Best way to invest 140k?

Chrismaths

Please could you quote some volatility figures for that Ed. Cash returned c5% with no volatility, China and Russia returned c50% with very high volatility.

You need to judge performance on a risk-adjusted basis.

jem16

EdInvestor wrote:

Jem may like to check this by having a look at the lower risk equity income sector which returned a total of 17.4% in the past year.Of course the best funds ( which an NMA should be able to pick) did much better than this.Property funds returned 19.2%.Presumably her portfolio has a lot of bond funds in it and they dragged down the overall performance. If not, charges may be to blame..

Thank you for the link. I'm not sure what figures you are quoting as average for equity income sector shows 14.8% and property 17.9%.


However if my IFA only gave me funds within Property & Equity Income I'd begin to worry as a sector allocated portfolio should have a much wider spread than that. In fact I may even have grounds for complaint

dunstonh

Jem may like to check this by having a look at the lower risk equity income sector which returned a total of 17.4% in the past year.Of course the best funds ( which an NMA should be able to pick) did much better than this.Property funds returned 19.2%.Presumably her portfolio has a lot of bond funds in it and they dragged down the overall performance. If not, charges may be to blame..

Equity income sector is not consistent with the risk profile attached to a cautious investor. I dont know why you keep posting that equity income is low risk when it is not.

A cautious portfolio would have fixed interest funds in it and performance from those would have dulled the returns in general but if there was a stockmarket crash, these would be the defensive buffer giving the protection. If this did occur, when the portfolio would next be rebalanced, these would allow a movement into the higher risk funds. This would result in units being purchased after the crash and these would have greater potential for growth after that. So, fixed interest may not be great at this time in itself but it is useful when used as part of a rebalancing and defensive portfolio.

EdInvestor

Equity income sector is not consistent with the risk profile attached to a cautious investor. I dont know why you keep posting that equity income is low risk when it is not.

Oh really, since when? A cautious profile allows 60% equities and most equity income funds are more defensive than other types of equities.

A cautious portfolio would have fixed interest funds in it and performance from those would have dulled the returns in general..

Yes,it would. But it wouldn't usually be mainly fixed interest - indeed you could argue that the bond market risk level has ratcheted up so much in the last couple of years, that cash was the better choice.

robledouk

Spoke to the IFA about his charges and he said he charges £100 per month which covers looking after/servicing the portfolio that we invest in, quarterly reviews, every year a rebalancing approach if not happy with performance and we have to visit the IFA at least every 6 months.

Does that sound reasonable? Really have no idea about typical charges of a New model IFA

My mother actually has 160k but is keeping 30k as security. 130k will go in investment (low risk portfolio) and the 30k she will use this year to draw from income (which will be put into a high interest savings account - I think he mentioned ING Direct).

Can alot be gained from investing 130k in a low risk portfolio,and wont be touched? (as she will draw money from the spare 30k for the time being)

Was just a chat but will have a more in depth meeting next week

dunstonh

Oh really, since when? A cautious profile allows 60% equities and most equity income funds are more defensive than other types of equities.

You were comparing it against 100% equity income not 60% or lower.

Also, what is cautious? A bog standard cautious managed fund may come out at 5/10 on the risk profile but what if the person is 4/10 or 5.5/10?

Spoke to the IFA about his charges and he said he charges £100 per month which covers looking after/servicing the portfolio that we invest in, quarterly reviews, every year a rebalancing approach if not happy with performance and we have to visit the IFA at least every 6 months.

Does that sound reasonable? Really have no idea about typical charges of a New model IFA

On £160k, if commission is being rebated or not taken then its not too bad. 0.5% trail = £800 a year. So its a bit above that. However, he is going further than the typical standards by seeing you face to face every 6 months. Plus his is fixed fee (possibly to deter smaller investors)

If I had won NMA of the year, I would probably put my charges up

So, as long there is no trail/renewal commission, it is very reasonable for the service you will be getting. If trail commission is on top, its a tad more expensive but that possibly reflects the status of the adviser.

jem16

robledouk wrote:

Can alot be gained from investing 130k in a low risk portfolio,and wont be touched? (as she will draw money from the spare 30k for the time being)

I would have to say from my point of view a lot has been gained. I have £104,000 invested from Feb 06 so it's near enough a year. The return from that, after charges, has been 16%. The 2nd ISA wasn't added until April 6th so that has only been running 10 months which gave the 14% average I quoted earlier.

If this was in my high interest account I would only have made 3.42% as I'm a higher rate tax payer.

robledouk

jem16 wrote:

I would have to say from my point of view a lot has been gained. I have £104,000 invested from Feb 06 so it's near enough a year. The return from that, after charges, has been 16%. The 2nd ISA wasn't added until April 6th so that has only been running 10 months which gave the 14% average I quoted earlier.

Thanks for that, it's gave me peace of mind

Do you just leave the portfolio alone or take the gains each year to live on? Don't mean to pry or anything but the situation you have been in is almost identical to my mum's but you can tell me to mind my own business of course

the IFA said to use the 30k that she's keeping spare to live on for now (although my mum was wanting to have that as 'security' incase she needs it for emergency) and use the gains she makes to live on during the year (and not use the 30k - just for emergencies/fix up the house when needed/sisters Uni as I mentioned!). Is that unrealistic to want to use the gains she makes for her income or is it better left alone? and do as the IFA said, use the 30k (that she wanted left alone as emergency money only)

All my mum wants is something comfortable to live on each year, with her money above inflation. Making lots and lots of gain isn't a priority if you know what I mean, just being comfortable is enough.

Of course I know we have to trust the IFA as he knows what he's doing, it's just taking that step to part with a huge amount of money that she only has left, being the 1st hurdle for my mum - having never done this sort of thing before is a bit daunting)

Thanks again for your replies, they really help immensely

jem16

The reason I posted was because your mum's situation is similar to mine.


I have left my portfolio to grow as I don't need an income from it at the moment. I am working and also have a pension from my late husband's scheme. It can be changed later if I do decide I need an income from it.

If your mum needs the income I would definitely take it from the investment but it's going to be a little while before that will come through which I think is what the IFA is saying with regards using the £30k at the moment. You could always leave a little extra in the emergency fund if necessary.

You would normally look to taking 5% as income which would allow the rest of the gains to provide growth. The growth is necessary to make sure the investment keeps ahead of inflation otherwise the capital will diminish and your mum will get less income.

Once you know exactly what the IFA is suggesting and charging you can come back on here and check it out.

Meanwhile feel free to ask - I'll help if I can.

jamesd

robledouk, using the 30k will let the investment keep growing. Taking the money out of the investment will leave the 30k earning only the lower savings growth rate. It looks like a good recommendation to improve the situation as far as possible.

Alternatively, investing instead of saving more of the 30k but in quite safe investments - bonds or commercial property perhaps - may reassure your mother about safety of the money and provide more to live on as income from the investments. 6% of say 20,000 of this would provide 1200 a year in income and this is reasonable enough income from investments while still leaving enough in them to compensate for inflation and grow a little.

Add in 6% of the remaining 130k giving 7800 a year and the combined 9000 a year would be enough for many people to live on without too much trouble.

You don't say where the money would be invested but have a look at these two for some not very high risk investments, though neither is the safest possible from their market sector:

• Norwich Property Trust (h-l) from Property all regions BI - real property uk
• Baillie Gifford High Yield Bond(h-l) from fixed interest - UK junk bonds

Notice from the h-l links that they didn't dip much when the stock market went down?

I'm not specifically recommending these, they are just examples. The first includes some equities so it isn't just real property, the second is at the high end of the corporate bond risk scale.