Best home for £55k lump sum

bigfreddiel

monevator site, passive portfolios should be a starting point, tim hales book on passive investing and also another book the all new coffeehouse investor

in a nutshell create a balanced portfolio of shares, bonds, gilts, property and cash - use loe cost trackers - etf'sor funds

rebalance each year back to the chosen proportions

the proportions are

equity tracker (100 - your age)%
cash 5%
bonds/gilts & property split 50/50 of the remaining amount

each year just rebalance to the same proportions - this has the affect of automatically selling high and buying low without any effort

and finally every 5 years readjust the equity proportion as you get older - this reduces the risk of your portfolio as you get older so that when you're 90 only 10% will be in equities

cheers

fj

BLB53

My advice, fwiw, would be to invest in a variety of income & growth investment trusts - average yield would be around 4.5% which would give you an income of around £2,500 pa and which should steadily rise year by year to keep pace with inflation.

I hold around a dozen or so in my S&S isa - recommended would be City of London, Edinburgh, Murray International, Temple Bar, Personal Assets, Murray Income and Aberforth.

Check out the discussion boards on Motley Fool - 'Investing for Income' and also 'Unit Trusts & Investment Trusts'

Also a useful ebook on generating income is 'Slow & Steady Steps..'
http://www.amazon.co.uk/Slow-Steady-Steps-Wealth-ebook/dp/B007EBLN3G/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1355264801&sr=1-1

Good luck!

RetiredInThailand

philip1988 wrote: »

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

Depending on your income level and tax situation, you might be much better off cashing in a small part of an investment to get funds for a holiday rather than taking it as income. The former counts in your CGT allowance but the latter is taxed at your top rate.

philip1988

Thank you everyone for your replies, I obviously have a lot to learn.

microb_2

I am in a very similar position to philip1988 in that I retire tomorrow and will get a lump sum of £70,000. I also have £100,000 in savings, my pension will be enough to live on and I am pretty risk averse.

I will look into all of the proposals made so far but was also considering putting £30,000 into premium bonds for a year or so. Is this something people would recommend?

bowlhead99

microb wrote: »

I will look into all of the proposals made so far but was also considering putting £30,000 into premium bonds for a year or so. Is this something people would recommend?

The question of PBs comes up all the time here. It's govt backed so it is safe in that sense, and the headline return is 1.5% tax free: for a basic rate taxpayer with no remaining ISA allowance, that's like getting 1.88% pre tax from a bank. It's a bit better than this if you'll be a higher rate taxpayer in retirement.

But you don't receive any interest direct, it is gambled for you in a raffle. Each £1 bond has a 1 in 24000 chance of winning a prize in the monthly draw. So with 24 k invested you should win one prize a month on average.

96% of the prizes are £25 so generally you'll get £300 a year for a 1.25% return on your 24k. A couple percent of the prizes are £50 or £100 so in a good year (every few years) you might get £360 in the year and achieve the headline 1.5% return. Every 20,000 months, you should win a £5,000 prize, and if you can wait 40,000 months it will be your turn to win a £10,000 prize.

If you can wait 148,000 YEARS, you'd be due one of the million pound prizes. This is not guaranteed and if you're unlucky, it might take you 300,000 or perhaps even half a million years for it to be your turn.

Of course, this is assuming you only invested £24k to get an average one prize a month. You were proposing to invest £30k, so you'll win prizes faster and instead of waiting 148,000 years for the top prize, you could get it in 118,000 years. Unless you're unlucky. Or the interest rate changes for the worse.

Given that only the top prizes are meaningful life changing amounts, you would be better investing elsewhere, getting 50 quid more interest a year and spending it on a weekly lottery ticket. You'll hit the jackpot every 270,000 years and meanwhile won't have 30k of your retirement funds tied up in a gambling addiction.

odds: http://www.nsandi.com/savings-current-interest-rates-premium-bonds-prize-draw-details

atush

Generally speaking, unless you pay HRT tax I don't recommend holding PBs unless you hold a token 100 or so (as I do) for a bit of fun.

AS they don't meet much less beat inflation they are risky- in that your money loses value to inflation as each month goes by.

Newly_retired

I had a lump sum to invest in 2007 and, suprise, suprise, it has only just returned to what it was worth five years ago.
So if you are planning on needing the money - or even any income from it, be aware that investments can go up as well as down and only invest what you are prepared to lose.

microb_2

Thanks bowlhead99. Put like that I will have to find other vehicles for my money

atush

Why thank him? He who invested a lump sum at a very bad time? What does that have to do with you, today?

Investing has made money for me since then, and money I had invested then has recovered before now. My risky 'fun' stockbroking acct is up over 20% on that time (despite losses incl 100% ones as this is where I do my riskiest trades.)

First of all, to minimise risk- dont invest one large LS all at one time. Do what I do, drip feed it into the market. This takes advantage of pound cost averaging. Which means if prices drop, you get more units for the next few months so when prices recover (and they always do in time unless you invest in one risky stock that goes bankrupt) you then end up with extra units and are extra in profit.

Second, Invest in funds/investment trusts over individual shares as this also mitigates risk. If you invest 1000 in a fund that holds 20 stocks and one goes bust, you still have 950. Invest 1000 in that one stock, and you have 0.

Third. Educate yourself in all areas from Risk (and don't forget the risks of inflation and shortfall) to diversification/globalisation, to investing basics. Basically, learn everything.