What sort of income can I generate from a £50k investment ?

Credo33

If I were to invest £50k, how would I best use it to generate a monthly income and what sort of income could I expect ?

DisgruntledGoat

Are you prepared to risk the £50k?

edit: not suggesting putting it on the 2:45 at Haydock, just that some approaches (e.g. high-yielding shares) won't guarantee that you will always get all the money back. The level of risk you're prepared to accept is important for answering the question.

jon3001

Credo33 wrote: »

If I were to invest £50k, how would I best use it to generate a monthly income and what sort of income could I expect ?

Do you specifically need a monthly income or would more sporadic, variable payments over the course of year suffice?

If you were to invest, and wanted to avoid drawing too much so as to protect the capital from inflation, I'd say at most a 4% withdrawal rate (£2K/yr) would be targeted. The higher the required withdrawal rate, the higher the risk.

Are you 33 years old? I take it you're too young to consider buying annuities?

DisgruntledGoat

One more question; what is the timescale for your investment? i.e. do you want it to continue (effectively) indefinitely, or is it for a limited period?

Credo33

I'm not 33 anymore - I'm 49 and I would require a monthly income and for a minimum of 10 years, maybe longer. I'm not averse to reasonable investment risk in return for a better income.

jon3001

I think you'd be looking to use the bulk of the money to build an income-producing portfolio. This might contains things like bonds, property funds and equity income funds.

Here's an article giving an overview of these types of investments:
http://www.thisismoney.co.uk/investing/article.html?in_article_id=481316&in_page_id=166

I believe there are a few funds that do aim to produce a monthly income but you might be best of spreading your money around. You could put the first year's expected yield in a savings account and then top it up as the portfolio pays out while withdrawing on a monthly basis.

In any event, keep some cash aside and uninvested for emergency purposes. That way you mitigate the risk of having to sell investments in a market downturn.

DisgruntledGoat

Speaking personally, my choice would be a "high-yield portfolio". There are a ton of hits if you Google it, one write-up

http://www.moneyweek.com/investment-advice/how-to-invest/the-lazy-investors-guide-to-making-money.aspx

In essence it focuses on buying a diversified selection of large (FTSE100), dividend-producing companies from a wide variety of different sectors, with the shares rising in-line with inflation (on average over the long term) and the dividends providing income. Setting one up takes more effort than buying funds, but provide more long-term control at lower cost. Dividends will vary on a month-by-month basis, so worth having them paid into a current account and drawing a suitable average income if you must have a constant monthly amount.

Worth noting that there's some argument about the long-term efficacy of the approach, so worth familiarizing yourself with both sides of the argument and making your own mind up.

bendix

whooooooooshh . . .


Anyway, nobody answered the second part of your question. Even allowing for very high yielding debt or equity investments, you'd be lucky to get more than 5-6% return which is - what - a couple of hundred quid a month?

jon3001

bendix wrote: »

Anyway, nobody answered the second part of your question. Even allowing for very high yielding debt or equity investments, you'd be lucky to get more than 5-6% return which is - what - a couple of hundred quid a month?

They didn't?

jon3001 wrote: »

If you were to invest, and wanted to avoid drawing too much so as to protect the capital from inflation, I'd say at most a 4% withdrawal rate (£2K/yr) would be targeted. The higher the required withdrawal rate, the higher the risk.

bendix

jon3001 wrote: »

They didn't?

Mmmmm .. ok. Let me rephrase. Nobody important answered the question until I came along ;-)

DisgruntledGoat

Even allowing for very high yielding debt or equity investments, you'd be lucky to get more than 5-6% return which is - what - a couple of hundred quid a month?

You're not going to retire on it, but 5% or so yield and (historically) pretty decent inflation protection for both the lump sum and the income isn't bad.