When you’re investing your money, you probably have a clear idea of what it’s for – and when you’ll need it. You could be looking for a return over the short-term of a year or two. Or maybe you’re taking a longer view of saving for the future, or even retirement. Either way you’ll need to make sure your money is in the right place. We’ll look at some of your options here. Remember, investments can go down as well as up, and you may get back less than you've put in.
Short-term investing
Investing for the short term means you need returns on your money over a fixed time. Maybe you’re aiming to do something like go on a holiday or put cash towards a new car. Unless you’re willing to gamble your cash, short-term investments should minimise your risk. But that safety can come at the cost of potentially higher returns.
Short-term investing options
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If you’re looking to make a return on your money over one to two years. While not technically investing, they can help to grow your money.
High interest savings accounts
High-interest savings accounts can be a safer way to make a return on your cash. That’s because, with savings accounts in the UK, up to £85,000 is protected by the Financial Services Compensation Scheme (FSCS). There are different kinds of savings account. Easy access accounts let you get your money faster but fixed-term accounts often offer higher rates of interest if you’re happy to lock your money away for 12 months or more. With all short-term investments, one thing to be wary of is the effect of inflation. If the return on your money is less than the rate of inflation, your spending power will be reduced.
You can find a range of savings accounts through Aviva Save.
Cash ISAs
With a Cash ISA you can still get FSCS protection for your cash, but with the added benefit of any gains you make being free of UK income tax or capital gains tax. You have an annual ISA allowance of £20,000 for the tax year 2024/2025 and can now have more than one type of ISA in each financial year, if you wish.
Long-term investing
Most investing is recommended for the longer term with the aim of building your wealth over years. This can take patience and occasionally nerves of steel. Over the years, you’re likely to see your investments dip as the stock market sometimes goes through big drops - like during the COVID outbreak. But by sticking to your plan and not drawing out your money, you can try and ride out those dips. This longer timeframe can allow you to put your money into riskier investments with the aim of higher returns.
You’ll need to review your selection of investments over time to make sure they still fit with your goals. For example, as people move closer to retirement, they often switch to less risky investments in things like their pension.
Long-term investment options
Here are some options if you’re looking to grow your wealth over a longer period.
Stocks and Shares ISA
A stocks and shares ISA is a tax-efficient way to invest for the longer term. Each tax year you get a £20,000 ISA allowance which you can use with your ISA. Any gains you make will be free from UK income tax and capital gains tax. You can invest in a range of things like:
Stocks and shares
Stocks and shares, also called equities, give you direct ownership in a company. When you invest in shares, you’ll buy individual units for fixed price set at the time you buy. Your investment is tied to the company’s fortunes over the time you’re invested. If it does well the value of your shares will rise, making you a profit. But if it does poorly, the value of your investment will drop – and you could get back less than you’ve paid. Picking winning shares can be difficult and requires an understanding of the businesses you’re investing in.
Some companies make regular payments called dividends to shareholders if they make a profit. If you have a decent-sized investment, these can be a useful way to have an extra income over the years. You can also choose to reinvest your dividends to increase the size of your investment.
Investment funds
Funds take a lot of your legwork out of investing. Rather than researching and choosing individual investments like shares yourself, a fund includes a basket of different ones. It’s a popular way to invest as you can match the fund to your long-term goals or choose things like the industry type – for example, tech, or a region like the US. It can also be a good way to spread your investments to help balance any big losses in one area – this is called diversification.
You can find out more about Aviva’s Stocks & Shares ISA here.
Investment Account
Once you’ve hit your ISA allowance you don’t have to stop investing for the long-term. You can continue to invest in the same things using an Investment Account. You won’t get the tax benefits of an ISA but there’s no limit on what you can invest in a year. You can find out more about Aviva’s Investment Account here.
A pension
Pensions are a good way to save for the future, as the government will give you a certain amount of tax relief when you pay into one. Your first port of call should be a workplace pension, if you have access to one. This boosts your pension payments, as your employer will have to make contributions of at least 3% of your salary alongside yours – although some pay more. Pension funds are invested in a wide range of things from stocks and shares to commercial property. If you can’t get a workplace pension, you can opt for something like a Self-invested Personal Pension (SIPP), which lets you choose your own investments. You won't be able to access money invested in your pension until you're 55 (57 from 2028).
At Aviva, we offer an award-winning Self-Invested Personal Pension (SIPP).
Lifetime ISA
If you’re saving for a home or retirement, a Lifetime ISA (LISA) can be a good option – if you meet certain conditions. To open one, you’ll need to be between 18 and 40 and you can only save into one until you’re 50. The LISA lets you pay in £4,000 each tax year and the government will add a 25% bonus – up to £1000. Any interest you earn or investment gains are free of UK income tax or capital gains tax. The drawback is that money can only be used when you buy a home or as part of your pension. If you decide to withdraw early you’ll face penalties.
Tax allowances are based on personal circumstances and are subject to change.
Medium-term investing
The medium-term could be anything from two to five years. It could involve saving for something bigger like a wedding or home deposit. It can be tricky to choose medium-term investments, you may not want too much risk as your money won’t have time to recover. Equally, you’ll want to aim for a decent return as inflation could reduce your spending power over that time.
In the medium term, you could opt for fixed-term savings accounts with longer terms of up to five years.
Or you could also look at investment funds with a very low proportion of high-risk investments like shares and a high mix of lower risk ones like bonds – these are often called low-equity funds.
Get professional advice
If you’re looking to invest for the long term, an adviser from Aviva Financial Advice Team may be able to help. Or you can find an independent financial adviser at Unbiased. There will be a charge for advice.
