When done responsibly, investing is the best way to grow your money, and many of the options for good investments UK are accessible to virtually anyone regardless of age, income or career. Such factors will, however, influence which investments are best for you at this particular moment. For example, someone close to retirement with a healthy nest egg will likely have a very different investment plan than someone just starting out in their career with no savings to speak of. Neither of these individuals should avoid investing, they should just choose the best investments for their individual circumstances.
Here are some investments for consideration:
Savings accounts
Online savings accounts and cash management accounts provide higher rates of return than you’ll get in a traditional bank savings or checking account. Cash management accounts are like a savings account-checking account hybrid: They may pay interest rates similar to savings accounts, but are typically offered by brokerage firms and may come with debit cards or checks.
Savings accounts are best for short-term savings or money you need to access only occasionally — think an emergency or vacation fund. Transactions from a savings account are limited to six per month. Cash management accounts offer more flexibility and similar — or in some cases, higher — interest rates.
If you’re new to saving and investing, a good rule of thumb is to keep between three and six months’ worth of living expenses in an account like this before allocating more toward the investment products lower on this list.
Due to lower overhead costs, online banks tend to offer higher rates than what you’ll get at traditional banks with physical branches.
Certificates of deposit (CD)
A CD is a savings account that offers a fixed interest rate for a defined period of time.
CDs are considered good investments UK, especially if you know you’ll need the money back at a fixed date in the future (e.g., a home down payment or a wedding). Common term lengths are one, three and five years, so if you’re trying to safely grow your money for a specific purpose within a predetermined time frame, CDs could be a good option. It’s important to note, though, that to get your money out of a CD early, you’ll likely have to pay a fee. As with other types of investments, don’t buy a CD with money you might need soon.
CDs are sold based on term length, and the best rates are generally found at online banks and credit unions.
Money market funds
Money market mutual funds are an investment product, not to be confused with money market accounts, which are bank deposit accounts similar to savings accounts. When you invest in a money market fund, your money buys a collection of high-quality, short-term government, bank or corporate debt.
This is one of the good investments UK for money you may need soon that you’re willing to expose to a little more market risk. Investors also use money market funds to hold a portion of their portfolio in a safer investment than stocks, or as a holding pen for money earmarked for future investment. While money market funds are technically an investment, don’t expect the higher risk and returns that other investments on this list have. Money market fund growth is more akin to high-yield savings account yields.
Money market mutual funds can be purchased directly from a mutual fund provider or a bank, but the broadest selection will be available from an online discount brokerage, so you’ll need to open a brokerage account.
Corporate bonds
Corporate bonds operate in the same way as government bonds, only you’re making a loan to a company, not a government. As such, these loans are not backed by the government, making them a riskier option. And if it’s a high-yield bond, sometimes known as a junk bond, these can actually be substantially riskier, taking on a risk/return profile that more resembles stocks than bonds.
It is one of the good investments UK for investors looking for a fixed-income security with potentially higher yields than government bonds, and willing to take on a bit more risk in return. In corporate bonds, the higher the likelihood the company will go out of business, the higher the yield. Conversely, bonds issued by large, stable companies will typically have a lower yield. It’s up to the investor to find the risk/return balance that works for them.
Similar to government bonds, you can buy corporate bond funds or individual bonds through an investment broker.
Mutual funds
A mutual fund pools cash from investors to buy stocks, bonds, or other assets. Mutual funds offer investors an inexpensive way to diversify by spreading their money across multiple investments to hedge against any single investment’s losses.
It is among good investments UK options if you’re saving for retirement or another long-term goal. Mutual funds are a convenient way to get exposure to the stock market’s superior investment returns without having to purchase and manage a portfolio of individual stocks. Some funds limit the scope of their investments to companies that fit certain criteria, such as technology companies in the biotech industry or corporations that pay high dividends. That allows you to focus on certain investing niches.
Mutual funds are available directly from the companies that manage them, as well as through discount brokerage firms. Many of the mutual fund providers offer no-transaction-fee mutual funds, meaning no commissions are paid, as well as tools to help you pick funds. Be aware that mutual funds typically require a minimum initial investment of anywhere between a few hundred pounds to thousands of pounds, although some providers will waive the minimum if you agree to set up automatic monthly investments.
Index funds
An index fund is a type of mutual fund that holds the stocks in a particular market index. The aim is to provide investment returns equal to the underlying index’s performance, as opposed to an actively managed mutual fund that pays a professional to curate a fund’s holdings.
Index mutual funds are among the good investments UK options available for long-term savings goals. In addition to being more cost-effective due to lower fund management fees, index mutual funds are less volatile than actively managed funds that try to beat the market.