£100,000 to invest to generate income and maintain value in real terms.

GTG

I'm looking for the safest investment possible that would not tie up the money for more than 1 year but would be prepared to consider 3 to 5 years if necessary.

Is there such an investment?

Thanks.

sparklymessygirl

Hi there,

I must admit I don't know much about this area but perhaps you could look at the National Savings and Investments website and read about the different types of bonds? I do think that you would probably be looking at tying up your money for 5 years or so

Sparkly

debbie42

GTG wrote: »

I'm looking for the safest investment possible that would not tie up the money for more than 1 year but would be prepared to consider 3 to 5 years if necessary.

Is there such an investment?

I wouldn't have thought so, not for one year, anyway. If you find one I'd like to know about it! Even 3 to 5 years is considered short term, in the investment market, I think.

If you need to access the money within the year, then I'd look into the highest interest paying account for the cash.

dunstonh

Many modern investments are open ended and die not have a tie in. You can withdraw and get the money within 2 weeks. However, investments typically mean you are looking at things which can go down as well as up and its better to consider a term of at least 5 years.

So, if its just a case of need access just in case, there are options. If it is a case that you will need the money in 3 years then your options are very limited.

jamesd

For safest use four different savings accounts.

For investments rather than savings or UK government bonds you will need to take a risk of having a year with some drop in value. If your one year is only because you're used to bank savings bonds with one year fixed term and you don't want to give long notice to take some money out, but you can leave the money invested, then you can consider funds in various sectors because you will be able to leave the money invested until the market has had some time to recover from a drop.

At modest, not low, risk you might consider a mixture of UK corporate bonds and UK equity income fund. For 100,000 you'd really be better served with 15 or so different funds across a range of sectors with different amounts in each to set the risk level. A few thousand pounds in an emerging market fund isn't excessive out of 100,000 provided you don't mind some up and down movement, even though it is speculative (above high) risk on its own.

In a mixture like this you'd arrange to have investments close to cash - corporate bonds, say - to cover whatever short-notice need you may have for six months to a year or so, while the rest could be spread around more.

If you're looking to retain the capital value long term - decades - and draw an income than you'll need equity funds. Otherwise inflation will rapidly reduce the capital value and available income.

If it's the proceeds from a house sale and you're looking to buy in a year, forget this and stick the money in the savings accounts.

What is the money going to be used for?

GTG

Thanks for the replies.

jamesd wrote:

"If it's the proceeds from a house sale and you're looking to buy in a year, forget this and stick the money in the savings accounts."

You were nearly right, it will be the proceeds of a property sale and I am keen to re-invest in property. The Uk market being as it is I was thinking about where to put the monies until things turn favourable again. Having said that I'm beginning to think that may be a long time for most parts of the Uk so may look to purchase overseas or perhaps in parts of Scotland where yields are good.

I remember a friend invested in lump sum in a Prudential with profits bond about six years ago and was taking an income of 7%. There were penalties for withdrawing before 5 years but recall that in the early years his capital was been eroded because of the poor performance of the stock market. Since then the market improved and I remember him saying (before he moved away from the area last year) that the value of his fund had grown to well above his original deposit. It sounded a bit unrealistic to me considering he had been taking 7% as an income. Can anyone confirm that this would have been correct and do the Pru still offer this investment.

Thanks

dunstonh

I remember a friend invested in lump sum in a Prudential with profits bond about six years ago and was taking an income of 7%. There were penalties for withdrawing before 5 years but recall that in the early years his capital was been eroded because of the poor performance of the stock market. Since then the market improved and I remember him saying (before he moved away from the area last year) that the value of his fund had grown to well above his original deposit. It sounded a bit unrealistic to me considering he had been taking 7% as an income. Can anyone confirm that this would have been correct and do the Pru still offer this investment.

I have a couple of Pru bonds on the books still and those from that time are just about running in double figures p.a. in his case, taking 7% would see the capital just about running a small surplus.

They still offer this but its a niche investment and there are a lot better options available today.

EdInvestor

A WP bond - or indeed any other WP investment whether endowment, pension or annuity - is certainly by no means a safe investment as many know to their cost.

It may be worth mentioning that the Prudential was the ONLY life company that managed its WP fund anywhere near properly over the last decade,generating a return which approximated to the original promise.

Shortfalls are the name of the game elsewhere.

GTG

dunstonh wrote: »

I have a couple of Pru bonds on the books still and those from that time are just about running in double figures p.a. in his case, taking 7% would see the capital just about running a small surplus.

They still offer this but its a niche investment and there are a lot better options available today.

Thanks, I had a feeling that he was exagerating a tad, so to maintain the value of his capital he would have been best to have been taking about 4 to 5% income assuming the CPI was between 2 and 3% during this period.

GTG

EdInvestor wrote: »

A WP bond - or indeed any other WP investment whether endowment, pension or annuity - is certainly by no means a safe investment as many know to their cost.

It may be worth mentioning that the Prudential was the ONLY life company that managed its WP fund anywhere near properly over the last decade,generating a return which approximated to the original promise.

Shortfalls are the name of the game elsewhere.

Yeah but was n't alot of people miss-sold WP products on the projected returns akin to what was the norm in the days of rampant inflation, or am I mixing this up with pension miss-selling?

EdInvestor

GTG wrote: »

Yeah but was n't alot of people miss-sold WP products on the projected returns akin to what was the norm in the days of rampant inflation, or am I mixing this up with pension miss-selling?

Misselling is related to your attitude to risk, not to the performance of the investment.Most people missold WP products of all kinds were risk averse and were wrongly told the products were safe.