where to place my £50000 lump sum

Bigmoney2

If you need more income consider taking a lower lump sum and a higher pension.
Will your pension be index linked.
Depending on the terms of your early retirement, will there be any claw back once you reach state pension age.

jamesd

gadgetmind wrote: »

Note that not all income is equal when it comes to tax. Any when the type of payment is income/interest will be subject to tax, but where income is as dividends then there is no more tax for a basic rate tax payer.

Yes, that's why I highlighted some that should get priority for an ISA to avoid the tax on the interest.

gadgetmind wrote: »

Income from Real-Estate Investment Trusts is a mix of both.

I happened not to include any property fund in the list but it would be of use to include one that does pay out an income, for extra diversification. Perhaps you'd care to suggest one with a nice income level?

EdGasket wrote: »

I think the OP's suggestion in the first post is a much safer bet.

You think planning to lose 100% of the money in just eight years is safer than planning not to do that?!

Volatility of capital value is expected and could cause a capital loss if the money was taken out during a low time but that's not the same as actually losing all of the money for certain. Do you really expect the investments to lose 12.5% of the original capital value every year for eight years until there's no capital left, like the original plan?

EdGasket wrote: »

NOTE: If inflation rises (I think it has to because of all the money printing going on), then any form of fixed-interest rate investment will fall in value and continue falling for as long as inflation is rising. I would not recommend committing your entire pot to Bond funds.

Inflation in the country where the investment is held can be expected to have that effect, it's part of why there's a mixture of investment types and locations, not all UK, and not all interest paying bond funds. Also why I actively avoided the gilts and lowest volatility corporate bonds which are both likely to be the biggest sufferers from that effect. Even so, any drop is not going to be 100% like the original plan.

You seem to have a very excessive fear of investment volatility if you'll try to avoid it at the cost of being certain to lose all of the money. Would you really choose to do that?

EdGasket

The OP was planning to spend the money for his/her own benefit which is not 'losing' as you imply. Losing is where you invest the £68000 in dodgy funds and your capital gets lost through management fees and adverse market movements with no benefit whatsoever to the OP.

gadgetmind

EdGasket wrote: »

Losing is where you invest the £68000 in dodgy funds

What does "dodgy" mean in this context?

your capital gets lost through management fees and adverse market movements with no benefit whatsoever to the OP.

Fees can be minimised and volatility can be managed. A sensible portfolio can deliver 5%-6% real growth and allow low risk drawdowns of 4%-5%. Money in "safe" assets will wither on the vine.

jamesd

EdGasket wrote: »

The OP was planning to spend the money for his/her own benefit which is not 'losing' as you imply.

I'm not implying it. I'm stating it outright as a clear fact. The money is gone. It's a plan to end up with no capital after eight years. Guaranteed 100% loss of capital.

EdGasket wrote: »

Losing is where you invest the £68000 in dodgy funds and your capital gets lost through management fees and adverse market movements with no benefit whatsoever to the OP.

Let me know your theory by which a legally operated and regulated investment fund can lose 100% of an investor's money through adverse market moves. It requires every investment that the fund holds to fall to zero value so fast that the fund manager can't do anything about it. It can't be straight fraud or insolvency because the FSCS protects against that even if the requirement to hold client money in segregated funds fails to protect.

The list off funds I mentioned probably has around five hundred to a thousand different underlying investments. What's your theory by which all of those including governments and companies like Vodaphone can all go bust at the same time and lose investors all of their money? In the range of countries and investment types that are involved, all at the same time?

Give the manager enough time to react and it gets even more unlikely. Say one of the investments was a global tracker fund. For the value to fall to zero the value of every significant listed company in the world would need to fall to zero faster than the fund can be rebalanced into the surviving companies.

What's your theory on how a fund can charge fees so high that the value will fall to zero in eight years? Or perhaps a better question, what's your theory for how ANY percentage fee can cause the fund value to fall to zero, ever - it's impossible? Normal charges for income-producing funds are in the 1-1.5% range. Assuming the higher end of those as the average for them all, after eight years of no other movement except taking out the income the value of £1,000 invested would drop to £886. After 100 years it'd still be at £220.

Charges and investment ups and downs happen and matter. End of the world scenarios like properly regulated funds with normal charge levels losing an investor all of their money aren't something that needs to be worried about, though it's still prudent to diversify so that a problem in one fund house can't affect all of your income for a while.

There will be capital value variations. Those can be very significant but they matter mainly if you're taking capital out regularly and you protect against having to take out capital from the more volatile funds at a bad time by having money in less volatile funds and cash.

Aegis

jamesd wrote: »

What's your theory on how a fund can charge fees so high that the value will fall to zero in eight years? Or perhaps a better question, what's your theory for how ANY percentage fee can cause the fund value to fall to zero, ever - it's impossible? Normal charges for income-producing funds are in the 1-1.5% range. Assuming the higher end of those as the average for them all, after eight years of no other movement except taking out the income the value would drop to £886. After 100 years it'd still be at £220.

Just to clarify, you're doing this on the basis of an initial £1,000 investment, correct?

gadgetmind

jamesd wrote: »

Perhaps you'd care to suggest one with a nice income level?

The big guys are British Land and Land Securities. There is also the IUKP ETF.

I've gone a less mainstream route and have holdings in UKCM and London and Stamford because I like their low gearing. The former is FTSE 250 and the latter even smaller, so you might prefer the big guys particularly as LSP's dividend cover is improving but not yet comfortable.

I have also bought some SREI (Schroders Real Estate) partly as a recovery play, but also because it aligns with my theme of buying into trusts that have been taken over by the big guys. My theory is that post-RDR far more PIs will be steered in this direct by IFAs and discounts should narrow.

I also hold some TR Property, which is an interesting combination of bricks and mortar in the UK and property securities in Europe. It's on a huge discount.

For infrastructure, I've used the shotgun and have bought HICL, JLIF, BBGI, and INPP.

This isn't an area where you're going to get rich quick, but I'm happy to have 15% of my portfolio split between property and infrastructure at this stage of the cycle.

jamesd

Aegis, yes, £1,000 starting capital. I edited that paragraph down while writing it and accidentally lost the initial sum.

EdGasket

To Jamesd:
ref. "Let me know your theory by which a legally operated and regulated investment fund can lose 100% of an investor's money"
It does happen; happened top me. Edinburgh New Tiger Trust; launched at 50p per share. The trust steadily declined even though Asia markets were fine. At around 15p, Edinburgh then closed the trust and converted investors into Edinburgh high income split capital trust. Two years later it went bust. That is how I lost 100% of my money in a 'legally operated and regulated fund'. You can check the facts yourself.

Ref. "What does "dodgy" mean in this context?" It means the funds cannot return above the market average without undue risk.Even Standard Life's 'Safe haven' Cash fund suffered a sudden 10% fall as it admitted it was invested in Mortgage backed securities. It means when inflation and interest rates go up, the capital value of bonds goes down; you lose your capital.

Ref "I'm not implying it. I'm stating it outright as a clear fact. The money is gone."
- Yes maybe the OP will have spent it all but he/she hasn't 'lost' it; he/she chose to spend it however they wished. That is totally different to having your capital wiped out in the stockmarket where can be lost with absolutely no benefit to the investor. If the OP spends the money then they will have benefited from the enjoyment and use of whatever they spent the money on. I don't lose my money when I buy things; I have the things or the experience I paid for.

jamesd

jamesd wrote: »

Let me know your theory by which a legally operated and regulated investment fund can lose 100% of an investor's money through adverse market moves

is what I actually asked.

Thanks for the examples and I'm sorry to read that you lost that money, though it doesn't appear that either of the investments was a fund, both seem to have been investment trusts. From the look of it the problems there included:

1. Leveraged, so the original trust could lose more than market moves.
2. Very high risk investments, the small companies in the smaller emerging Asian markets (back in 1994 when those were less developed even than today).
3. The successor was one of the split cap funds, again a high risk investment.
4. The loss wasn't due to adverse market moves, the markets were fine.
5. Persisting with investing with a known poor performer that was severely underperforming the market for a sustained time.

I do agree that a fund manager can choose to make a lot of poor decisions and lose a lot of money.

I'm puzzled about why you think it's related to the sort of things that might be used for drawdown, though, and whether you think any of the funds I've mentioned here have risk levels anywhere near to leveraged small companies in immature markets.

Even though the money has been spent on living expenses, it's still gone, and it's not likely to be gone if it's invested so that it's producing sufficient income for there to be no or greatly reduced need to draw on capital. A plan to deliberately end up with no money is different from a plan that takes exceptional circumstances to have that result.