There’s no one-size-fits-all approach when choosing how to invest £100,000. Everyone’s personal circumstances and goals are different. So it’s worth reflecting on what you want to achieve with your investment – and when you want to achieve it by. For example, you may have a life stage or event you are investing towards – whether that means investing to fund a property move, take a career break, plan for your projected retirement, or cover your children’s university fees. But whatever your plan, it will probably have a potential timeline, and a list of things that need to happen. Thinking about those will probably affect how you want to invest.

How long you want to invest for – or rather, when it is you want to see returns on your investment – is a key deciding factor in your options. For example, if you’re looking to create a retirement income, then a pension fund over the long term could help your money grow over time.

On the other hand, a cash ISA could be more suited to people wanting to withdraw capital in a shorter time span. At NatWest Premier we recommend keeping your investments in place for at least five years, to give them the best chance of performing.

Though you may have a lump sum ready to invest, you should always look at your current financial situation before you think about investing, to make sure you’ve taken care of any bigger priorities first.

If you have any higher interest debts or outstanding loans, it could be better to look at paying these off first before you entertain the idea of investing.

If you’re thinking of investing £100,000, it’s a good idea to review your current finances to see whether you have enough set aside for emergencies.

One strategy could be to ensure you have four to six months of living costs and general expenses safely stashed away, potentially in something like an easy-access savings account.

Personal risk appetite is something many people never think of. But whenever investing a considerable sum of money, you should assess your attitude to risk. This is not only about your personal preference – it requires you to look at your finances too.

For example, do you have the capacity to risk higher losses on shorter-term investments? Or are you looking for slower returns over time?

It also means taking a look at your wider obligations. Dependents, commitments, and so on, as well as consulting any partners in the investment. It’s also a useful exercise – it can reveal so much more than we think about our assets, and even ourselves. 

Portfolio diversification helps to mitigate risk by spreading your investments across a range of different assets. Depending on your investment goals, timeline, and risk appetite, alongside a host of other factors, diversification can look wildly different from person to person. Your ideal investment portfolio might have less risk, but be able to look for growth over a longer timeframe, and so on. 

Your portfolio might include a blend of stocks, property, bonds and other investments. Financial advisers, like those offered by NatWest Premier,  could help here, as well as assist with any periodical rebalancing.

If you invest you may have to pay Income Tax on any investment income, such as dividends from companies or interest on bonds. You may also have to pay Capital Gains Tax if your investment grows.

Capital gains are the profits earned when an asset – like shares or investment property - is sold higher than its original price. Depending on the type of investment, you may or may not be taxed on earnings, so it’s important to be aware of the rules. Capital Gains Tax is the he most common type of investment tax.

Some investment methods, such as ISAs, are highly tax-efficient too. This means you don't pay UK income tax or capital gains tax on things like gains, growth or income. It's worth noting though that the personal ISA allowance for this tax year is £20,000, which could be split across different types of ISAs.

Additionally, if you're planning for retirement, you could also consider a personal pension. The government offers tax relief on anything you contribute, meaning they top up your investment by 25% if you're a basic rate taxpayer, and could offer more for higher and additional rate taxpayers.

To clarify, the tax relief is actually 20% of the gross amount, but this works out as a 25% top-up on your net contribution. For example, if you put £80 into your pension, HMRC adds £20, making a total of £100 in your pension pot. Here, the £20 top-up is 25% of your original £80 contribution.

Once deciding on how you invest - with an ISA or pension - it’s then worth considering what you invest in. Beyond traditional investments like stocks or bonds, you could think about adding a sustainable lens on your investment strategy by including low-carbon companies, green bonds or ethical funds. (Again, NatWest has experts in this area.)

Alternatively, you may want to consider more niche areas like crowdfunding or high-value collectibles. These will each carry their own set of risks and imperatives.

Your financial goals may dictate whether you look at investing for longer term growth or a more regular income. Here are the key differences:

Investing for growth

• Focuses on increasing value over time.
• Investment may be sold in the future for a profit.
• Earnings are often reinvested as part of a long-term approach.

Investing for income

• Focuses on generating a more stable income.
• Investments may be in funds that pay out interest or dividends.Earnings are often paid out to you for regular returns.

A pension allows you to invest your money in a tax-efficient way and prepare for retirement. The government adds tax relief, and your investment has the chance to grow free of UK taxes. At NatWest, your investments would be looked after by Coutts investment managers, offering five ready-made funds for you to choose from.

Pros

• Tax relief on contributions.
• Ringfences your retirement savings.
• A tax-efficient way to save or invest. The pension annual allowance for this tax year is £60,000 or 100% of earnings (whichever is lower) and you can also carry forward any unused allowances from the past three years.
• Potential for a 25% tax-free lump sum withdrawal.

Cons

• Besides the tax-free lump sum withdrawal, income from a pension is subject to income tax.
• You money is locked away until age 55 – soon to rise to 57. 
• Market volatility may impact your portfolio and final value.

Best suited to: People planning for retirement, or interested in investing in a long-term, limited-access growth strategy.

Learn more about Premier pensions

An ISA is an individual savings account - a tax-efficient wrapper allowing subscriptions of up to £20,000 per year. At NatWest, we offer three types of ISAs:

ISAs we offer:

Cash ISA. is a tax-free savings account often with instant access and variable interest, A short-term savings method.

Stocks and Shares ISA. An investment account that invests your money in funds made up of stocks or bonds, or a combination of both. A key objective of investing in a stocks and shares ISA is capital gains rather than solely earning interest.

Junior Stocks and Shares ISA. Similar to a regular stocks and shares ISA, invest up to £9,000 per tax year for a child under 18 - separate from the £20,000 personal ISA allowance.

Pros

• Money you make is free from UK income and capital gains tax.
• Flexibility to choose between Cash and Stocks and Shares ISAs.
• £9,000 Junior ISA allowance per child, separate to your personal ISA allowance.

Cons

• Annual contribution limits are in place.
• Stocks and shares ISAs are subject to market volatility.
• Cash ISAs could be impacted by inflation.

Best suited to: People who are happy to invest up to a fixed amount annually, with the flexibility to choose between long-term investments and shorter-term savings.

Learn more about NatWest ISAs

Stocks and shares represent ownership stakes in a company. While ‘stocks’ and ‘shares’ are often used interchangeably, the former refers to having ownership in one or more companies, while the latter refers to the individual units invested in.

Pros

• Potential for high returns depending on your investment tactics.
• Flexibility for people of varying risk appetites.
• You can earn money through capital gains and dividend payments.

Cons

• Returns are not guaranteed.
• Managing a diversified portfolio can be difficult without financial advice.
• Market volatility can greatly affect your investments.

Best suited to: People who understand risk and volatility. However, investment guidance is available for managing your portfolio. 

Bonds essentially require you to lend money to an organisation for a fixed period, which they agree to pay back with added interest. For example, bonds are often issued by governments or institutions when they need to raise money, or if a business wants to get a new product off the ground.

Pros

• Risk is not as high as stocks and shares.
• Often provides higher returns.
• Most bonds offer regular payouts.

Cons

• Value is reliant on interest rates.
• Inflation could eat away at your fixed income .
• Risk of bonds being recalled early.

Best suited to: People with a lower risk appetite who want semi-regular payouts. However, come with maturities of 1-5 years up to 30 years, so it’s worth thinking about your investment horizons and expectations.

Property investment involves buying real estate with the intent of generating profit. For example, buying properties to rent out, renovating property to sell at a higher price, or investing in commercial property.

Pros

• Could generate consistent income – e.g. through rent.
• There’s often a high demand for certain properties, like rentals.
• Could benefit from long-term capital appreciation.

Cons

• Requires active management.
• Initial costs are high when buying and renovating.
• More regulations and taxation for landlords than homeowners.

Best suited to: People who have the money to initially invest and are prepared to actively manage property with a long-term plan to rent it out, renovate or sell.