Get the best return on your £50,000 investments

If you do opt to put your money in a savings account then you would likely get up to 5% interest a year if you want instant access, and this will be liable to income tax if it is outside of a cash ISA. Remember to ensure that your savings are covered by the Financial Services Compensation Scheme so your money is safe should your bank go bust.

Investment ideas for £50,000

So assuming you are happy with investment risk what types of asset could you invest in?

Buy-to-let property

As a nation we have a love affair with property. Yet, despite what people tell you the reality is that house prices tend to only keep pace with inflation, having increased by just under 3% a year over the last 50 years. However, that masks some huge market falls.

Part of the reason for its popularity is that property is relatively easy to understand. You buy a house, get people to live in it for rent. Then you sell it when you get fed up. Well that's the theory anyway. The problem is that it is seldom that straightforward. While the average gross rental yield in the UK is around 6% this doesn't take into account a whole host of costs such as the mortgage cost, insurance, letting agent costs (if used), void periods, repairs and eventual selling costs.

The reason people do make money on property is that they often use their own money (say £50,000 or £100,000) as a deposit and then take out a buy-to-let mortgage in order to buy the property. Or in other words, they leverage their investment. Would you borrow money and invest it in the stock market? The answer would almost certainly be no, but people are more comfortable with the idea when it comes to property.

Buy-to-let’s biggest attraction is that it is seen as low risk and easy to understand. Yet the problem is it’s a difficult investment to manage which is why it is not a great investment for most people.

Investing in assets via funds

Personally, I prefer to invest via funds. Funds are collective investments which pool investors money together so they can benefit from economies of scale and reduce costs. There are thousands of funds out there investing money in a range of assets including shares, bonds, commodities and property. Funds are run by a manager whose job it is to analyse a company's accounts, in the case of funds investing in shares, and pick the best shares to buy.

What this means is that you can then pick the best funds for you and build a portfolio which covers a range of assets such as those mentioned in the next section. Without using funds it would be very difficult to build a diverse and cost-effective portfolio if you bought assets directly. The beauty of funds (be they unit trusts, investment trusts or exchange-traded funds) is that you can buy and sell them very easily.

I suggest that you download the guide to investing in funds to find out all you need to know about how to invest in funds.

Basic asset types and historic returns

You can invest in funds via a Stocks and Shares ISA or a pension. The beauty of doing so is that you can then build a portfolio of funds to maximise your returns. Below I list two key asset types you will likely invest in and their potential returns.

• Equities (shares) – these are company shares traded on the stock exchange. Yet as a UK investor you do not just have to invest in UK shares, you can invest in shares from around the world. Some investors do invest in shares directly after researching a company, yet this carries much higher investment risk than investing via a fund as you'd be lumping all your eggs in one or two baskets. For example, a manager of a fund specialising in UK equities would typically invest in between 50 and 100 different companies. Shares are typically medium to high risk investments. According to the Barclays Equity Gilt Study equities have produced an average return of around 5.5% a year over the last 50 years. Yet in that time there have been big market falls as well as rallies.
• Bonds – bonds are loans to companies or governments that are tradable. They are low risk investments and have historically moved in the opposite direction to equities. Again, there is a whole range of types of bonds from around the world which dictates the types of risks and returns you might expect. Average annual return from UK bonds over the last 10 years is around 2%.

Follow me as I invest £50,000 of my own money

The key to successful investing is knowing what to invest in and when. This is where the world of financial services tries to pull the wool over people's eyes. They do this by making out that it is far more complex than it is but also overstating their own expertise. For example, most financial advisers have no investment expertise, instead picking from a short list of funds often promoted by the people actually running them.

That's why no other commentators or IFAs run an open portfolio to show how good they are at investing. It is for this reason that I actually invest £50,000 of my own money for the benefit of 80-20 Investor subscribers. 80-20 Investor is my DIY investing service which teaches people how to run their own money and make sure they are in the best performing funds. I continually update subscribers with the funds I buy and why.

I have been running the portfolio for over nine years and in that time we've experienced market-sell offs, a Chinese equity market collapse, a commodity crash, Europe almost imploding as a result of the Greek debt crisis, Brexit, a shock US election win by Donald Trump, a subsequent US-China trade war, the coronavirus outbreak and a war in Ukraine.

Yet despite this, my portfolio is comfortably beating professional fund managers, financial advisers, discretionary fund managers and passive portfolios since I began running it in March 2015, as shown in the table below. The reason I have been able to do this, while only typically exposing around 50-60% of my money to the stock market, is that I have moved in and out of markets and altered my portfolio using the 80-20 Investor algorithm. I have turned my original £50,000 into £87,575.