Ask HN: How should I best invest £5000? | Hacker News Reader

Ask HN: How should I best invest £5000?

7 pointsrefrigerator15 comments

What should I do with £5000 so that 1-3 years from now, I'll have more than £5000? Theoretically, my life will not be affected if I lose it all so I can afford to be risky but I'm leaning towards not being very risky (maybe you can convince me otherwise?). Thanks

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Asking this question on this website, you are probably male, under 30 and working with technology. The largest amount of capital you have is probably yourself.

You should increase the returns you make on this capital. Buy some books, take some courses, invest in your health, hire someone to design your portfolio. If you get a job with 10% more payment, you effectively doubled your investment after one year, tripled id after two and so on.

Its lame, I know. Alternatively start and finish a side-project and invest the money in PPC ads.

I am assuming you want to invest with minimal additional effort. E.g. more like buying shares than flying over to the states to enrol in YC.

In that case you could pick up some books on investing in shares. This has good liquidity and although risky it is unlikely you will lose 100%. If you have a portfolio of shares in different sectors, you should be at low risk of losing lots.

If you fancy learning but still a passive investment, then maybe stamps, antiques, collectibles. You will get additional enjoyment out of it in the meantime.

Some parts of the UK I imagine you could use 5k for a house down-payment and rent it out. I have been expat for 4 years so I have no idea.

If you want to be more involved you could start some kind of business, using 50-100 pounds and your own effort to get it going, then 'invest' more money once you have a proven method. For example once you can spend 100 on advertising to make 200 gross profit, then you can scale that up using the 5000, then keep reinvesting to grow it. Easier said than done!

Or you could renovate something. Lots of people have broken things they would give away or sell cheaply - you repair and sell on for a profit. But you will need some capital and that is how you can invest your 5000.

> Some parts of the UK I imagine you could use 5k for a house down-payment and rent it out. I have been expat for 4 years so I have no idea.

Maybe in Merthyr, but even 4 years ago you'd have been lucky to find a house under £100K without anything unrentably wrong with it.

Plenty of houses for less than £100k outside of the South East.

I can get a 2 bedroom apartment in the city centre in Liverpool for <£100k and it would rent out for £600/month easily.

Sorry, you are right, I do have a bit of a South East bias.

However, Looking on Rightmove, I see no houses in L1 for that price, but I do concede that there are plenty near the L1 edges of L3, L7 and L8.

Houses are rare in L1. Try L9, L6, L7, L4 very commutable to the city centre.

You should probably figure out what your risk tolerance is. The more you stand to lose, the more you could win. What are you going to use this money for in 1-3 years? The traditional advice is either bonds or stocks, likely with some amount of diversification. Bonds are safer than stocks, but might not return as much. See this site [1] with a quick overview of some investment options of varying degrees of risk.

For what it's worth, it's probably not a bad idea to put it in the S&P 500[2]. In the long run, it's probably going to outperform most other investment strategies, although if the US economy tanks in the next few years you could lose a good bit of what you put in there.

I also think that allendoerfer's advice about investing in yourself can be very good, depending on your situation

[1]http://personalfinance.duke.edu/prepare-your-future/savings-...

[2]https://personal.vanguard.com/us/funds/snapshot?FundId=0040&...

Investing in an index fund (US or otherwise) is going to be your best medium risk investment (with middling to good return). There is more QE on the horizon for the euro, though the dollar is strengthening. Minimal fees, relatively minor risk (If you lose half your investment you'll have bigger things to worry about than 2.5k quid), and pretty okay returns. Plus you'll learn a bit about the market so that you can become a better investor in the future.

There is no such thing as a risk-free investment.

This comment should not be construed as a replacement for professional financial investment advice.

Sure, but some things are riskier than others - I'm saying that I'm looking for something reasonably low risk :)

There might be. One financial sage gave the following example: buy nickles. Currently, the value of the material is ~30%(?) higher than the nominal value of the coin. Therefore at some point in future the government will have to switch to a different material. At that point you'll be able to sell at 30% gain. If this for some reason is not possible then you'll still have whatever you started with. This way you are sure not to lose any money (except due to inflation) and possibly make 30% profit. You have to consider the likelihoods of both outcomes, etc. Anyway, he bought nickels worth of a couple of million dollars.

This seems like a bad idea. Firstly, the melt value of a nickel is less than $0.05 [1]. Maybe he was confused by the fact that it costs more than $0.05 to mint each coin; that's because there are costs other than the materials. That also means it'd be cheaper to just buy the metals that are in the nickels than to buy the nickels if you wanted to bet on their price. If the government switches to a different composition, there will be less demand for nickel and copper, which doesn't bode well for the melt value increasing significantly beyond $0.05 because of a switch.

Secondly, just holding the nickels doesn't mean you're sure to not lose any money. As you said, simply stuffing cash (or nickels) under your mattress means you're losing some every day to inflation. You're also losing all the potential gains of the other things you could be doing with that money other than piling up nickels. At the very least, you take no risk of losing the principal by sticking it in a savings account (~1% APY) or buying a 1-5 year CD (2-3%).

Then again, I don't have a couple million dollars to blow on stockpiling nickels. The sage investor must know something I don't.

1: http://www.coinflation.com/coins/1946-2007-Jefferson-Nickel-...

There is also probably laws that keeps you from doing that. At least in many countries, It's illegal to damage money even after they changed the material or the currency itself. It's a very long shot and probably not very profittable.

The easiest form of investment to get started with are investment funds (aka mutual funds in the US). They are a form of collective investment (i.e. you invest along with other people in a basket of goods, rather than a single share). The advantage of this is lower cost (buying and selling shares has a cost, with a fund there are economies of scale so it's usually cheaper to invest via a fund than directly in a similar basket of shares), and generally lower risk (if a company that the fund invested in goes bust, you usually lose less money than if you invest in the company directly, because the fund invests in many different companies whereas you'd usually invest in a smaller number of stocks).

ETFs (Exchange Traded Funds) and Investment Trusts are similar to investment funds in that they are also collectives, relatively low cost. The current fashion in investing is to buy 'passive', 'tracker' or 'index' funds (or ETFs), which all follow an index such as the FTSE or S&P. These tend to be lower cost than 'actively managed' funds (where the fund manager tries to beat the index). Vanguard is a popular 'passive' fund manager.

Other types of investments include property (you generally need quite a lot of capital), and more risky types of investment such as forex trading, spread betting, etc. Even experienced investors tend to consider these risky.

Investments have done reasonably well over the past year in some areas (some UK income funds are up 8% in the past 12 months), not so well in others (a FTSE All Share tracker is only up 0.6% over the year). Investing is not risk-free, and generally speaking there is no guarantee to make a profit. You could also consider saving in cash, but with interest rates as they are now, you'd probably be worse off in real terms by the end of the year than you were at the beginning (because interest rates are generally lower than inflation)

Some investment brokers in the UK include: rplan (disclosure: I work for rplan), Hargreaves Lansdown (the largest), Fidelity, Nutmeg (another startup).

As others have mentioned, it's definitely worth doing a bit of research to find out more about how things work. If you don't mind the shameless plug, we have a 'guide to investing' available on our site which we think is quite a good overview of what's available (it's fairly UK-specific though): https://www.rplan.co.uk/investment-guide (note: registration required, let me know if you'd rather not register and I can send you a copy).

Found a company, follow your passion!

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