What to do with my inheritance ?

bcfclee27 wrote: »

The only problem is my wife is very risk averse and sees the money as a one off gift if you like that we need to invest securely - ie the mortgage.


The thought of placing large sums in stocks and shares ISAs to her would be like taking it all down Ladbrokes and losing it all.


How about if I did something in between say 80k into the stocks and shares ISAs (VLS 80 ) and 100k off the mortgage ?


In regards to the loans I shall pay both them off.


In regards to getting into debt it was a one off rather than poorly managed lifestyles. House improvements (central heating) that we could do at a significant saving (hence the dad loan).

What risk(s) is she worried about? You would both seem to have good job security. You have rock solid pensions.

Yes, some combination of pay off mortgage and extra pension would be preferable (IMHO) to putting it all against a very low cost mortgage now, also its a mortgage that is less than, and is being eroded away by, inflation,because the rate is less than inflation, so again financially (not for peace of mind) the later you pay it off the better because every year in real terms its worth less even if the headline number stays the same.

Without doing the sums to work out the exact numbers, lets say you pay the final £100 off in 20 years time. If you paid that off today with £100 it would cost you £100. If you paid it off it 20 years time it might cost you £50 in todays terms, because the pound will be worth less than the pound today - it might only buy you one Mars Bar than two now for example.

The alternative, as outlined as an option in the Monevator article is pay it off now (or as much as you can) and then use the "freed up" mortgage payments to add into a pension. The downside with that is opportunity cost, you've lost (say) £50k-£100k compounding over 20 years instead you are trickle feeding it in. You are also, back to inflation again, putting in money thats worth much less at the end than now. One pound now is probably worth an investment of two in 20 years time just to keep even with inflation. So you should pay off the mortgage as late as possible.

Of course, if your wife will have conniptions every time she sees a headline about the FTSE dropping 1 % today, then maybe for peace of mind, even though in your specific circumstances its pretty much a clear cut bad financial decision, you should pay off a large chunk at least of the mortgage.

bcfclee27 wrote: »

Thanks for your response, my wife would never check these things, so once we invested it I would feel happy we would not even really look at it for 10 years plus as we would have committed to that decision and am aware that the markets go up as well as down and not to panic when its down.
Time invested etc...


I think the problem for her and to an extent myself is that most people don't invest and just slave away at the mortgage, most people see stocks and shares and just assume its a massive gamble and they will lose all their money.

Most people are thinking too short term and only listening to the sensational headlines in the news. They don't look at the evidence or work in nearly long enough time frames. If you were investing for a 1-5 year horizon then there's an argument for cash but not for any longer IMO

My wife and to an extent myself realise or assume that paying lumps off the mortgage is the number one target. But after reading through this thread it has really tempted me to look into investing instead.

You should. If only to satisfy yourself that the decision you're making is the correct one for you. Perhaps your the type of people that are happy to go against the maths that say investing in equities is the best solution financially in order to gain peace of mind that the mortgage is paid. There is of course a value attached to that peace of mind. :cool:

One question @AnotherJoe is that if I managed to persuade my wife to put considerable sums into S&S ISA, would Vanguard Life Strategy 80 be a wise choice to invest for the long term ?

Many thanks

That's the fund I'm using instead of overpaying my mortgage so I think that its a good choice.
I also invest in the Lift Strategy 100 fund with my personal savings. Overall that works out at about a 90% equities proportion.

it depends on your mortgage interest rate, because of the tax implications I chose to switch to an offset mortgage, my rate is 1.96% so my emergency fund is reducing my mortgage interest by 1.96% tax free - mortgages are usually the cheapest form of debt so the last to pay off, but using that money in a non cash investment does add risk. The offset mortgage would be a good place to put 20K emergency fund and then you can risk the rest in a S&S ISA or top up your pensions with a SIPP knowing you can't access it until age 55

Carrieanne wrote: »

The other 25% would be spent on purchasing British gold bullion coins, which are CGT free, as a financial insurance policy.

Hush. Those of us who see merits in some gold sovs are viewed as dangerous heretics or gibbering loonies.

Carrieanne wrote: »

I'd go the Steady Eddie approach during these increasingly chaotic times - 75% of the proceeds to wipe out the personal debts and a nice chunk off of the mortgage to lessen the weight of the debt monkey on my back. The other 25% would be spent on purchasing British gold bullion coins, which are CGT free, as a financial insurance policy.

"Increasingly chaotic times"?

In what way are present times more chaotic than the 1930s, the 1950s, the 1970s or the 1990s?

"the debt monkey on my back"?

An idiom like that begs the question. Debt currently weighs next to nothing -- its being massively subsidised by savers. Cheap debt is the compensation we're getting for the other bad things which have happened in the economy, and not exploiting it to acquire real assets is illogical.

"The other 25% would be spent on purchasing British gold bullion coins, which are CGT free, as a financial insurance policy."

The OP is a police officer, for Goodness' sake. Even the Bolshevik government paid the salaries and pensions of ex-Tsarist police officers who went over to their side. Police officers always get paid.

Your risk-reduction suggestions are inappropriate and needlessly expensive in this case. The interesting challenge is to increase this family's risk and return, not reduce it.

Warmest regards,
FA