£500,000 Investement

xmodz

bigadaj wrote: »

Reasonable make up but surely 5% in cash?

the op asked what i would do,

this is what i would do, i dont like my money just sitting there, i like it working for me

marathonic

acc2007 wrote: »

Didn’t realise this was an English exam

If you have nothing to say about the topic, don’t comment and keep your opinions to yourself.

It isn't an English exam but it still makes sense to write your posts in such a way that they can be clearly understood in order to avoid confusion similar to that encountered above.

somethingcorporate

xmodz wrote: »

If i had 500,000
to invest

I would have
£100,000 in buy to let
£300,000 in shares split between 30 companies £10,000 each
£50,000 in corporate bonds between 20 companies £5,000
£30,000 in gold and silver
£20,000 on funds

Something like this does seem very sensible, assuming you have accessible cash in your ISAs to cover emergencies. Otherwise keeping 5-10% a bit more liquid is certainly a good idea. Only go into B2L if you want to be a landlord, it is not an easy way to make money at the moment.

marathonic

It's an interesting point on whether cash is required as part of such a valuable portfolio. I suppose it depends on the associated persons monthly expenses.

Let's say, for example, the person has an annual expenditure of just £12,000 and the funds for this portfolio came through an inheritance or lotto winnings.

The primary purpose of cash in someones portfolio is to tide them over if they happen to lose their jobs whilst stock markets are at low levels - or to cover unexpected expenses such as the replacement of a broken down boiler.

Let's assume that the £300,000 invested in individual shares, referred to by xmodz above, is achieving an annual dividend of 2.5% (or £7,500 annually).

In this scenario, the dividends would cover the mortgage on the BTL portfolio (assuming the £100k is the deposit and a mortgage is used to leverage up) for vacant periods. If the investor lost his/her job, the £7,500 in dividends, together with the rental profits, should cover expenses. Likewise if a large, unexpected expense came up.

The worst case scenario is that you lose your job AND the rental property is vacant. In this case, the dividends should pay the BTL mortgage and you'd have to sell gold, bonds or shares to cover living expenses. One would have to assume that it's highly likely that one of these three asset classes will be high enough to consider selling at any point in time.

xmodz

marathonic wrote: »

It's an interesting point on whether cash is required as part of such a valuable portfolio. I suppose it depends on the associated persons monthly expenses.

Let's say, for example, the person has an annual expenditure of just £12,000 and the funds for this portfolio came through an inheritance or lotto winnings.

The primary purpose of cash in someones portfolio is to tide them over if they happen to lose their jobs whilst stock markets are at low levels - or to cover unexpected expenses such as the replacement of a broken down boiler.

Let's assume that the £300,000 invested in individual shares, referred to by xmodz above, is achieving an annual dividend of 2.5% (or £7,500 annually).

In this scenario, the dividends would cover the mortgage on the BTL portfolio (assuming the £100k is the deposit and a mortgage is used to leverage up) for vacant periods. If the investor lost his/her job, the £7,500 in dividends, together with the rental profits, should cover expenses. Likewise if a large, unexpected expense came up.

The worst case scenario is that you lose your job AND the rental property is vacant. In this case, the dividends should pay the BTL mortgage and you'd have to sell gold, bonds or shares to cover living expenses. One would have to assume that it's highly likely that one of these three asset classes will be high enough to consider selling at any point in time.

The £500,000 investments option i said took into consideration none of the money would be needed to be spent as the person will still be working and that would cover his day to day life expenses.

marathonic

xmodz wrote: »

The £500,000 investments option i said took into consideration none of the money would be needed to be spent as the person will still be working and that would cover his day to day life expenses.

Yes, but the main purpose of cash in any portfolio is to cover loss of job if that job loss happened to occur at a stock market low.

For example, your £300,000 portfolio could drop to be worth £150,000 (as it did on the run-up to 2009) and, at that point, you could lose your job.

You really don't want to be forced into selling shares that have just dropped by half in order to cover living expenses.

That's the reason I put a bit more analysis into my post above with regards to dividends and rental profits.

Glen_Clark

Totton wrote: »

What a great position to be in - I think that I would consider a bunch of Investment Trusts

Why Investment Trusts?
With £500k you could hold 50 shares x £10k each for less charges, and stay in control.
50 shares seems more than enough diversification to me.
More diversification still doesn't stop you losing money if the market falls.

Perelandra

I would give it to Perelandra... very nice chap.

cepheus

It's impossible to provide an informed view without more information. Important factors will be how much you've already got got tied up in property, type of pension contributions if any, your present job security and responsibilities, income and tax situation.

lippy1923

Whoa, why has nobody mentioned holidays, exploring the world... Invest a small portion in you! Maybe 5% on luxuries.

I would kick myself if I invested/ saved everything, only to get hit by a bus and not enjoy any of it.

Very nice position to be in. Enjoy it.