Earnings from investments

kunal_x

Hi all , been reading the forum for a while now and been able to build some savings base before i start posting.

I have got £6500 saved in A&L esaver account (giving 5.05% NET) which i build up in the last six months. I ussually manage to save in the region of £800 - £1200 every month.

Although when i read the forum and look around am sure there are better ways for money to work harder. I am not nessecarily looking to save, investments excite me where a monthly income is to be gained.

Although not exactly sure what to look at. Any guidance will be very helpful.

jon3001

If you're saving £800-£1200/month do you really need to draw a monthly income from the investments?

With a £6500 portfolio you could probably only draw about £25/month before you ate into your capital.

Maybe you meant that you were looking to build up some capital before you started to draw an income from it?

kunal_x

Well i dont plan to work 9to5 for life so want to get a head start. i dont mind taking some medium risk.

I know saving a £800 is a lot but thats through earnings from job. I want to ensure that these saved pounds are working harder rather than earning 5% net from savings

eventually i am sure livings on earnings from investment portfolio is better than 9to5

jon3001

Financial independence is a worthwhile goal and one I have for myself. Portfolios for building capital are going to be different from those used to draw an income. So for now I assume you're going to be concetrating on the former.

In terms of building your capital think about the level of income you need to cover any expenses, then multiply it by 20. I.e. Every £10K of income is going to need about £200K of capital. This assume you'll eventually build an income producing portfolio with a withdrawal rate of 5% and enough growth left over to hedge against inflation. Will you have other sources of income such as company or state pensions?

Are you going to contribute any of this money into a pension fund (not accessible until age 55)? The ISA limit of £7200/year won't cover all your contributions so some money may end up in taxable accounts and you'd have to plan accordingly. Or maybe you could phase withdrawals between the ISA and the pension?

In terms of building a portfolio - are you looking to do this yourself or hire an IFA? DIYers can start here:
http://www.investorsolutions.com/v2content/book/index.cfm

Other books I like (available on Amazon):
http://books.google.co.uk/books?id=JmcQVbCcu0IC&pg=PA27
http://books.google.co.uk/books?id=q80oFFsiI3kC&dq=0071478094