Investing your money is proven to grow your money faster over longer periods. In times of inflation, the interest rates offered by savings accounts rarely offer enough of a return to keep up with surging prices. The best investments in 2023 may help you win the battle against inflation and increase your real wealth.

Following the fall in global stock and bond markets in 2022, analysts and economists now believe that expected returns have increased. This could make 2023 the perfect year to begin (or continue) building a sensible portfolio of investments

In this article, we’ll list some of the best investments used by experienced investors to grow their wealth over time or produce a passive income.

This article should not be interpreted as financial advice. For actionable guidance that is based upon your own personal circumstances, please find a financial adviser. This is a journalistic article formed from personal experiences and extensive research. Please read our disclaimer. 

The best investments for 2023

Starting with the lowest-risk and building up to higher-risk options; we’ve listed the following UK investments:

1. Fixed-term savings accounts (banks or building societies)
2. Government bond Exchange Traded Funds (ETFs)
3. Corporate bond ETFs
4. Cheap equity ETFs
5. Real Estate Investment Trusts (REITs)
6. Residential property
7. Value Equity ETFs
8. Equity crowdfunding platforms

1. Fixed-term savings accounts

Before you jump into riskier investments and begin weighing up the latest stock market outlook, you should review the best-buy tables for top savings accounts. 

In order to make an informed decision about how much risk you are prepared to take in exchange for financial rewards, you need to understand the baseline.

Fixed-term savings accounts with an FCA-regulated bank are practically risk-free. UK banks are subject to tight regulations and the first £85,000 of your deposit with a bank is guaranteed by the FSCS compensation scheme. The government demonstrated in the 2008 – 2011 financial crisis that it was prepared to support failing banks and the compensation scheme to ensure that savers were not left out of pocket.

This means that the best-buy interest rate from a UK institution represents the ‘risk-free rate’ you have access to over various time horizons. The highest interest rates are available to savers who agreed to lock their money away for a longer fixed period, such as 3 or 5 years. 

As you learn about the risk and return characteristics of the next investments on this list, you should be asking yourself the question of whether the incremental return of those options justifies the additional investment risk you’ll be taking on.

Some of savings accounts allow you to withdraw your money early, in exchange for a penalty charge or forfeiture of interest. Others will prevent you from accessing your funds until the maturity date. It’s important that you have other emergency savings in an instant access account before you lock a significant chunk of money away for 3 – 5 years.

Best investment for: 

• Risk-averse savers who don’t want to take the risk that their investment could fall in value over the saving period.

• Folk with specific financial goals within a short time frame (such as placing a house deposit in three years).

Less suitable for: 

• Those who think that interest rates could rise. A 5-year fix can turn out to be a raw deal if interest rates increase while you’re locked in at a pre-agreed rate. Interest rates are currently very low, and the consensus among monetary policy watchers is that the Bank of England will look to increase the base rate over the next few years. 

Attention: The following investments require a stockbroker account

The investments that follow in this list are only accessible via a stockbroker. Here is a shortlist of our favourite brokers:

2. Government bond ETFs

ETF stands for ‘Exchange Traded Fund’, and refers to a collective investment scheme that invests in a basket of assets on your behalf. 

You can use an award-winning UK stockbroker to buy shares in the ETF, and by doing so, you effectively hold a slice of everything owned by the fund. ETFs themselves are quoted on the stock exchange, which means they can be bought and sold through your broker at a live price during trading hours (London: 8:30am – 4:30pm).

Government bond ETFs invest in arguably one of the safest investments that exist – a government bond. A government bond is the main way in which governments borrow money to finance their spending plans. It’s an IOU to you – the bondholder – that a principal sum and interest will be paid in the future. 

A government bond ETF will invest in a diverse basket of bonds. Depending on the specific strategy of the fund, (which will be evident from its public fund factsheet), it may buy the bonds of multiple governments. 

Emerging market government bond ETFs even buy the debt of governments with a higher risk of defaulting on their obligations. These funds offer higher interest payments but are ultimately a much higher risk proposition. 

Best investment for:

• Savers who want to generate a stable interest income from their investments. 
• Savers who wish to take few risks with their capital 

Less suitable for: 

• Investors who are happy to accept higher risks in order to generate the maximum return over the long run. Safe government bonds don’t offer particularly attractive yields because they don’t demand that investors take on much risk. 

3. Corporate bond ETFs

Corporate bond ETFs are funds that invest in the corporate debt issued by medium to large companies around the world. Investors can buy corporate bond ETFs and receive quarterly interest payments from corporate debt, almost as if they’d lent the company money themselves!

Like their government bond variant, ETF strategies vary. You’ll find funds that stick to large companies with strong credit ratings in developed countries. You’ll also find higher-risk funds that seek out the bonds of companies in an imperfect financial condition or that operate in countries with an unsettled political climate. 

The higher the risk that a company will default on its bonds, the higher the interest yield you will be offered for owning those bonds. Across a diversified portfolio, the premium interest rate should more than cover the costs of default, but during economic strain, these funds can perform poorly compared to their triple AAA rated ETF cousins. In our guide to investing in corporate bonds we suggest that investors don’t simply chase the highest yielding corporate bond fund blindly. 

Corporate bonds, are publicly quoted financial instruments, which means they have a market value which will rise and fall in accordance with its attractiveness to investors. This will be affected by the financial performance of the underlying business as well as wider economic factors such as the interest rates available elsewhere. 

Best investment for:

• Savers looking to take on a little more risk than a savings account
• Equity investors seek a ‘stabilising’ influence to their portfolio. Most financial advisers include an allocation of corporate bonds to any long-term investment portfolio. 
• Investors approaching retirement tend to hold a greater and greater proportion of their assets in corporate bonds to steadily reduce their exposure to potential stock market fall-out as they approach retirement.

Less suitable for:

• Very young investors with a long term time horizon who are prepared to take the maximum risk to grow their investment value
• Conservative savers who need to receive a precise income without any risk. 

4. Cheap equity ETFs (index funds)

This investment has great potential for high growth over the long term (10 years or more). Equity ETFs invest in a broad collection of individual company shares to generate capital growth and dividend income from those holdings. 

We suggest researching equity index funds, which do so for the lowest annual management fee. 

Alternatively, you could choose an actively managed fund, where a well-paid fund management team will attempt to buy shares that will outperform the broader market. They will charge a higher fee to compensate for the additional cost of doing so. Finance studies consistently show that active management does not produce a high enough return premium to cover this fee. 

Therefore investors are usually better off choosing an index fund that passively invests in a ‘bit of everything’ in a corner of the stock market for the lowest cost to you. The cheapest equity ETFs only charge an annual fee of 0.05%, which is virtually indistinguishable from zero. The most expensive actively managed equity funds charge over 1% per year, which quickly adds up. 

In our eToro review we point out that the selection of equity ETFs available was one of the reason why we preferred this investing app over other competitors which didn’t offer funds.

Best investment for: 

Any investor looking to earn average returns of 5% – 8% per year over the long run, and do not need to access their money during this time. 

Less suitable for: 

• Investors who cannot stomach large % changes in the value of their investment. Even ETFs following broad stock market indexes such as the FTSE 100 or S&P 500 may find the value of an ETF could move by up to 5% per day during periods of exceptional volatility.
• Investors who need instant access to their money, and may be forced to sell equity investments after a fall in value in order to raise some cash. 

5. Real Estate Investment Trusts (REITs)

Real estate investment trusts offer investors the chance to benefit from commercial property investment and large property development projects. 

The best UK Real Estate Investment Trusts (REITs) are publicly quoted companies which trade on the London Stock Exchange. 

They use their capital to invest in large construction or development property projects, with the intention of selling the completed development for a capital gain or collecting rental income from the property once brought into use. 

A defining characteristic of a REIT is that it must distribute 90% of its property profits each year by law. Therefore to a shareholder, a REIT or collection of REITs will provide a property-linked income to the investor. Dividend yields on REITs consequently tend to be some of the highest dividend yields available on the main market. 

At the time of writing, the largest UK REITs offered dividend yields of between 3% – 4%. 

Best investment for

• Equity investors looking to enhance the income from their equity allocation.

Less suitable for

• UK investors seeking a ‘defensive’ investment that will remain steady during recessions. The property market is very cyclical and the income from REITs (and thus their share price) can see dramatic falls in times of low or negative economic growth. 

6. Residential property

Buying a house is one of the simplest investment concepts around. Most of us eventually purchase a house for our own use, so property investment feels quite accessible to even those who wouldn’t consider investing in the stock market. 

The reality of property investment is not as simple as the concept. Transaction costs are high and homeowners are recommended to buy a comprehensive house insurance policy to protect them in the event of many unlikely (but severe) scenarios such as flood, structural collapse, criminal damage or fire.

Investors who buy a property with a view to earn a rental income by letting it out to tenants are known as ‘buy-to-let’ landlords. Buy-to-let investing is different to buying a house for your own use. Specialist mortgages are required, building safety regulations apply and you’ll need to get to grips with how your rental income will be taxed. 

Ultimately, you can outsource much of the compliance and management effort to a letting agent in exchange for 10% – 20% of the rent collected by the agent. This allows many investors build a growing portfolio without giving up too much time.

Best investment for: 

• Investors with the spare time to oversee and
• Investors with larger sums of capital that will allow them to diversify across more than one property

Less suitable for: 

• Investors who may need access to the money invested in a short time-frame – it is common for property transactions to take 6 months to complete.
• Investors who don’t have the time or patience to act as a responsible landlord

7. Equity crowdfunding platform

An equity crowdfunding platform is a website that allows everyday investors to contribute money to new projects or companies looking to raise cash to expand. Investors receive shares (or equivalent certificates) and become part-owners in the business. 

Investing in small companies is a very high-risk strategy because many of the firms you place your faith in will ultimately fail. Finding one feet in a competitive marketplace is difficult, and new businesses may suffer from financial difficulties before they manage to even bring a product to market. 

Even the best equity crowdfunding platforms can offer no guarantees that all, or even most, of the investment opportunities will still be active businesses after 5 years. 

Investors accept the high risks because the financial pay-off from being an early investor in a business that grows a thousand-fold over the next few years can be immense. It’s this prospect that drives investor interest in these platforms. Everyone hopes that they will pick the ‘next Uber’ or the ‘next Google’. 

Best investment for:

• Adventurous investors with an active interest in business who have the time to review individual company profiles and make investment decisions on the basis of a business case

• Investors who understand the high risks of investing in small businesses and therefore only allocate a small part of their portfolio to this investment. 

• Investors who are prepared to lose their investment or not be able to access it until a later date, e.g. in 7 years. 

Less suitable for:

• Investors who wish to be able to sell their investments on demand. Private market investments such as small company shares cannot be easily sold. 

• Investors who are risk-averse and would not enjoy the process of holding big losers alongside big winners within a portfolio

The best investments – conclusion

The investment ideas listed above are some of the most popular ways in which savers and investors can grow their money over time. We hope you perform further research into the investments that interested you and find your perfect match.