What’s the absolutely cheapest, safest way to invest £5000 in the stock market for 10 years?

When looking for the safest and cheapest way to invest £5000 in the stock market for ten years many investors would turn to professional advisors. However, few money managers would take on a £5000 portfolio.

Luckily there is a new breed of fund managers that actively seek out smaller investors, the so-called Robo-advisors.

Firms who use technology to manage smaller pots of money and keep their costs low.

Combining a low-cost Robo-advisor with a tax-efficient savings product like a stocks and shares ISA is probably one of the best bets for investors, with modest sums to invest over the long term, that’s 5 years and above, who wouldn’t feel comfortable managing the money themselves.

Investing is all about trade-offs

What I mean by that is, that it’s all about trying to balance those two opposing, but equally powerful forces, of risk and reward.

They are polar opposites but are intrinsically linked when it comes to generating returns. Higher risk is associated with higher rewards, and low or no risk with capital preservation.

Investing your money wisely means deciding what returns you would like to generate over a given period and how much risk you are prepared to accept to get there.

If you are 100% risk averse, then you might think that keeping your money in a bank account might be the best way to proceed.

But would that view be correct?

I say that because if your money isn’t earning a rate of interest that’s above the rate of inflation then you are losing money because the purchasing power of that cash is being eroded every day.

And that’s to say nothing of the opportunity costs you are incurring but not doing anything more adventurous with it.

If you want your money to grow significantly you’ll need to look beyond cash deposits

So what are the choices if we are looking for cheap, relatively safe ways to invest £5000 in the stock market for 10 years?

The first thing to think about is how you can maximise your returns even before we talk about where to invest, we should consider how you invest.

One of the most efficient ways to invest in the UK is to do so through an ISA or individual savings account

A tax-free wrapper, within which you save £20,000 per annum, under current legislation. Any income earned or capital gains made within the ISA are free income or capital gains tax. ISAs make sense because the less you have to pay away, the more your money can grow through what’s known as compounding.

Where to invest is a harder question

Here are three alternatives to consider:

Bonds – securitised IOUs issued by governments and large corporations bonds pay a rate of interest or coupon to their holders throughout the lifetime of the bond and on maturity they pay back the principal or face value of the money lent against them

Blue-chip equities – the shares of the biggest and often most established companies’ equities are riskier than bonds but they offer high rewards or returns. And blue-chip stocks such as those in the FTSE 100 or Dow 30 are seen as being a stable place to invest, with relatively predictable returns.

London-listed International Bank HSBC has seen its share price rise by +51.0% over the last 10 years whilst Nasdaq-listed social media giant Meta Platforms stock has risen by +822.0 % in the last decade

ETFs– Exchange Traded Funds are collective investment vehicles which track the performance of stock market indices, sectors or investing styles and factors.

Some of the biggest ETFs track indices such as the S&P 500 or Nasdaq 100.

By investing in an index-tracking ETF you get diversification and can expect to mirror the performance of the underlying index.

ETFs often have low annual management fees and many of them will be ISA-eligible as well.

The iShares Core S&P 500 UCITS ETF which tracks the S&P 500 index has generated returns of +578.0% since its inception in May 2010, and +251.0% over the last ten years to January 31st 2025.