Best investment options?

MoscowMule_2

Hi everyone

This is my first post here, so please be gentle with me ;-)

I'm a trustee for my late mother's estate. We have £30-40,000 to invest somewhere, and it needs to provide some income for my dad, about £150-£200 per month. We'll probably put it into a high interest account for 6 months while we decide what to do, but we want to try to grow the lump-sum, which won't happen in a bank account if we're using all the interest.

I know nothing about investments! What are our investment options?

Thanks in advance :-)

dunstonh

As trustee you have a legal requirement to do what is best for the beneficiary(ies). That not only means doing the best but also being seen to do what is the best (just in case the beneficiary decides to take you to court later for mishandling the trust).

So, if you dont know anything about investment options, you should really be seeking professional advice and make sure that the documenation that supports the recommendation is kept as a reference.

1echidna

Remember that if you go for the investment option, growth in your capital sum is not guaranteed and the cost of professional investment advice will take a not inconsiderable amount from your capital. There is a massive industry around stocks and shares and associated funds all parts of which have an interest in people trading in its businesses. There is a lot of emphasis on the potential for growth which, arguably, depends on good timing or perhaps waiting a very long time indeed. See http://news.bbc.co.uk/1/hi/business/7584227.stm

dunstonh

the cost of professional investment advice will take a not inconsiderable amount from your capital

On what basis have you made that comment?

There is a massive industry around stocks and shares and associated funds all parts of which have an interest in people trading in its businesses.

There is a massive industry in every area of life. Tesco make a fortune but you still eat. They pay their staff too funnily enough. Teachers get paid for teaching. Doctors get paid too. What planet do you live on where people do not get paid for doing their job?

Why do you also assume that the alternatives to investments dont make money for the providers either? And you appear to have assumed investing means stocks and shares. That is not the case.

There is a lot of emphasis on the potential for growth which, arguably, depends on good timing or perhaps waiting a very long time indeed. See http://news.bbc.co.uk/1/hi/business/7584227.stm

Of course there was going to be an article like that due. We had one of the biggest stockmarket crashes in a generation at the start of the millenium. So, the next downturn was always going to generate an article highlighting how much you wouldnt have made had you picked the worst time to invest against the lowest value now using poor quality investing (100% into UK equity). Luckily, not too many people tend to put all their eggs into that one basket.

Plus there is a flaw in the BBC article. They have not taken into account tax. They are comparing the gross return on savings against the net return on the investments (net of basic rate tax, lower or nil).

As you have chosen to knock investment advisers, I will just comment that the top selling fund of 2000 by IFAs would have returned £2609 (after charges) in that same period. Twice that of the savings account and the FTSE index tracker/sector average return figure used.

1echidna

dunstonh wrote: »

On what basis have you made that comment?


There is a massive industry in every area of life. Tesco make a fortune but you still eat. They pay their staff too funnily enough. Teachers get paid for teaching. Doctors get paid too. What planet do you live on where people do not get paid for doing their job?

Why do you also assume that the alternatives to investments dont make money for the providers either? And you appear to have assumed investing means stocks and shares. That is not the case.

Of course there was going to be an article like that due. We had one of the biggest stockmarket crashes in a generation at the start of the millenium. So, the next downturn was always going to generate an article highlighting how much you wouldnt have made had you picked the worst time to invest against the lowest value now using poor quality investing (100% into UK equity). Luckily, not too many people tend to put all their eggs into that one basket.

Plus there is a flaw in the BBC article. They have not taken into account tax. They are comparing the gross return on savings against the net return on the investments (net of basic rate tax, lower or nil).

As you have chosen to knock investment advisers, I will just comment that the top selling fund of 2000 by IFAs would have returned £2609 (after charges) in that same period. Twice that of the savings account and the FTSE index tracker/sector average return figure used.

My guess is that charges will be £1,000 to £2,000 over buying direct from the cheapest source. "Considerable" or "not considerable" depends on your point of view.

Did I say that financial advisors shouldn't get paid or indeed that one shouldn't use them? I was more trying to suggest that the whole investment option should be considered before jumping in. There are those that suggest that the economic crisis that the world is facing has not yet reached its worst by quite some way and that recovery will be slow.

Talking about the best performing fund does not seem particularly relevent when even for an investment advisor it is hard to pick and as you say good investment advice will always be for a balanced portfolio of a range of investments.

cheerfulcat

1echidna wrote: »

Did I say that financial advisors shouldn't get paid or indeed that one shouldn't use them?

You did imply that! But as dh writes, a trustee has a legal obligation to do what's best, and given that the OP has admitted to knowing nothing about investment, it would be in the OP's own best interests to engage an IFA. Oh, and I wouldn't pay any attention to the BBC article; it is deeply flawed.

1echidna

cheerfulcat wrote: »

You did imply that! But as dh writes, a trustee has a legal obligation to do what's best, and given that the OP has admitted to knowing nothing about investment, it would be in the OP's own best interests to engage an IFA. Oh, and I wouldn't pay any attention to the BBC article; it is deeply flawed.

The OP may well be legally covered for the investment route if he/she engages an IFA but may well feel rather sick if the value of the trust slides and stays low more or less indefinitely. I leave it to others less "gung ho" about investing "come what may" to decide what my first post said or did not say.

dunstonh

The OP may well be legally covered for the investment route if he/she engages an IFA but may well feel rather sick if the value of the trust slides and stays low more or less indefinitely.

Why would the value act as you suggest? The recommendation would take into account the risk profile appropriate to the trust and utilise the most appropriate spread to match the risk profile. Risk is not on/off. It is a whole sliding scale and there are plenty of options available that dont require a gung ho approach. Indeed, it tends to be those that are gung ho with high risk investments that tend to get their fingers burnt.

1echidna

dunstonh wrote: »

Why would the value act as you suggest? The recommendation would take into account the risk profile appropriate to the trust and utilise the most appropriate spread to match the risk profile. Risk is not on/off. It is a whole sliding scale and there are plenty of options available that dont require a gung ho approach. Indeed, it tends to be those that are gung ho with high risk investments that tend to get their fingers burnt.

I bet there were advisors and plenty of other people asking just that when the bubble was just about to burst eight or so years ago http://news.bbc.co.uk/1/hi/business/7202412.stm . At that time they had the additional weight of psychological argument of unprecedented growth for a number of years and a mindset that the stockmarket was virtually a sure bet. As for reasons why values might act as I suggest there are many and I don't wish to be a doom merchant but the relationships with large energy suppliers such as Russia and Iran come to mind were long term supply problems to develop. The likelihood of economic recession even without unforeseeable adverse events seems to be increasing and noone knows how deep or long it will be. The OP's targets of 6 to 8% income (not sure whether this is before or after tax, or if tax is applicable) plus capital growth seem quite ambitious - any comment about the risk of investments required?

dunstonh

The OP's targets of 6 to 8% income (not sure whether this is before or after tax, or if tax is applicable) plus capital growth seem quite ambitious - any comment about the risk of investments required?

6-8% is not ambitious. Many investors who contribute to this forum are averaging in excess of 10% a year. However, once again you are assuming 100% into stockmarket. Investing does not mean you have to stick all your money in the stockmarket.

What the OP wants isnt going to be obtained from a savings account. So, its either compromise or invest. The lower down the risk scale the more the compromise that will be likely.

1echidna

The OP talks about 6-8% plus capital growth. It is very useful that you have identified that the OP has to compromise on possible returns the lower down the risk scale he wishes to be. I understand that the stockmarket is only one of a number of places where one can invest but I do think that looking at it is indicative of what could happen to at least a minor and possibly major part of his investments. Some other investments such as commodities or property may be equally volatile. You say some forum members 'are' averaging in excess of 10% a year. My comment would be that they 'have' averaged in excess of 10% per year and that past performance is not necessarily any guide to the future.