I’m often asked about investment opportunities, however I am not a financial adviser and so I cannot give this kind of advice. What I can do however is tell you what I would do if I had some money and wanted to find the best way to invest 10k short term.
No Risk Option
My favourite no risk option for investing is in Premium Bonds. Being no risk, there is also no guarantee of making any money on your initial investment or savings, so if you are looking at making a lot of money fast, this is not the option for you.
What are Premium Bonds?
Premium Bonds are in their simplest form a form of savings account, but instead of earning interest on your bonds, the interest is used to fund a monthly prize draw. Every bond in each monthly draw has an equal chance of winning a prize, so the more bonds you have, the more chance you have of winning. These prizes range from £25 to £1 million and are all tax free, and the funds are backed 100% as well as the programme being backed by HM Treasury.
Premium Bonds are provided by National Savings & Investments (NS&I) who also offer other savings products, however due to the nature of the system, it can take a few days to cash them in (longer if you didn’t purchase them online) and withdraw the money, so I wouldn’t recommend having all your savings in Premium Bonds in case you do need money at very short notice.
Are Premium Bonds a good investment?
With a normal savings account, you know that you will earn the interest rate (less tax) every year and so you can work out after a period of time how much your investment will be worth. With Premium Bonds, you have no such guarantee so if you need a regular income or growth on your investment then this method of investment is not the best investment for you because there is a chance you may end up making zero profit and will not conclude that premium bonds are worth it.
As the interest rate is so low at the moment, I decided to put some of my savings into Premium Bonds and see what happens as I wouldn’t be missing out much interest on the amount of savings I had.
Before making any investment, speak to a financial adviser for individual and bespoke advice for your situation.
How do you buy Premium Bonds?
There are several ways that you can buy them, over the phone or online, by filling out a Premium Bonds application form (if sending this back in the post you will need to send a cheque with it for your initial deposit) or by bank transfer or standing order. Once this is processed, you will be given a customer or bond holder number and that is how you will track them. I have an online NS&I account and keep track of all my savings products in this account. There is also an app where you can check your account balances but for many of the transactions you will need to log in to the NS&I website.
What happens when you win the Premium Bonds?
National Savings & Investments (NS&I) are no longer issuing cheques for new bond holders. You will need to provide a bank or savings account details in order for them to pay you your winnings. You can also select that you receive all your winnings as additional Premium Bonds, which will of course increase your chance of winning.
I did have my settings set to pay any winnings into a savings account I have with NS&I, but since my win, I have changed this and will invest in more Premium Bonds should I win again. You will need to provide a savings or bank account details even if you choose this setting as there is a maximum amount of bonds you may hold and so in case your winnings take you over this, they will need to pay out to a separate account. Currently (November 2020) this maximum stands at £50,000 (so I’m a very very long way off)!
What else do I need to know about Premium Bonds?
There is a minimum amount of £25 for each investment, so you can get started with a very reasonable amount.
Bonds for children
Premium Bonds have traditionally been a gift for children and young people, and you can still buy them for children, whether you are the parent or guardian or not. If you buy them as a gift for someone who you are not the parent or guardian of, they will receive a confirmation as well as you.
After I opened my NS&I account, I discovered that I had been gifted some as a child. I was able to contact NS&I and get the bonds added to my online account and now I can manage them all in one place which is super handy.
Have I won?
If you purchase your Premium Bonds online you will receive notifications of wins via email or text (depending on your personal preferences). Back when I was gifted my bonds, a paper card was issued, and as I have moved several times since then, if I had been a winner there is a good chance that the notification or cheque would not have reached that address. If you think you have won, there is Premium Bonds Prize Checker online where you can search for your holder’s number and see if there are any wins that you are owed.
Premium Bonds after death
If a Premium Bond holder dies, the bonds become part of their estate and will be entered into draws for 12 months after the date of death unless they are cashed in prior to this date.
Unclaimed Premium Bonds
There is no time limit to claim lost or unclaimed Premium Bonds and so if they are unable to contact you, the prize will remain waiting for you until you claim it. Claiming of prizes and some other admin tasks will require you to put requests in writing to them, but I have found them to be efficient and work in a very timely manner. Remember that if you have changed your name or address, you may be required to provide additional information. I sent off a copy of my birth certificate when I was tracking down the ones I had as a child, and they returned this promptly, and I do not know if they even needed it. You can always given them a call or send them a message on Twitter to ask before you do anything.
What do I do if I change my address
Just like with any bank or financial institution, you should let NS&I know if you change your address. They will update your records accordingly. If you moved a long time, and they may have been trying to reach you – you can contact them directly and confirm your old addresses with them.
I’m feeling risky!
I don’t really understand the stock market, all I really know is that you buy a share (or partial share – yes that is a thing) and then depending on how well the company is doing, the value of your investment goes up or down. I have a grand total of £15.29 in shares at the moment, and I started this journey with FreeTrade. If you use my referral link, you will get a free share when you invest £1. Once your free share has been allocated, you can cash out almost immediately and the free shares are worth between £3 and a massive £200!
This can be a great way to invest short term, and make a bit of extra money, but you need to bear in mind that in the time your money is invested, you can lose money, so although you have the free share, you can still lose out in total, especially if you are investing a large amount of money. It is therefore worth investing the £1 to get your free share.
If you want to invest longer term, the stock market can be a good option, but you need to get specialist advice about investments whatever your plans are.
Other investment options
If investing is something you want to do, and are looking for the best way to invest 10k short term or long term, then there are loads of things you could consider bonds, trusts, securities, property, stocks, shares and more. Whatever you do, make sure you speak to a professional financial advisor, and remember that with the majority of investment options, the value can go up as well as down, so you shouldn’t be investing anything you cannot afford to lose.