Best home for £55k lump sum

philip1988

I retire on Friday and will have a lump sum of £55K to save/invest and really don’t know what to do with it. With savings rates so low I see little option but to put my money into something a LITTLE riskier. The question is what. I am not looking for something high risk with the potential for high gains but something where there is little risk to the capital whereas at the same time giving a return that is better than the best (if you can call it that) savings accounts
I know that there are S&S ISA’s, various funds/bonds offered by a wide range of companies and I have just read about fixed term investments where your capital is protected and the return is based upon the FTSE performance.
I would appreciate views as to which is likely to be lowest risk and any suggestion of companies/investments

RetiredInThailand

philip1988 wrote: »

... I have just read about fixed term investments where your capital is protected and the return is based upon the FTSE performance.

Watch out for these. The "protection" is in the form of a guarantee from a bank or insurance company. This is what brought Lehman Brothers to its knees (actually below its knees!) a few years ago. Look it up.

I think that there is something to be said for buying FTSE 100 or FTSE 250 trackers as the costs are low and they provide some dividend income, and the future value should be reasonable, assuming everything doesn't just collapse. You can hold these via in an ISA wrapper with the usual restrictions. You are unlikely to do worse from these than from one of the guaranteed products you mentioned, but like all share purchases they can go down as well as up.

Dont put all your eggs in one basket though, and personally I wouldn't put more than 50% in stocks.

Linton

Are you looking for cash income to supplement your pension or is your pension income adequate for your immediate needs, which suggests that capital growth could be more important? Is £55K the total of your savings? How much other savings do you have and how are they invested?

I think you should be looking to put a significant part of the £55K in funds. How significant the part and which funds depends on the answers to the questions.

gozomark

how much of your capital are you prepared to lose, and how long do you want to tie up your money ?

atush

Is this 55K your only savings pot? Do you have any other non pension investments?


You need to keep enough in cash deposits to cover short to med term needs such as holidays, home maintenance, car replacement/repair. AS far as equities, while trackers could be an idea I would be leery of leaving them ALL Uk based as I prefer a Global strategy.

A mix of corporate bonds and equity income funds. Held in ISAs when possible.

philip1988

Thanks Linton and Gozomark

In answer to your questions

a. My pension should if all the spreadsheets are correct be sufficient to cover my day to day needs. However I would like some income from the investment for a holiday or two a year

b. I have approx £100k in savings, typically cash ISA's and 1 year fixed rates. I have a small amount of S&S ISAs inc in this amount

c. I understand that I will need to have some risk in order to beet savings accounts, however as I don't like taking risks I couldn't afford to loose much.

d. I suppose if the investments are generating income with a small increase in capital I would be happy to invest for 5 plus years

gozomark

how much are you prepared to lose ?

philip1988

gozomark wrote: »

how much are you prepared to lose ?

10% at most. I hate the thought of loosing money

Linton

I guess that your £100K in cash is more than enough to fund all the holidays you may wish for the foreseeable future and the odd emergency as well. So you could invest the £55K with a 5-10 year timescale.

I suggest that one possible approach would be to put perhaps £20K in something broad and unadventurous such as a global tracker or a balanced managed fund and the other £35K in a 3 year fixed rate account. After 3 years you can then decide whether to increase your equity investment with say £10K in the Far East or Emerging Markets or whatever if you are happy to do so.

A complete loss of all your investments (or even half of your safer ones) is in my view vanishingly unlikely, but if global economic circumstances were such that it happened I would think that your pile of cash would be pretty unsafe as well.

jimjames

philip1988 wrote: »

10% at most. I hate the thought of loosing money

Remember you only lose money when you sell. If you hold on then an investment is likely to come back up again.

Technically I could have lost 30-40% of my savings in the 2008/2009 crash. I didn't sell and they are now above the level from before then.

grey_gym_sock

stock markets can sometimes fall 50% (not an exact figure, of course - just a general idea) (though they do tend to bounce back later if you are prepared to wait), so i suppose you could put 20% of your money in shares, and keep 80% in ordinary savings accounts (or fixed rate accounts). then you're unlikely to lose more than 10% of your total capital.

investing only 20% may not be give an acceptabe return, though.