Invest now or wait

fred_49

I have a large sum of money(£100,000 +) and i had intended investing it across a
range of funds.However with the current uncertainty in financial markets which of the following options would appear most prudent,

1. Invest the lot as above now
2. Drip feed smaller amounts in over the next year
3. Invest non at present time and put it in 1 year fixed term accounts for a year and then review the situation.

I will not need this money for at least 10 years so the investment route will be the best in the end but at the moment I am inclined to go with option 3 as I can't envisage getting a 7% return on investment this coming year(in fact can see a loss).
Do you think this is the best choice?

1echidna

My inclination would be to hedge your bets by investing say 15% in the next few months.

dunstonh

You dont stat your risk profile but appear to be wanting to look at high risk (i.e. 100% equity). Can you confirm your risk profile by perhaps saying what your maximum tolerance to loss is before you would get cold feet and pull out? i.e. 30%, 40% etc Also, what is the timescale involved.

fred_49

The sum mentioned in the original post is approx half of the money I have saved,
The other half is already in fixed interest accounts or NI&S index linked certs,
I would probably class my risk tolerance as medium, I realise that to generate
larger returns I would need to invest in something other than cash but am just reluctant
to commit to such investments with the current financial turmoils. The reason I favour option 3 is that I think the majority of investment funds will struggle to match the7% that I can achieve through fixed interest accounts at present,

jon3001

Phasing the money in over 12 months will definitely reduce your downside risk.

The other thing you can do is spread the funds over a variety of asset classes: bonds, property, commodities and stocks (in a variety of sectors. E.g.: domestic large/small companies, international developed large/small companies, emerging markets).

dunstonh

I would probably class my risk tolerance as medium,

You need to put that medium in context. One persons medium is another person low or high.

I think the majority of investment funds will struggle to match the7% that I can achieve through fixed interest accounts at present,

That would depend on where you invest and what you are looking for

fred_49

In reply to jon3001 .This is the strategy that i would use,but I fear that gains in some categories would be wiped out by losses in others leaving a net effect of zero growth at best.Using this strategy but in 12 months remains my favorite option.

In reply to dunstonh.. previously when i visited an IFA my risk profile came in at 6-7 on their charts.I am hopefully looking to make returns of 3% + after allowing for tax and inflation(lower rate taxpayer).I appreciate 7% in a fixed rate account will not get me this but for this year it will at least get me 1-2% positive growth.If the money had already been invested i would not have jumped ship but left it to ride out this financial storm.the question is when to put this money into investments rather than savings.

davidlee

fred_49 wrote: »

I think the majority of investment funds will struggle to match the7% that I can achieve through fixed interest accounts at present

No, that's not true.

luckylizard

in yr position, i'd drip-feed in the money across a broad range of sectors starting asap and continuing until the market bottoms (if it hasn't already) and then recovers. it's just too volatile at the moment to try to time the market by investing all at once. you want to make sure you invest at least some of your money near the bottom of the market, and drip-feeding constantly is the only way to be sure of doing this.

fred_49

In reply to Davidlee

Are you saying that you think the majority of funds will show a profit of more than 7% this year

jamesd

For people who want fairly low overall ups and downs I tend to suggest investigating this mixture of investments at the moment:

30% BlackRock UK Absolute Alpha
20% Cru Investment Portfolio
20% Invesco Perpetual Monthly Income Plus
20% Invesco Perpetual Income
10% Neptune Global Equity

The chart shows how the volatilities differ and why so much is in the more stable ones (colors are red, blue, yellow, green, gray in fund order).

The first two are fairly low risk and reasonable even in a falling market. The Monthly Income Plus fund is a bit more risky but is mostly corporate bonds so it's not likely to fall as much as pure shares would fall. The last two are more for growth times to give some balance if uncertain how the markets will go.

All except the Invesco Perpetual Monthly Income fund produce capital gains so are effectively tax free for the first 9600 of gains each year.

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