment is also crucial to its success. Almost any stock, bond, or asset class will have periods of gain and stages of falling values. Get your timing wrong, even on the ‘right’ asset, and your £100,000 investment will not reap the rewards of your dreams. Spreading your capital amongst several investments will reduce the need to time your investment perfectly, as some assets will rise in value when others fall.
By thoughtfully allocating your £100k among different assets, you can enhance the potential for profitability while safeguarding against significant losses, thus achieving a more stable and resilient investment portfolio tailored to your financial goals and risk tolerance.
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How Can Gold Provide Balance in a £100k Portfolio?
Gold holds a unique role in its ability to provide balance to an investment portfolio. That’s because it tends to be inversely correlated to many of the mainstream investment categories. That means, finding a place for gold in your £100k portfolio, will bring a degree of stability to your investment’s value, like no other asset can. Afterall, a market event such as recession, war, or a virus, will likely cause stocks, property, and crypto to plummet simultaneously. Meanwhile gold would likely rise during this period due to a ‘flight to quality’ approach by investors.
As black swan events are so difficult to predict, financial advisors tend to recommend always allocating a percentage of gold into your portfolio at the least. Allocating 5-10% of your £100k into gold will qualify you as prepared for any event, whenever it chooses to come. This removes the need to question when to buy gold. By always owning some gold, your hedge will be in place when the markets shock.
During sustained periods or market turmoil or longer-term bleak outlooks, the case for owning a far higher percentage of your £100k in gold is strong. Many investors choose to shift a majority into gold to ride out the storm and still make great returns.
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Best Gold Investment for £100k
So what is the best way to invest £100k into gold? To answer this, we’ll focus on physical gold coins and bars, rather than electronic gold offerings such as ETFs or mining shares.
A gold investment of £100,000 provides scope to achieve quantity discounts and a varied portfolio if desired. However, it also means that Capital Gains Tax (CGT) on gold needs to be considered before purchasing.
Kilo Bars are Most Cost Effective
If lowest cost per gram is the main objective, then focussing on large gold bars will provide the most gold for your £100k. Lower premiums are charged on these huge bars as manufacturing costs are far lower to produce one block of gold rather than lots of intricately sized gold bars or coins.
The current value of a 1 Kilo gold bar is more than £60k as of August 2024) which would eat up more than half the investment budget. The remaining budget could be filled with the next largest denominated gold bars such as 500g, 250g, and 100g. Each size down in the scale adds slightly to the premium you pay, so stick to the largest possible to be cost-effective.
You have the choice between brand new kilo bullion bars such as the Metalor 1KG Gold Bar, or to pay even less, you could consider buying one of our pre-owned Best Value Kilo Bars at a discount.
Portfolio Divisibility
With gold’s inevitable rise in price over the long term, a kilo bar will cost closer and closer to the full £100k budget. Portfolio flexibility then becomes an increasing consideration. If you only own one of two large gold bars, then there is no divisibility to sell small parts of your gold holding. If you wished to cash in 10% of your portfolio to lock in profits, you can’t. You would have to sell the value of your smallest available bar, which could be worth a large chunk of your overall portfolio value.
A compromise would be to either purchase smaller gold bars or gold coins. We wouldn’t recommend buying lower than 1oz Gold Bars as premiums on sizes below this mark are prohibitive. We think that 100g bars (currently worth over £6k) provide a sweet spot between cost and divisibility.
Avoid a Potential Tax Bill Down the Line
As well as being cost-effective when you purchase gold, you also need to forward plan to ensure your gold investment is also tax efficient when the time comes to sell. Like a majority of investment classes in the UK, most gold is subject to Capital Gains Tax. That means if you purchase £100k or gold today and sell it at a profit in the future, then you’re potentially liable for tax on that gain.
This is a growing concern for investors as the Conservative Government lowered the annual CGT tax-free threshold to a measly £3,000 per year from 2024. That means that any profit above £3,000 becomes taxable (across all your investments, not just gold). The scale of a £100k portfolio makes this low tax-free bar very surmountable indeed. Additionally, fears that the new Labour Government will target CGT to raise tax income are growing. This could amount to increases in the CGT tax rates themselves, making it an increasing burden on investors.
Luckily, certain UK gold coins are CGT-free to UK residents. A variety of different coins qualify for the tax-free status, but we’d recommend the 1oz Gold Britannia as the smart option for the best £100k investment. Premiums are very slightly higher than kilo gold bars, but not significantly so. There’s no need with this size of portfolio to consider smaller coins than 1oz, as divisibility is sufficient and further premiums would be incurred as coins become more fractional.
Many of our customers consider a mixed £100k portfolio, consisting of a kilo bullion bar, with the remainder comprising 1oz gold Britannias.
Best Gold Investment for £10k
With surging gold prices, a £10,000 investment doesn’t buy you vast amounts of gold. Therefore, it’s even more important to buy the best type of gold for your investment.
Depending on your objectives and investment needs, the two main choices are between gold bars or gold coins. There’s the assumption that all gold bars are cheaper per gram than all gold coins. This is far from the truth, with many gold coins being available at lower gold premiums than small gold bars. We’d advise avoiding 5g, 10g, and 20g gold bars which unfortunately come with inflated premiums which would impact your investment return.
Gold Coins are Best for £10k Investments
Generally, the best all-round gold investment for £10k is to focus on coins. Like gold bars, coins are available at different price points and varying premiums over the gold spot price. The general rule of thumb is that bigger coins are slightly cheaper than smaller ones, while older historical coins are more expensive than their more recent counterparts.
While the 1oz Gold Britannia is a popular investment choice, at around £2,000, you’d only be able to afford five within your portfolio. If you feel this provides sufficient flexibility, then this is a great, cost-effective choice. We’d recommend building a majority of the portfolio with the smaller Sovereign coin. At around a quarter of the size of the larger Britannia, Sovereigns provide far more portfolio divisibility. This can be useful to divide amongst children and grandchildren, or simply to be able to liquidate small amounts of gold when required. Half Sovereigns are to be minimised due to inflated prices, and quarter Sovereigns avoided at all costs.
The huge bonus with these coins, is that they’re exempt from Capital Gains Tax, whereas gold bars are not. That means you get to keep all your profits, regardless of how high the gold price rises.
Which Sovereigns are Best for £10,000?
We always think a mix of coins is the ultimate choice when constructing a portfolio. Sovereigns have existed for two centuries so there are plenty to choose from.
We tend to split them into three main categories: new, pre-owned, and historical. The cheapest Sovereigns are the pre-owned coins, which we call Best Value Sovereigns, for obvious reasons! These are simply Sovereign coins which we’ve bought back from customers and could be any date, but usually they’ll be Elizabeth portraits. We don’t feel investors should pay the extra couple of percent on the price for brand new Sovereigns as this premium won’t be recouped upon sale.
Older Sovereigns, such as Edward VII and various Victoria portrait coins come with a higher price tag. We wouldn’t recommend filling your £10k portfolio with 150-year-old Victorian Sovereigns as you’ll get far less gold for your money due to the higher premiums. However, if you’re able to balance the investment between cheaper and more historical Sovereigns, then this can be prudent.
The best time to buy more numismatic Sovereigns is when dealers put them on sale, perhaps due to temporary over-supply. Keep your eyes peeled or chat with your gold dealer, as Victorian coins can sometimes be obtained at relatively modest premiums. These coins tend to hold their value better during price downturns than newer coins.
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FAQs
What are some safe investment options for £100k?
Safe investment options include high-yield savings accounts, government bonds, and certificates of deposit (CDs). These provide lower but more stable returns and preserve your capital.
How can I achieve high returns on my £100k investment?
To achieve high returns on a £100k investment, consider a diversified portfolio including high-growth stocks, property, and equity funds. Focus on long-term growth, reinvest dividends, and maintain a mix of assets to balance risk.
Should I invest all £100k in one place?
It’s generally safer to diversify your investment. Spreading your £100k across different asset classes like stocks, bonds, and property reduces risk and enhances potential returns. Adding a proportion as physical gold can provide balance and protection if the macro-economy suffers.
How important is liquidity in my investment decision?
Liquidity is crucial if you might need quick access to your funds. Highly liquid assets like stocks and money market accounts are easily convertible to cash, while assets like real estate or private equity are less liquid and harder to sell quickly.
How to turn £100k into a million
To turn £100k into a million, invest in a diversified portfolio of high-growth stocks, real estate, or a successful business. Focus on long-term growth, reinvest profits, and practice disciplined saving and investing. Consider seeking advice from financial advisors to tailor strategies to your risk tolerance and market conditions. Patience and consistency are key.
What is the safest investment with the highest return in the UK?
The safest investment with the highest return in the UK is premium bonds from NS&I. These government-backed bonds offer tax-free prize winnings instead of interest, providing security and potential for higher returns, though not guaranteed. They combine safety with the chance to win monthly cash prizes.
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