Investing £200K for an income?? Please help

pkrnts

You can open them before the deadline, stick the money in and decide what to do later.

al_yrpal

Hi Mattyd,
I am a private investor, not an IFA, or other sort of advisor like some posting here and I have been investing for many years. I have lost serious money and made serious money, particularly since I retired and have treated investment as my profitable part time job.

If I were looking at getting the best from 200k, I would put the 2/3 into the best cash savings account that I could find(should give you £5k pa), and invest the rest. On a sum of £67k, you could have expected to get up to £27k (before tax) per annum in the last three years,and thats what I achieved over the last two when I have been concentrating on investment. I use 'momentum investing' on unit trusts.
Basically I maintain more than half the investment in the fastest growing sectors (recently this has been in Emerging Markets such as Russia, Latin America, Korea, but is now changing), and keep swopping investments into the the new leaders every three months or so. Its possible to avoid commision and you pay direct charges of 1.25% or so, but this is peanuts compared with the gains. I maintain the balance of the investment in good quality UK income funds and feed profits into these every so often to keep the investment balanced. 40% growth means you are more or less doubling your investment every two years. So, far I have avoided any tax by using ISA's and the CGT allowance.
You cannot just invest and forget using this method, you have to keep an eye on things every week, do a 2 hour review a month and be prepared for some paperwork every 3 months or so.
There are other strategies - read about High Yield Portfolio at the Motley Fool. There's value investing - read Jim Slater's the Zulu principle on that subject. For my strategy you could have a look at 'Fundology a recently released book.
If you don't feel confident to do any of this consult an IFA, £200k is a serious sum, but it should be capable of supplementing your income considerably. Whatever you do don't just put it in a savings bank - make it work!

Good Luck

Al

Mattyd_3

al_yrpal wrote:

Hi Mattyd,
I am a private investor, not an IFA, or other sort of advisor like some posting here and I have been investing for many years. I have lost serious money and made serious money, particularly since I retired and have treated investment as my profitable part time job.

If I were looking at getting the best from 200k, I would put the 2/3 into the best cash savings account that I could find(should give you £5k pa), and invest the rest. On a sum of £67k, you could have expected to get up to £27k (before tax) per annum in the last three years,and thats what I achieved over the last two when I have been concentrating on investment. I use 'momentum investing' on unit trusts.
Basically I maintain more than half the investment in the fastest growing sectors (recently this has been in Emerging Markets such as Russia, Latin America, Korea, but is now changing), and keep swopping investments into the the new leaders every three months or so. Its possible to avoid commision and you pay direct charges of 1.25% or so, but this is peanuts compared with the gains. I maintain the balance of the investment in good quality UK income funds and feed profits into these every so often to keep the investment balanced. 40% growth means you are more or less doubling your investment every two years. So, far I have avoided any tax by using ISA's and the CGT allowance.
You cannot just invest and forget using this method, you have to keep an eye on things every week, do a 2 hour review a month and be prepared for some paperwork every 3 months or so.
There are other strategies - read about High Yield Portfolio at the Motley Fool. There's value investing - read Jim Slater's the Zulu principle on that subject. For my strategy you could have a look at 'Fundology a recently released book.
If you don't feel confident to do any of this consult an IFA, £200k is a serious sum, but it should be capable of supplementing your income considerably. Whatever you do don't just put it in a savings bank - make it work!

Good Luck

Al

I really like this idea. Did you know anything about investing before you started?

I assume you use some sort of fund supermarket to avoind the worst of the charges?

I am going to get the book you suggested

EdInvestor

Hi Matty

You might find this Citywire Fund Finder useful.It rates funds in their sector from top to bottom over 10 years, so you can see at a glance which are the top performers right now and the consistently good performers over various periods.

Takes a lot of the mystery out of picking funds.

Of course as the FSA likes to point out "past performance is no guide to the future", but a little history is often useful, I find

al_yrpal

Mattyd
I have been investing since the 80's. I have tried shares (always ended up with burnt fingers), and funds. Like most people I got burnt in the dot com bust and watched the value of my fund investments wither away until 2003. Then, just before retirement I started to get a lot more serious about investment. Basically what I had been doing wrong was to just sit there like the rabbit in the headlights. You just can't do that, you have to be much more active and disciplined to succeed. It has been fairly easy over the last three years, we have had a risng market. But there have still been challenges - the recent 'oil slick' for instance - I bought an oil fund, and held the rest because I thought the slide was short term - I judged it right. When the Livedoor scam emerged I sold all my Japanese stuff immediately - I judged that right too.
The greatest challenge is knowing when to sell. Just at the moment there is a lot of hype about Latin American funds and they are shooting up, but I think what is happening is that 'the investment herd' is arriving. This forces the price up. It will continue for a few months for sure, and you can ride it, but you must use your own judgement about when to bale out. This is the sort of thing you will face - but its fun!
There is a basic underlying principle in my investment strategy. I believe that the greatest economic growth will be in developing countries - 'emerging markets' in investment terms. Just reading the paper you can gather that things are getting better for people in these places. They want a bank to keep their first wage packets in they want to borrow to buy vehicles and homes, they want insurance, they are increasing users of energy and commodities like copper (driving Brazil) in electronic goods. So the BRIC's nations Brazil, Russia, India and China are leading the charge. The investment opportunities in these places and many others eclipses anything that the UK offers. Funds are an easy way to invest in this
However, thats just my opinion. People say that such investments are risky - well, for the last three years they almost haven't missed a beat. The stockmarket is like an excitable child, when things are good they are very very good, when they are bad they are awful, you must get used to this and use it (selling opportunities and buying opportunities)
When you are starting out, run several ghost portfolios for a bit and thus watch the performance of likely funds. Better to withstand paper losses than real ones.

Good Luck

ps I use https://www.chartwell-investment.co.uk to buy and swop funds. Initial and swopping commision in eliminated and they rebate 0.25% of annual commission. As recommended by Martin!

dunstonh

With the amounts involved, the investment bond tax wrapper could well be far more suitable than the unit trust tax wrapper. It could be cheaper as well.

Whilst Ed continues to post ongoing misinformation about investment bond charges, they can often be cheaper than unit trusts over the same period.

With that sort of amount, you could be looking at a 1% initial advice charge as a going rate with 0.5% ongoing (the 0.5% is fairly industry standard).

You can look at the quality of the IFA intially by looking at what fund(s) they have recommended. If it is a one fund solution, then you can rule that IFA out as single fund options rarely offer everything you need.

Mattyd_3

So with your clients do you make a strategy proposal then they decide if they take that advice and you then earn your commission? Or do you charge them a fee then suggest a strategy. This is the problem I am facing. They all seem to want a fee upfront. To be honest this puts me right off. How can I be expected to spend £1000-£1300 before they have even hinted as to what they would do For all I know they might suggest putting it in high risk market which isnt what I want :eek:

dunstonh

Mattyd wrote:

So with your clients do you make a strategy proposal then they decide if they take that advice and you then earn your commission? Or do you charge them a fee then suggest a strategy. This is the problem I am facing. They all seem to want a fee upfront. To be honest this puts me right off. How can I be expected to spend £1000-£1300 before they have even hinted as to what they would do For all I know they might suggest putting it in high risk market which isnt what I want :eek:

The issue with upfront fees is to do with the regulator. The FSA likes the fee option and as you are buying a service, many IFAs will invoice and expect payment upfront (in case you do a runner and don't pay them). Also, the fees this way should have VAT added.

Personally, with investments I prefer the hybrid option and agree the fee but take the agreed fee as commission. So, say the commission in full was £7000 and the agreed fee was £1000. This would rebate £6000 back into the investment and as the £1000 is technically commission (from the VAT mans point of view) there is no VAT to pay on it. So its a fee but its done cleanly and taken on commencement of product.

There is a business risk to that in that you are giving advice and you could take the advice and go elsewhere. However, I havent really had a problem with that. I guess that would vary from IFA to IFA depending on the quality of their presentation and advice.

You could ask them for a sample of what they have recommended in past cases. This doesnt mean it is right for you because risk, goals, taxation and timescale all have an impact which can vary the product, provider and funds but it does give you an indication of the quality of the reports, research and recommendation. That would give you a lot more confidence in the ability of the advisor. You also want to find out what you are going to get for your 0.5% trail commission. Are they going to work for it or not?

As for cost. Many of the direct execution only providers can do it cheaper as they have very little overheads and they have no advice liability. However, on a 1% plus 0.5% trail commission basis, it is quite possible for many IFAs to beat or at least match Cavendish with some of the providers (as I found out some months back).

EdInvestor

Hi Mattyd

I mentioned earlier the HYP stragey, which IMHO is one of the best ways to invest for income. It's also a comparatively low risk way to buy shares.

You may like to peruse the performance of this demo HYP:
HYP 3rd anniversary

Of course this one was bought right at the bottom of the market, and thus has a very high income and has benefited fully from the recovery.

But compared with a tracker,which whould have also performed well, but is much riskier, it's outstanding.

Also worth comparing with cash. Note that dividends are tax free for basic rate taxpapers.

Mattyd_3

Well I have now registered with https://www.Squaregain.com :j

The discount for buying funds is huge :T Down form 5% to 1.05%

I am going to monitor a few funds shares etc for a while and see how things progress. I am a little nervous about jumping straight in so might just experiment for a few months :rolleyes: