where to invest £500k?

codetown

I disagree with the usual reasoning that money looses value overtime.
It looses value ONLY if you choose the wrong savings, exactly as it can loose value if you choose the wrong stock.

But as long as you keep your money in savings accounts which offer a NET interest higher than inflation, your spending value will NOT decrease in any way. It will increase slowly but steadily and with a VERY LOW risk.

If you are a basic rate tax payer (20%) you can find plenty of accounts which are returing you NET over 4%. Examples:
A&L DirectSaver - Net: 4.2% (interest paid monthly)
CoventryFirst - Net: 4.17% (interest paid monthly)

Investing 500k in the Coventry First will give you 1738 pounds of interest net a month. And this more than covers the loss of buying power due to inflation.

Of course this is a calculation on average, as at the end of the day the inflation depends strictly on the area you are going to spend into and the particular sector. For example the inflation in the housing market in London might be 10%, while in Scotland might be 1%. Or the inflation in the food sector might be 2% etc. The only official number we have talks about 2.4% on an annual basis on average. Consider what you are going to do with your money and how you will be spending it in the future.

if you are risk adverse, stay away from shares, stocks etc and leave your money in reasonably solid banks/BSs at a net interest rate which is higher than inflation, as suggested above. For additional safety I would spread it over three separate institutions (always at rates at least of 5% gross to keep inflation away).
Your capital will be safe and you will be happy and free from worries.

ReportInvestor

Blimey.

This thread has turned into a savers v investors battleground.

That's a great shame.

A higher rate taxpayer with £500K needs to invest.

As will a basic rate taxpayer who wants to build a retirement nest egg from scratch.

Mrs_pbradley936

ReportInvestor wrote:

Blimey.

This thread has turned into a savers v investors battleground.

That's a great shame.

A higher rate taxpayer with £500K needs to invest.

As will a basic rate taxpayer who wants to build a retirement nest egg from scratch.

You mean they are not the same? I have not really given it much thought but always supposed that investing was long term saving - while saving was short term with goal in mind i.e. holiday, Christmas etc. Can someone enlighten me? I can start another thread if you would prefer.

Mrs_pbradley936

Have just started another thread so as not to hijack this one.

codetown

Saving is a very low-risk investment. Basically you loan your money to a bank which will invest it and spread its risks in different areas passing you in return a share of its gains (if everything goes to plan). This "share of their gain" is the interest they give you.

If the interest they give you (after tax) is still higher than inflation (or RPI or whatever index you wish to choose to track your future spending), then you have protected the buying power of your money leaving the risks to others.

Of course in 'saving' (instead of investing) you also leave to your bank/BS part of the potential rewards, which could have come directly to you from a more active approach on your side (and therefore a more active investment in stocks, or other higher risks products or a portfolio including them).

I don't agree there is a unique solution for everyone. It is always a personal choice depending on circumstances and attitute towards risk (some like it some don't and prefer much lower returns but safety)

nrsql

Of course the problem is deciding what inflation is for you.

Saw recently the results of a study that said that for pensioners inflation is running at 5.7%. That would be because utilities, council tax and such like would be a large proportion of expenditure. Things going down in price - electrical goods etc wouldn't have such an effect.

Wouldn't put much stock in general inflation figures as everyone is different.
Having £500k in savings probably means the OP isn't living a (typical? whatever that is) pensioners lifestyle though.

Conrad

It all depends on your objective.

I am 39 and building a retirement pot. I favour out of fashion funds, as an example I piled - into technology just after the dot - com crash.

Also like health funds for a longterm steady growth as I expect health will only ever be undersupplied.

I did the UK B2L thing but then moved the capital into 1 UK commerical property and also property in Berlin and now the Meds best development called Saidia in Morocco which is owned by Spains second biggest developer.

Latest I am buying shares in a UK property company which is aquiring German retail real estate (in other words real assets not just a business concept / good) so feels very safe to me. This gives me exposure to my favorite type of investment - unloved property (in our recession property was unloved but the love always comes back).

One thing I never do is jump on bandwaggons as its usually too late. A classic example of this would be UK or Dubai or Spannish property.

Always buy when no one else is.


When I retire though I wont want growth so Ill stick a lot in a Bank account, a steady FTSE income fund and a property or 2.

Chrismaths

Latest I am buying shares in a UK property company which is aquiring German retail real estate

Was it one I mentioned?

Seriously though, Conrad does make a decent point, although perhaps with a bit too much bombast for my taste. Don't buy something just because it has gone up - that's a surefire way to buy high and sell low. Whether you agree with what Conrad has decided to invest in is up to you.

It's easy to see why German property is attractive - they haven't had the run up in prices that other places have, property ownership is low, but with business confidence ebbing away in Germany, and with the ECB starting to forecast zero growth for the Eurozone, there are also risks apparent.

Conrad

Chrismaths wrote:

Was it one I mentioned?

Seriously though, Conrad does make a decent point, although perhaps with a bit too much bombast for my taste. Don't buy something just because it has gone up - that's a surefire way to buy high and sell low. Whether you agree with what Conrad has decided to invest in is up to you.

It's easy to see why German property is attractive - they haven't had the run up in prices that other places have, property ownership is low, but with business confidence ebbing away in Germany, and with the ECB starting to forecast zero growth for the Eurozone, there are also risks apparent.

Bombast, I dont know what u mean:rolleyes:

The shares Ive bought are http://www.treveria.com (UK company buying German retail real estate)

richgirl

If you fear inflation and want 100% security then there are index linked goverment bonds