£400K What is realistic Income?

Linton

luckystrike23 wrote: »

no risk = no return.

However, I think with 400k you could make up to 32k per year if you put them in reasonably safe corporate bonds like Barclays.

You could get that sort of return from corporate bonds though the safer ones are closer to 5-6%, the downside compared with shares is that there is no chance of the capital increasing with inflation.

The answer I believe is a balance of various asset classes. Some to provide a steady income, if that's what you want, and others to provide the capital growth.

GeorgeHowell

The OP said 'I do not wish to risk the capital, but I have no need for it for at least 10 years.' so I don't know why people are talking about share based investments.

grey_gym_sock

GeorgeHowell wrote: »

The OP said 'I do not wish to risk the capital, but I have no need for it for at least 10 years.' so I don't know why people are talking about share based investments.

but he also said he wanted an income, and didn't want the capital to reduce. i don't think he spelt out whether he wanted to preserve the real value of the capital (allowing for inflation) or just the nominal value, but most ppl care about the real value.

if you stick to savings accounts, and want to preserve the real value of your capital, you might hope to draw an income of between 0% and 1%.

i think it's fair to suggest that OP might consider putting part of the money in shares if the aim is to draw a higher income while preserving the capital - even though it's not what was asked for.

savings accounts are also not risk-free when you're looking at the longer term, in which inflation has more time to erode your capital.

luckystrike23

i didn't mention shares but corporate bonds which are guaranteed UNLESS the company goes bust - I'm speaking about buying bonds in blue chip companies.... but whatever way you look at it there is nothing that is free of risk.

Glen_Clark

CLAPTON wrote: »

if you want to preserve the purchasing power of your capital then ordinary saving a/cs can be ruled out (except for money you need for short term spending) as the post tax income is below inflation.

so that leaves
-index linked bonds of various sorts
-stocks and shares
however these add risk to your capital
-property to let out but only if you want to be a landlord.

Do you think Buy To Let doesn't add risk to your capital?

Jonbvn

luckystrike23 wrote: »

no risk = no return.
However, I think with 400k you could make up to 32k per year if you put them in reasonably safe corporate bonds like Barclays.

This would be crazy!!! Remember a few years back when several "safe" banks nearly went bust?

IMO, diversification is the key here.

GeorgeHowell

grey_gym_sock wrote: »

but he also said he wanted an income, and didn't want the capital to reduce. i don't think he spelt out whether he wanted to preserve the real value of the capital (allowing for inflation) or just the nominal value, but most ppl care about the real value.

if you stick to savings accounts, and want to preserve the real value of your capital, you might hope to draw an income of between 0% and 1%.

i think it's fair to suggest that OP might consider putting part of the money in shares if the aim is to draw a higher income while preserving the capital - even though it's not what was asked for.

savings accounts are also not risk-free when you're looking at the longer term, in which inflation has more time to erode your capital.

I think a great many people actually care about the nominal value of capital. The opening thread implied that seeing this dwindle on the back of the FTSE100 or whatever was not an option. People seem to be trying to convince the OP that he should change that stance, but that's not answering the original question that he asked.

gadgetmind

GeorgeHowell wrote: »

seeing this dwindle on the back on the FTSE100 or whatever was not an option.

Investing so narrowly would definitely be a mistake, but historically not something that has seen value dwindle in real terms other than over carefully chosen periods.

jamesd

GeorgeHowell wrote: »

The OP said 'I do not wish to risk the capital, but I have no need for it for at least 10 years.' so I don't know why people are talking about share based investments.

Because there is also a desire to have an income and presumably to protect the capital from inflation. Those objectives are inconsistent with just using savings accounts so it'll be necessary to find some balance. That balance might be savings accounts only and minimal income or it might be accepting some possibility of loss with investments or some certainty by taking more income than the interest rate of savings accounts can provide while keeping up with inflation.

Each person will have a different balance point.

paul5046

Lets take a fixed rate online saver that pays 3.62% and interest can be taken monthly.

3.62% of £400k is £14,480. Monthly that would be £1,207.

That is gross. A basic rate taxpayer would take home in the region of £960 a month. In 10 years you would still have the 400k capital, but as has been said, its purchasing power would be less due to inflation.

Lots of banks offer rates in the region of 3-3.7% fixed for a number of years.

(I'd be interested to know what you decide , if you don't mind)