3. Stocks
Stocks represent shares of ownership in a company. Companies usually sell shares of stocks to raise money when they want to generate capital to grow their business.
If you’re looking for places to invest £100k, buying stocks may enable you to increase your wealth and beat inflation, depending on how well the company you buy stocks in performs. However, if the company underperforms, you stand to lose some or all of your investment.
Read our investment guides for more information on how to get started.
4. Peer-to-peer lending (P2P)
Also known as P2P, peer-to-peer lending is an alternative way to invest or diversify your existing investment portfolio. This type of investment allows someone to accept a loan directly from someone else, rather than taking out a loan with a bank or building society.
When you lend an individual, or ‘peer’, money, you’ll earn interest and get your money back when they repay the loan. Lenders, like you as an individual investor, and borrowers, mainly small companies or other individuals, collaborate via online peer-to-peer companies, which keep overheads down.
The risk of you losing your money is mitigated by the P2P company splitting your money into smaller amounts, rather than loaning it all to one or two borrowers.
You can typically get a competitive rate of interest when you invest in peer-to-peer lending because the overheads are significantly smaller. There are no physical branches and fewer staff, for example.
The downside is that P2P lending is not currently covered by the FSCS, meaning there is more risk of losing your money should the borrower fail. However, thanks to the personal savings allowance, the first £1,000 of interest earned from P2P lending is tax-free for basic rate taxpayers. Meanwhile, higher rate taxpayers can earn up to £500 in tax-free income from a P2P platform. Certain P2P savings can also be held in some ISAs.
5. Equity
Equity is the amount of money that could be returned to a company’s shareholders once all assets are liquidated and debt is paid off.
Investing in equity can deliver a worthwhile stream of income, but it can also go terribly wrong if you don’t do your research or you make a risky move. It also carries more risk than some people are comfortable with.
If you’re looking for equity that pays regular income, a mixed basket of shares in different companies could be your best option as they often pay out dividends to shareholders. However, the stock market is unpredictable and subject to fluctuations, including financial crashes.
6. Bonds
Bonds represent a company or government debt. When a company or government issues a bond, they are issuing debt and agreeing to pay interest on the money you’re “lending” them. Bonds typically pay out annual interest, repaying their debt at the same time. Because of this, bonds are often considered one of the safer types of investment, especially if you want to invest over a short term.
The different types of bonds are best described as a spectrum from most to least risky, starting at ‘gilts’, or government bonds, at the safer end, through to high-yield bonds from companies with low credit ratings at the much riskier end.
7. Annuities
If you’re looking to be set for a certain period of time without access to your £100k, you could choose to invest in an annuity. An annuity will provide you with a guaranteed income stream but it will mean you give up your right to access your cash.
