This is the third in our six-part series looking at how to invest £10,000 at different ages. Previously we looked at 20-year-old and 30-year-old investors. You can also click through to for advice for those in their 50s, 60s and 70s.
While we are told to save and invest as early as we can the reality is that a large proportion of us don’t start in earnest until around age 40.
Many would have already bought their first home and started a family and may finally be thinking about investing for the future.
However, your 40s are really another decade that will pull you between short-term commitments and long-term contingencies. It will not be as difficult as when you're in your 20s or 30s, but conflict management and considering splitting the £10,000 into long-and-short-term investment plans may be necessary.
Knowing where to start is difficult, but below Telegraph Money has some suggestions on what to do with your £10,000.
We have chosen £10,000 as a starting point, but the thought process should remain the same regardless of the amount. For this guide, we have assumed there is no high-cost debt to be paid off, which should be prioritised, and that there are emergency cash savings elsewhere.
Investing when you have children
Having children will significantly impact how you save during this decade. Sam Buckingham, of wealth manager Canaccord Genuity, said families will have to juggle significant outgoings such as school fees, a mortgage and holidays, with saving for the future.
“If your income covers these outgoings but doesn't leave you much left to save for rainy days, then you may need to rely on this £10,000 for emergencies,” he said. "This means you won't be able to invest all of it in higher-risk, higher-returning, assets."
For these investors, it could be worth investing in a low-to-medium-risk fund that buys defensive assets such as gold and government bonds, along with some stocks.
The easiest way to get started without doing much admin is to choose a ready-made fund or investment trust that spreads money in a way that matches your risk.
Multi-asset funds, as these are known, will make these decisions for you, providing a “one-stop shop” for investors that include the aforementioned assets.
Fund groups Premier Miton, Architas and Schroders all run highly rated, actively managed multi-asset portfolios that invest in both bonds and stocks. Vanguard and iShares, owned by BlackRock, offer low-cost passive alternatives.
Dame Helena Morrissey of St James's Place, said: “If you’re time poor, want to delegate portfolio construction or you’re not confident in choosing how and where to invest, multi-asset funds should be the cornerstone of your investment strategy.”
If you are able to cover your costs, and save cash, then you could invest the £10,000 for your children via a junior Isa. Money is saved for a child who is not allowed access the money until they are 18. You can save £9,000 per tax year per child via a Jisa.
Mr Buckingham said: “If your child has several years before they turn 18, you should invest the bulk of the Jisa in stocks."
He suggested Evenlode Global Income, Lindsell Train Global Equity and Fundsmith Equity as funds that invest in “quality” companies. These are defined as market leaders where their earnings are less impacted by the global economy.
One area that should not be ignored during this decade is your retirement. Richard Pearson of EQi, a broker, said investing the £10,000 via a self-investment personal pension remained a smart choice due to the tax relief and incentives from the government. (see the 30-year-old guide for more detail)
“Modern day Sipps also give investors a world of choice on how to invest. You can stay in control and build a portfolio that suits you,” he said. He suggested passive funds would allow you to invest in the global stock market while keeping costs down. A list of the Telegraph's recommended passive funds can be found here.
Helal Miah, of broker The Share Centre, said another option is to invest in themes. Traditional investors invest by geography, but finding the right theme to back could be another option.
While technology stocks have been the best performers over the last decade, this year's crisis has put healthcare back in spotlight.
“In addition to the pandemic, societies around the world are ageing so the demand for healthcare products and services is rising,” he said.
British companies such as GlaxoSmithKline, AstraZeneca, Smith & Nephew and Hikma Pharmaceuticals could serve as good investments for those who want to invest in more stable, steady healthcare stocks.
The more speculative world of biotechnology and treatments could provide even better returns. Polar Capital Healthcare Opportunities fund or Worldwide Healthcare Investment Trust have exposure to this sector.
No matter how you invest, Dan Kemp of investment analyst Morningstar, said it is important investors were wary of their own behaviour when investing, as the way our minds work often mean we end up making mistakes that cost money.
There are a number of dos and don'ts. While they seem obvious, such as doing your homework and avoiding tinkering, they are mistakes that many people fall for.
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