Receiving an income from investment

pecklet

Hi,
I have £50,000 invested in an Halifax Managed Income Fund from which I receive a quarterly income. Unfortunately, though, my income fluctuates according to the stock market and there is always the danger that my initial investment could reduce. Does anyone know of an investment fund which would give me a constant income and still keep my initial investment in tact.

Chrismaths

A gilt. But then neither your income nor your capital would grow. That's the nature of risk and reward.

As an aside, I can see you got "advice" from a bank salesman. How am I so prescient? Because no self respecting professional would ever recommend that fund. I also have the nasty feeling this is wrapped in a life bond, which is likely (although not definitely) unsuitable to your needs, and are often sold by bank advisers to increase their own commission.

Have a look here to see how truly awful your fund has been.

Never. Ever. Trust. Banks.

dunstonh

OMG, £50k in one fund. How wasteful is that. And a bank fund too.

There are much better options and yes you can get a fixed regular amount paid. However, if you want to keep up with inflation, there is no guaranteed option available for you (there is but you only use them as a last resort when the client is really adamant they want capital security and undestands that it will cost them).

If you stick it in the bank and draw the interest, then that £50k will experience the equivalent of a major stockmarket crash every 7-10 years. In 10 years time it would have the spending power of £35,000. To avoid that, you need to take some investment risk to achieve some capital growth to maintain it's real value (and maybe make some more).

It's a case of balancing the risk and not going over the top but also being sensible and not picking the wrong product (such as a savings account).

EdInvestor

http://forums.moneysavingexpert.com/showthread.html?t=401807

Some thoughts on this thread.

One way of getting a better return is to arrange your own income, rather than hunting round for funds that will do it for you.

Assume you want 5% from your 50k, ie 2,500 p.a., a bit over 200 pounds a month. Take the 2,500 from the capital and put it in a high interest instant access savings account.Draw the money out every month from this account for your income.

Then you can invest the other 47,500 wherever you like, without bothering about the income aspect. Just make one withdrawal at the end of each year to top up your instant access account to provide your following year's income.

cheerfulcat

pecklet wrote: »

Does anyone know of an investment fund which would give me a constant income and still keep my initial investment in tact.

Index-linked gilts would let you sleep at night. The income is very low but it will rise with inflation, and the capital is secure and will also increase in line with inflation, free of tax. You can read about them here.

free4440273

EdInvestor wrote: »

http://forums.moneysavingexpert.com/showthread.html?t=401807

Some thoughts on this thread.

One way of getting a better return is to arrange your own income, rather than hunting round for funds that will do it for you.

Assume you want 5% from your 50k, ie 2,500 p.a., a bit over 200 pounds a month. Take the 2,500 from the capital and put it in a high interest instant access savings account.Draw the money out every month from this account for your income.

Then you can invest the other 47,500 wherever you like, without bothering about the income aspect. Just make one withdrawal at the end of each year to top up your instant access account to provide your following year's income.

ed, i hope you don't mind me asking you this. i have put into bold what i need information on. is there a specific risk free savings account that will give me an income of approx £200 per month on an investment of approx £2500? or have i just been really stupid and misread the context in which you are quoting this (probably so i suspect!). thanks

jamesd

pecklet, please tell us more about your personal and financial situation, for example, are you retired, how old roughly, other income sources and rough amounts. That will give some idea of your possible tax situation and that may help point in a useful direction.

JoeK_3

Pecklet, get yourself a good Independent Financial Adviser as this seems to be a perennial problem that needs to be sorted out.

JoeK

Ian_W

free4440273 wrote: »

is there a specific risk free savings account that will give me an income of approx £200 per month on an investment of approx £2500? or have i just been really stupid and misread the context in which you are quoting this (probably so i suspect!). thanks

Ed can obviously speak for herself but that isn't what she is suggesting.
The £2.5K in the account IS the first year income!

The 47.5K remaining is then invested and a further £2.5K is taken each year to be used as income. It certainly isn't risk-free though. Either low market growth for a extended period or a market crash in the early years could cause it serious problems.

For £2.5K to produce £200pm income would require almost a 100% interest rate. Anyone who finds a risk free account paying that please let me know soonest - there's a good drink in it for you! :beer:

free4440273

...so i was being stupid. it's Friday (that's my excuse, fish and chips and a bottle of wine). thanks for clearing that up ian w. have a good weekend also and everybody else

cheerfulcat

JoeK wrote: »

Pecklet, get yourself a good Independent Financial Adviser as this seems to be a perennial problem that needs to be sorted out.

JoeK

There's not really anything an IFA can add. Given the brief, i.e.

Does anyone know of an investment fund which would give me a constant income and still keep my initial investment in tact

cash or gilts ( index-linked if the capital preservation is to be in real terms ) are the only answer.