Fidelity personal financial specialist Marianna Hunt has answered a reader’s question about whether to invest savings or use them as a property deposit.
The reader, in their late 20s, has saved around £20,000 while living in London and originally intended to put it toward buying a first home.
They noted the money would not stretch far in London and, even with further saving, would likely only cover a one-bedroom flat.
Friends who have recently started investing suggested that returns from investment have been notably better than those typically seen from property.
Hunt acknowledged the achievement of saving £20,000 while living in London in one’s 20s, praising the reader for questioning the path taken by previous generations.
She confirmed that, in recent times, returns from investing have on average been better than those from buying property, citing her own analysis of asset performance up to the end of July 2025.
Hunt found that, once inflation was factored in, the average UK home had actually fallen in value over the previous three and five years.
By contrast, global stocks delivered positive returns after inflation of 25 per cent over three years and 45 per cent over five years.
Hunt was careful to note that past performance offers no guarantee of future returns, and that few people buy a home based purely on potential financial gains.
She highlighted that homeownership carries benefits beyond finances, including the freedom to decorate and the security of not being asked to leave unexpectedly.
However, Hunt expressed concern about the reader’s intended timeline, noting that one of the golden rules of investing is not to put money into the stock market if it may be needed in the short term.
“One of the golden rules of investing is not to put money into the stock market if you think you may need it in the short term,” she said, recommending a minimum horizon of at least five years.
She outlined a scenario in which £20,000 invested as a lump sum in a medium risk portfolio targeting around five per cent a year after fees could potentially grow to around £26,000 after seven years.
Hunt suggested that drip-feeding money into the market, for example £1,000 a month, could be a less daunting approach for those new to investing.
If the reader continued investing £1,000 a month after fully deploying the initial sum, Hunt indicated the portfolio could be worth more than £96,000 after seven years, though this is never guaranteed.
She recommended using a stocks and shares ISA, noting that any gains and withdrawals should be tax-free, and referenced Fidelity’s stocks and shares ISA calculator as a useful tool.
For those overwhelmed by investment choices, Hunt pointed to low-cost passive funds that purchase a small share of every company in a given market as a sensible starting point.
She described this approach as diversification, calling it “the financial equivalent of not putting all your eggs in one basket.”
Ready-made portfolios, now offered by many investment platforms, were also highlighted as an option, where users answer questions about risk tolerance and time horizon to receive a pre-built diversified portfolio.
Hunt also raised the possibility of a hybrid approach, combining monthly market investment with savings, so that funds remain available if the right property arises without needing to sell investments during a volatile period.
She additionally flagged the Lifetime ISA as worth exploring, noting it allows tax-efficient saving for a first home with a 25 per cent government uplift on contributions, subject to various rules and restrictions.
Hunt concluded by recommending that anyone uncertain about their options speak to a financial adviser to build a plan suited to their personal circumstances.