Due Inheritance - need guidance!

guitarist

Hi all!

A little about me:
I'm a graduate, looking for work, and currently claiming jobseekers allowance *dodges any thrown tomatoes*
I currently have no major outgoings, and thus am saving the jobseekers allowance in my current account (Nationwide).
I have a £1,250 overdraft maxed with Natwest.

Within the year, I'm due a ~£25,000 inheritance, and am trying to research into the best way to invest it.

I think I'd want to keep about £5000 accessible, as I may buy a car/bike if I need to commute, but the rest I wouldn't mind putting away for 5-10 years.

No-to-low risk would be best for me I think - but I may consider medium-risk if well sold to me!

I'm still learning the ropes with money and investments - I've never seen this kind of cash before, and the inheritance was quite a shock to me, so I'm finding the whole process quite daunting

The options available to me (I think...) are:
ISAs
Bonds
Shares

I'm happy to rule out bonds, as I know their rate of return has much to be desired...
And with shares, I know I'd have to spend a long time researching the market - something I'm willing to do if need be. But I also know of course this is a higher risk investment.
So that leaves me with ISAs. Cash? Fixed rate? Offshore? It's all too much!!

May I kindly welcome any suggestions or nudges in the right direction? I want to make the most of this inheritance, and do the sensible and most beneficial thing for myself.

Thanks for reading, and I hope to become a regular part of this great community!!

fozzeh

I was in the same instance and there is a lot to consider. I had some at 18 and 25 (retained)...and upon reflection, I wish I could have had a lot more at 25! But I had a cracking time at uni' and didn't worry about course fee's!!! (Only the £12k I owe the government left to pay back...)

First thing I would do is pay off you O/D and have a "living fund" (so whatever you can live on, put that into your bank and live in credit, replenishing it every month, never going overdrawn).

Do you ever want a house or your own? If the answer is yes, put aside £15,000 now! Put that somewhere with low risk as this is your best chance to have a deposit. You don't want to lose it. I'd max an ISA out now and again in 2 months (which will take you up to £10,200).

As for getting shares; can you live without that £10,000 you just put into a company? Dealing charges? Stamp duty? Management fee's? If you want to risk it, you need to buy into some unit trusts or irredemable stocks (i.e. - government ones with a fixed coupon).

HLH a bit.

Eco_Miser

Is your o/d at 0%? If not you will be paying more on that than you earn elsewhere, so pay it off.

ISAs are not an investment themselves, but a wrapper around Bonds, Stocks, Cash Deposits, etc. which enable you to not pay tax on the interest (for cash ISAs)/capital gain(for S&S ISAs).

Search the forums for info about LloydsTSB Vantage, a useful home for £5000-£21000 of ready money.

Mojisola

The JSA will stop once you have the money so you will need some for day-to-day expenses.

Loughton_Monkey

guitarist wrote: »

The options available to me (I think...) are:
ISAs
Bonds
Shares

To be a bit more precise, your options are:

Bonds
Individual Shares
Funds
Cash

Any of the above inside an ISA wrapper. Or outside the ISA wrapper.

If you are absolutely serious about leaving it for 5/10 years, you should steer towards funds. They are very likely to grow over such a long period (10 year preferable), but they grow in 'fits and starts'. They can easily fall 20% or more in a year, but when they do, it is typical that they bounce back the following year etc.

So you must consider the 'risk' that if there were a time - say 3 years from now - when you might want to spend this money, there is a much more likely risk that this coincides with a time when they have temporarily 'dived' by 30%. Hence you can hedge a bit with a proportion in Cash and a proportion in Bonds, plus a proportion in the more volatile equities. Your choice, really.

As to the ISA wrapper, then as long as you envisage being a tax payer some time in that 5 to 10 year period - best think about doing it under an ISA. You are limited in the amounts you can put in, per tax year, so make your mind up before 5th April so that you can 'max out' on this year's ISA allowance.

guitarist

Thanks for the replies, I really really do appreciate it!

I forgot to mention the overdraft I have is a student account and is at 0% (and will be for a couple more years). I don't mind brining that back into the black at the very last minute...as long as I transfer money in and out every now and then, they're kept happy.

I'm certainly going to look into ISA funds...I won't be receiving the inheritance until the end of this year - so I still have a lot of time to wait and decide...but now the time I should start learning what options there are!

Many thanks again

Incyder

My tip is never never never tell your future girlfriends you have it, or mates.

Also, never have a joint account with them, ever, even if you live with one.

Keep being judged for who you are not what you have stashed.