How would you invest 1 million pounds

dunstonh

innovate wrote: »

You could always try Coutts for advice?

http://www.dailymail.co.uk/news/article-2252050/Coutts--Co-Lotto-couple-won-1million-want-compensation-Queens-bank-wrong-advice-left-just-10k-year-live-on.html

There is more to that than meets the eye. You look at the plans that were retailing at that time then not one would have seen a loss of the level being quoted in the paper. Also, the paper is turning an investment with a value into a annual amount. These products dont pay an annual amount. They pay what you decide to withdraw out. So, the account holder is in control of their withdrawals. So, it could be that £650,000 @5% was reasonable 10 years ago but 2.5% is safer now to cover inflation. If you assume a small loss on capital then you could easily see the £10,000 figure being quoted quite reasonably with very little loss on capital (and if you add withdrawals back in, then a good chance they made more than savings).

The fact there is no fund value being quoted suggests sensationalism by the Daily Mail.

dunstonh

The MITS can really assess for himself whether Fidelity Small Cap (I madethat up) is going to:

a) Continually return a regular income of say, 4-5% pa

b) Go up in value over the next 10-20 years

What is the difference between analysing investments that have a variable capital and variable income with property which has a variable capital and a variable income. Knowledge is needed in either area to do it well but the principle is the same.

And the experience of the past 5 years (not to mention the Dot CON boom) hasshown how much they are worth.

A spread of equity income and bond would be beating property in most cases.

Thrugelmir

petervasilev wrote: »

Forgot to mention that I'll be expecting 10% to 15% yearly return.

Then better to start your business. Than invest in UK property which at the moment has past its peak.

innovate

dunstonh wrote: »

The fact there is no fund value being quoted suggests sensationalism by the Daily Mail.

Well of course, it's the Daily Mail, so they wouldn't bother unless they could put a slant to it that appeals to Joe Bloggs.

tim123456789

dunstonh wrote: »

What is the difference between analysing investments that have a variable capital and variable income with property which has a variable capital and a variable income. Knowledge is needed in either area to do it well but the principle is the same.
.

As I have already pointed out.

Collecting all the information necessary to evaluate the prospects for specitic property is well within the grasp of the average person.

Collecting the informatuion to evaluate the prospect for enough companies to get a good spread is not.

And evaluating the prospects for a unit trust (or similar) is impossible because the fund managers can't be trusted not to change the investment mix in the future (tracker funds excepted).

I'm not saying that this make property the right choice. I'm just saying that some people will be more comfortable with it because they will have made all the choices.

dunstonh

Collecting all the information necessary to evaluate the prospects for specitic property is well within the grasp of the average person.

During the credit boom, a blind monkey could pick a property at random and make it profitable. We no longer have the credit boom. It requires more knowledge and understanding now.

Collecting the informatuion to evaluate the prospect for enough companies to get a good spread is not.

Which is why most people use funds.

And evaluating the prospects for a unit trust (or similar) is impossible because the fund managers can't be trusted not to change the investment mix in the future (tracker funds excepted).

OK, so we can take from that you do not understand investing. Funds will invest within the remit of the fund objectives. It cannot go outside of that. Fund managers can be trusted to act within their remit and accounts are published.

If you are on about trust, then how about trusting the tenant not to do a runner or trash the property?

I'm not saying that this make property the right choice. I'm just saying that some people will be more comfortable with it because they will have made all the choices.

Doesn't matter which you choose. Both are affected by external things which the individual has no control over. Both allow choice. Both have risks.

jamesd

If using property, then buying five or ten properties of value up to £100,000 or so, with mortgages at 75% or so loan to value would be the way to go. In different areas. The value leaves some chance of avoiding CGT or minimising CGT on sale and also room for capital appreciation without hitting the point where stamp duty starts. The mortgage interest can be deducted from the rental income, reducing her tax cost, something that will matter since she's close to or will be a higher rate tax payer if she wants that level of income.

For income generation the pretty much completely standard approach for most of the money is to use a range of funds like these examples:

Invesco Perpetual High Income
Invesco Perpetual Monthly Income Plus
Invesco Perpetual Distribution

She'd also want to keep at least two or three years of planned investment income in a savings account and pay her income from that account. Have the investment income top it up. This way she has a large buffer that smoothes out the variations in investment income.

Her age and current income also matter since it may make sense to use pension contributions for some of the money as a way of boosting the income generated.

Her age also matters because it sets some thresholds for how long the income must be provided. If she's 90 now she's probably not going to need the income for more than 20 years, so might choose a low investment volatility target and plan to draw on the capital. If she's 20 then she'll need to generate the income mostly from ongoing investments.

Her objectives for her life also matter hugely. Does she simply want to stop working? How much income does she think she'll need for her plans? Does she want to prioritise long term income or blow half of it on immediate luxuries and halve the long term income?

For some rough guidance on income potential, she might expect to be able to take between 4% and 6% of the capital value in income each year depending on how cautious she is with the investment selection. So £40,000 to £60,000 a year of income.

That's getting into higher rate income tax levels so she should be considering tax wrappers as well. Some limited use of VCTs for tax free dividend income may make sense, up to perhaps 5-10% of the total depending on how much up and down value variation she's prepared to accept overall.

Risk is something that needs more discussion. What does she mean by low risk? Low chance of losing all of the money? Or low up and down movements in value from year to year? Investments have variations in value from year to year that vary depending on the type of investment but the overall trend is generally upwards over the long term.

She has to accept some degree of up and down variation in value to get a decent income. If she sticks to savings accounts she'll only get about 1% above inflation long term, if that. If she can handle it she should be setting a target of at lets 20% drop in a bad year to allow a reasonable mix of investments. Increasing that to 30% would increase the income potential. Going higher isn't needed for an income brief.

Diversification is a critical part of good investing and you might notice that I've mentioned savings accounts, property, funds and VCTs as options that are useful to some degree for her. Funds also have many different types and have diversification within them.

doughnutmachine

dunstonh wrote: »

If you are on about trust, then how about trusting the tenant not to do a runner or trash the property?

with respect, you seem to have little knowledge of property investment. i bet every single ftse100 company rents property, the BBC rents property, the Government rents property. Do you think these tenants are likely to "do a runner or trash the property"?

prowla

I would spend half of it on beer & women, and waste the rest.

grey_gym_sock

commercial property with quality long-term tenants would be a very different proposition to 10 houses. i think the latter was the idea earlier in this thread. as it usually is when ppl discuss investing in property.

whatever kind(s) of property it might be, best not to put all eggs in that basket.