200K to invest

DiggerUK

James138,

If you decide to see an IFA don't, whatever you do, sign anything.

200k should last your mum quite nicely without need to generate much more than inflation beating returns.

Anything to do with equities is possibly the highest risk investment going at the moment. Look at the news for evidence of that.

Keep it simple, keep it safe is my advice. You don't need an IFA for that strategy.

All the best.

Lokolo

DiggerUK, can I ask how you know that an IFA is going to offer 100% equities?

Aegis

Lokolo wrote: »

DiggerUK, can I ask how you know that an IFA is going to offer 100% equities?

He doesn't, he just has this enormous bias against IFAs. Chances are that an IFA talking to someone looking to supplement their income in retirement would be looking at largely cash and fixed-income holdings with a small amount of equity exposure to try and maintain real value while still allowing drawdown from the initial capital.

The fact is that the 4% she might be able to get a year (at best with the current fixed term accounts on offer...) is unlikely to even beat inflation right now, and £8000 a year extra income now might seem like quite a lot, but if it's still only paying £8000 a year in 10 years time, that's not going to be so good.

Of course, she could always supplement the interest by taking money out from the capital, but that pushes the required yield from the investment choice even higher if the income payment is to be maintained.

All in all, it's probably best to discuss a few options with an investment specialist.

themanbearpig

Everything is full of risk right now..
equities have started paying good dividends, but who knows how safe your capital will be? The next bank collapse is just around the corner.
Property still has a considerable amount of falling to do
Gold is overvalued, and may fall in value
Banks are giving poor returns, and just hold your constantly devalued fiat currency..

Aegis

themanbearpig wrote: »

Everything is full of risk right now..
equities have started paying good dividends, but who knows how safe your capital will be? The next bank collapse is just around the corner.
Property still has a considerable amount of falling to do
Gold is overvalued, and may fall in value
Banks are giving poor returns, and just hold your constantly devalued fiat currency..

Diversification and drip feeding is my portfolio's solution to the uncertainty

Debt_Free_Chick

themanbearpig wrote: »

Everything is full of risk right now..

Can't argue with that. But I'd go further and say that there is "risk" in everything.

Whenever someone posts that they don't want risk, I always say to myself "Risk of what?"

G_M

Anything to do with equities is possibly the highest risk investment going at the moment. Look at the news for evidence of that.

Perhaps, but equities were in fact a whole lot riskier 12 - 18 months ago. If the OP had put his mum's 200K in equities then, she'd have lost a lot. Put it (or a % of it) in equities now and it's got a much better chance of increasing in value over the coming years.

dunstonh

Every option there is has risk. It could be investment risk, inflation risk, shortfall risk or provider risk.

Buying a house can see the value fluctuate. Gains are subject to capital gains tax. The rental income can be steady for long period but what if you get a bad tenant that doesnt pay or trashes the place. Rental income is also subject to income tax. There are also legal responsibilities as well. You really need to be an active landlord and ideally have multiple properties or use a property management company who will just take a good chunk of the income.

Investments can fluctuate in value or if guarantees are involved it means tieing the money up for a period (typically around 5 years). it doesnt have to mean 100% equities. That would just be silly. Investment returns can and do fluctuate. Always have, always will. Guaranteed options can smooth or remove that volatility though but guarantees tend to come at a cost and thats usually in reduced potential.

Savings give you capital security but the interest rate has historically just about kept up with inflation or just below. So, in real terms you are losing money. If you are drawing the interest as a form of income then you are guaranteeing real terms capital loss. Plus interest rates arent exactly great right now. £200k will be worth £140k in spending power in around 10 years so it really does need to be considered.

In reality, there usually no one option that can be used for all the money. A selection of options can be used so you dont have all the eggs in one basket. Risk based options can often be considered. As mentioned higher up, yields are high at the moment. So, putting some money in to higher yielding investments with some of the money to provide an income could allow the rest of the money not to be touched as you are then only placing some at risk of fluctuation and using more secure options for the rest.

Pensions are another option as well. If she is under 75 then utilising those each year can create an income that equates to 8-15% p.a. depending on her age. That extra rate of return may again allow less of the other money to be used for income or suffer capital erosion if the income requirement is more than the interest .

There are plenty of options but if you want a single solution that does everything then it doesnt exist.

DiggerUK

Debt_Free_Chick wrote: »

Whenever someone posts that they don't want risk, I always say to myself "Risk of what?"

"Risk of running into her indoors on the internet"

socrates

dunstonh wrote: »

Pensions are another option as well. If she is under 75 then utilising those each year can create an income that equates to 8-15% p.a. depending on her age. That extra rate of return may again allow less of the other money to be used for income or suffer capital erosion if the income requirement is more than the interest .

This is interesting - can you explain further?