Income in % terms

brodev

I have what sort of income in % terms can someone ecpect from an investment of £100,000. I am willing to take risks but I do not know what to expect from the various catagories of investment. I would also like my capital to keep pace with inflation. Can anyone point me to w2here I can get this info?

dunstonh

It depends on what you mean by risk. Its not an on or off situation but a sliding scale.

It would really depend on the portfolio spread. I just looked up one I did on 29th June this year for its 6 monthly report and that was a 100k invested with £460 withdrawn each month and the current value is £110,808. That was on a cautious portfolio with only 20% exposed to stockmarkets. The other 80% was spread over lower risk asset classes.

Its been one of those years though where the higher the risk you took, the higher the gains were. It wont always be like that. So, had that investment been 80% stockmarkets (global), the returns would have been higher. However, what goes up by 50% can go down by 50%. You must always remember that. Generally though, the higher the risk you take, the higher the potential growth will be over the long term. Cautioned by the greater potential for it to go down.

Income portfolios tend to be prepared with lower risk in mind (like my example). If you wanted a long term average, you could look towards 5% net as being a relatively safe assumption of what is achievable.

brodev

Thanks for your reply. I think that I am aggresive in risk. But what I want to know is something like:
No risk 4%
Medium risk 5%
High risk 6%
Very high risk 7%
People talk about the difference in taking risk but I have not seen it quantified. I hope I have explained myself properly

dunstonh

5% would be low risk. 7% would be medium risk. Once you go above medium risk, the volatility of higher risk investments means they could result in anything really. 9% would be the usual benchmark though as a long term average.

So, that makes cautious 5%, medium risk 7% and high risk 9% as long term averages.

brodev

Exactly what I am looking for. Thanks very much

deemy2004

Risk for returns ?

In my experience - looking at 2004 / 2005

Low risk 5 to 5.5%% (i.e. cash isa's, fixed bonds, high int savings etc)
Medium risk 8% (i.e. index linked gov stock)
High risk 20%+. (Investment Trusts and individual stocks)

Obviously look to put most of your £100k into the low risk, and then say 20% in medium and 20% in high risk.

dunstonh

I wasnt looking at years in isolation. I was looking at long term averages. If you looked a the last couple of years then medium risk would be 10-20% and high risk 20-80%. Not very realistic for long term, although very nice at the time

carnet

Are we not getting a little muddled here ?

The OP refers to "income" from the investment.

Higher risk normally equates to higher potential capital growth and when we talk of possible 20% returns and the like the OP must appreciate that most of this would be in the form of capital growth, not income.

Income up to, say 6 -8% p.a., is possible from certain Bond funds - but the higher the yield, the more risk there is of capital erosion.

dunstonh

Good point. Although it would depend on whether you are looking for natural income or growth as well as income to be taken as a fixed withdrawal. i.e. if it grows at 9% average and you take 6%, do you think of that as income?

I read it as the latter and not natural income.