What to do with £50k

booklover

Hello

My friend who has no computer access at the moment has saved about 50k and it is just sitting in her current acc. What is the best way for her to save/invest it

She is fortunate that she and her hubby have paid their mortgage and have no debts. They earn 46k between them and have 2 sons,1 teenage (still at school and one adult working). The husband is early 50s and the wife is just 40.
They said they might put it towards their pensions.....

I wish I had their problem!! :cheesy:

Many thanks for our advice

Fiona

aleph_0

booklover wrote:

Hello

My friend who has no computer access at the moment has saved about 50k and it is just sitting in her current acc. What is the best way for her to save/invest it

She is fortunate that she and her hubby have paid their mortgage and have no debts. They earn 46k between them and have 2 sons,1 teenage (still at school and one adult working). The husband is early 50s and the wife is just 40.
They said they might put it towards their pensions.....

I wish I had their problem!! :cheesy:

Many thanks for our advice

Fiona

Looking at the article:
http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1103213261,45760,

Would be a good start. Others will be able to make other comments, and may suggest investing. The most essential thing is to get at least the £3k each allowance into an ISA each tax year (so they don't have to pay tax on the interest for this money), and put the rest of the money in a high-rate postal account.

dunstonh

there are tens of thousands of investment options. Some are easily eliminated, others are variation of a theme, some are more specialist. There is no one best option as people are very different and have different needs.

We cant really comment on what investment options are likely to be best for them. Chances are though that pension will not be the best tax wrapper to use for their investments. I wouldnt recommend a cash ISA yet either in case they are better off with a MAXI ISA instead.

jamesd

First easy step is to open a savings account at their bank and shift most of it to that. Then they can do more after thinking further.

Given the long term thought for pension it's likely that 7000 into a stocks and shares ISA this tax year in her name and another 7000 in the new tax year would be useful. Within this her risk tolerance needs to be thought about to select a suitable range of funds to invest in. If she is willing to share the funds with her husband and he has his own stocks and shares ISA allowance available, 14000 more can be moved into the ISA wrapper by mid April.

7000 each tax year from each of them into a stocks and shares ISA is a fair default course for anyone with long term objectives, money available, no debt and sufficient funds to handle likely emergencies.

Their current pension situation - state, work and any existing personal pension arrangements and forecasts - needs to be considered before it's really practical to give suggestions that are more assured to be best. Getting a state pension forecast for each of them is a good start.

cheerfulcat

Hi, Fiona,

Have a look at the Motley Fool; start here, and then go to the discussion boards.

tt07

On the share ISA would it be better to put the 7 or 4k max for 06/07 and then drip feed the 7 or 4k for 07/08. 7 or 4 depending on Mini or Max

I say this as I drip fed £200 a month in 06/07 but started the year putting a lump sum to equal the 4k and the market dropped just after I put the lump in. For 07/08 I will drip the full 4k over the year and not do any lumps to smooth the rise and falls out.

Just a thought.

Appreciate they can afford to do a lump put longer term it might be worth dripping it in over the year.

jamesd

Longer term its best to get as much as possible into the stocks and shares ISA if the choice is putting it in or losing some of the allowance for a year. If someone wants to drip feed from a 7000 lump sum they can put the 7000 into low risk funds and move it to others later. Here are some example low volatility options:

New Star Property from Property all regions BI - real property uk. Gregor Logan replaced Stephen Whittaker as manager of the property stocks section of this fund on 02/01/07. Stephen Whittaker now manages New Star Equity Income fund. Performance of the 20% or so in stocks is a bit more unknown than usual.

Baillie Gifford High Yield Bond from fixed interest - UK junk bonds

At lower risk still are gilts and money market funds.

I also put money in just before the market fell, right at the end of the tax year. Such is life and stock market variability - if you look at the funds above you can see that there were lower risk options but neither of us chose them.

cheerfulcat

jamesd wrote:

Here are some example low volatility options:

[...]

Baillie Gifford High Yield Bond from fixed interest - UK junk bonds

Hi, jamesd,

High yield bonds are at the high risk end of the bond market anyway ( the term " junk " is not used lightly ); right now they are arguably way overvalued, which makes them even riskier. The Baillie Gifford fund manager may use derivatives as well, which again adds to the risk. All in all I don't think that "low volatility " is going to be a characteristic of this fund...not to say that it's a bad choice, just that I personally would not want to see it making up more than a small part of a diversified portfolio.

tt07

At lower risk still are gilts and money market funds.

I also put money in just before the market fell, right at the end of the tax year. Such is life and stock market variability - if you look at the funds above you can see that there were lower risk options but neither of us chose them.

Mine went down the funds that my wife was in went up. It was typical I almost timed it to the day of the fall.

I think I am a bit more cautious having been a little burnt this year but you are right if it's long term 5 - 10 years it doesn't really matter. I guess that's the trouble tracking funds in MS Money you see it when ever you login.

booklover

Thank you all so much for the very useful advice which I will pass on to my friend. You are all so clever and full of such amazing knowledge!

Plenty of food for thought here....

Many thanks again

:T

Fiona

tomstickland

Immediately move it to a high interest instant access account like HiSave, anything over 5.5%.
Maximise the ISA allowance every year.
Consider using some of it to invest.