What to do with £20,000?

By THIS IS MONEY
Updated:

 

I've got £20,000 to invest. Where should I put it to make maximum growth over a 12-month period? LB, Watford.

Anna Bowes, independent financial adviser with Chase de Vere says: As you will require the capital in 12 months time, your options are restricted. You must leave this money in a cash-based investment such as deposit account, as you cannot risk it dropping in value within a stockmarket-based fund.

There are a few options open to you however. If you have not yet used your ISA allowance, then £3,000 could be invested into a mini cash ISA this tax year, and a further £3,000 in April 2001. The best rate currently available is 7.25% with www.smile.co.uk available only on the internet. If you would prefer not to use the internet, then the Coventry and Britannia building societies are offering 6.85%. An ISA is a tax-free investment.

With the remaining capital, you may wish to consider investing in a fixed-rate bond for 12 months, especially if you feel that interest rates have peaked and may start to fall over the year. The best rate available is 6.5% gross with the Northern Rock. Currently, a better rate of interest can be found within a variable rate account. Once again, the internet is offering the most competitive rate, with www.cahoot.com currently paying a variable interest rate of 7.1%.

A non-internet alternative could be with the Bristol & West which is offering a guaranteed rate of 7% gross until 29 June, at which point the rate will drop to its normal instant access account rate. However, if this new rate become uncompetitive, you will be able to move your capital as there are no restrictions on closing the account.

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