Advice please - 70k equity what to do with it?

egg345

Please advise:

We have 70k equity after selling house. have no debts.
Renting perfect house on 6 mnth contract (cud never afford to buy it if it was for sale)
Want to 'make' equity work for us to cover rent.
Should we put it in lots of 'pots' eg.Buy a flat off plan and sell when ready? Buy flat to rent out? savings? shares? isas? go to a financial advisor? Buy a property so are not out of the market?

Any thoughts would be very welcome.

Very confused!

Martinslovechild

It really depends how old you are. For instance, if you're less than 40, I would definitely say invest the lot in the stock market - it's done me proud for the past 5 years. If you're older than 40, you may want to invest up to 70% in stocks and the remainder in government bonds.

Property is a bubble waiting to burst. House prices are way over the trend, so I would not personally recommend anybody investing in property right now - wait until the well predicted crash comes - my best guess is that it probably won't arrive until 2010, but you'll see disappointing returns up to then and then lose a pile of cash thereafter.

Check out HousePriceCrash for lots of interesting discussion on the subject.

egg345

Thanks for quick reply!
Thanks for website on property crash.

Both age 36, married with 3 kids.

Where to start looking for stockmarket advice though?
Have ABSOLUTELY NO idea about any of it, this surely makes it very risky for us?
Feel 70% investment a 'safer' option??


Any comments gratefully received.

Martinslovechild

If you have no experience of the stock market, the simplest introduction is to buy Unit Trusts - these are basically a collection of shares managed by a Fund Manager. Balance your portfolio so that you have amounts in different funds, e.g. 25% in UK Smaller Companies, 10% in China Shanghai B index etc.

You could either try talking to an IFA or alternatively there are lots of good money mags in WH Smith or a local newsagent with charts in the back.

If you feel unhappy with a level of 70%, then adjust this to your own needs. The best 2 rules about investing in the stock market are (1) never put all your eggs in one basket, and (2) don't invest money that you can't afford to lose.

The stock market is all about risk; I don't akin it to gambling like some people because gambling is pure risk. I would describe shares as a 'calculated' risk, i.e. in most cases we have years of historical data to help us decide where to invest, unlike a roulette wheel!

At the end of the day, the choice is yours - you could earn 5% or thereabouts in cash ISA's, but it's really not impossible to make gains of 25% or even 45% in 12 months in the stock market (I've managed 28%, 44% and 27% in each of the past 3 years and I would describe myself as a complete amateur who happens to have a passing interest in business & finance).

Whatever your decision, good luck.

advent1122

Maybe invest in a holiday home?

If Sarah Beeney reckons you can make 4 squillion pound in a year I cant see any downfall (sarcasm mode off)

PoorDave

Sounds like you need to see a proper advisor who can run you through all your options, in my opinion.

Consensus is you're too late to invest in property, i think. Unless you invest in Bulgaria/Montenegro/today's other "guaranteed money" country, obviously!

silvercar

you need to see an IFA to advise you.

Gorgeous_George

It will all depend on how much risk you are prepared to take.

Personally, I would only gamble 10% on the stock market. The rest I'd bank in the highest paying account that I could find and then syphon the max into cash ISAs each year. Don't forget the kids have tax allowances too.

Remember, the I in IFA stands for I (meaning me, the financial advisor).



GG

Martinslovechild

Gorgeous_George wrote:

It will all depend on how much risk you are prepared to take.

Personally, I would only gamble 10% on the stock market. The rest I'd bank in the highest paying account that I could find and then syphon the max into cash ISAs each year. Don't forget the kids have tax allowances too.

George,

Although this will produce guaranteed returns, they will barely be above inflation. Even if egg345 was to invest the maximum in cash ISAs, only £3,000 per year per person could be invested, or £15,000 assuming the whole family each opened accounts.

This leaves £55,000 remaining in a savings account paying 5.15% gross or 3.09% net. Current Inflation is 2.5%, so egg345 would receive a net return of just 0.59% - I for one would certainly be unhappy with that kind of level.

Investing 10% in the stock market is the gambler's equivalent of making a single bet on the Grand National each year. Our pensions are invested in the stock market, so why not our savings too?

Guy_Montag

Careful with the stock market:

I invested all my savings in various tracker funds (it was high risk & I'm still young) just before the peak in 2001 (my guess is MLC invested just after the crash). Of course, two months later some 'planes crashed & so did my funds. They are only just back to the level they were when I invested them. Fortunately I've not needed them yet.

That was on the advice of an IFA.

My advice, for what it's worth, go see an IFA to get some ideas, then do some research on what they suggested. Check out the best performing funds, check out the competitors.

Martinslovechild

Guy_Montag wrote:

Careful with the stock market:

My guess is MLC invested just after the crash

Nope - I started at the peak and drip fed cash into shares. When the market was driving down, I bought more defensive stocks, e.g. pharmaceuticals and tobacco companies - I showed a paper loss of 17% compared to a FTSE250 loss of much more than that.

When the market looked like it had finally hit the bottom, I bought stocks that had either been oversold or looked undervalued. In mid-2003, I was back into profit and by 2004 was nearly 70% up - that's the power of a bull market.