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

missile

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.

I took out a Norwich Union WP bond for 100K in Jan 2002 taking 7.5% per annum and @ Jan 2007 value had recovered to my initial investment. I am pleased with that performance as it did rather better than most of my other investments over that period.

jamesd

GTG, it does sound as though bank deposits are most suitable, at least for the amount needed for a deposit on a single property.

For money beyond that your problem with market-related investments is that there could be a market drop of 20%+ at any time and you'd have to be willing to either accept that and take the money or stick with it through the recovery and that could take 1-5 years.

High yield bonds have a reasonable yield but interest rates are rising and that's hurting the capital, so they aren't a particularly good option at the moment. Bond funds are also becoming more cautious about the possibility of bad loans and are switching away from the highest yielding bonds.

Commercial property that holds real property is more interesting, perhaps, but the commercial property funds have seen a big money influx and aren't necessarily going to yield more than a savings account - and might yield less.

You could look at global high yield bonds or UK equity income or UK absolute return funds as more volatile but still not hugely volatile options.

You could probably limit yourself to no more than a 10% or so downside with a mixture of those things, but 20% is more realistic and might get you 10%+ a year total return. That's not an unreasonable risk for your 3-5 year timescale because the returns should shield you from the drop after a couple of years... but still, there's a risk that they won't.

Now it's really up to you to form your own view about the merits of the potential returns higher than savings accounts and yielding more than residential property does in much of the UK (but not geared...) and decide if the risk of delaying your property buying is worth taking.

GTG

jamesd wrote: »

GTG, it does sound as though bank deposits are most suitable, at least for the amount needed for a deposit on a single property.

For money beyond that your problem with market-related investments is that there could be a market drop of 20%+ at any time and you'd have to be willing to either accept that and take the money or stick with it through the recovery and that could take 1-5 years.

High yield bonds have a reasonable yield but interest rates are rising and that's hurting the capital, so they aren't a particularly good option at the moment. Bond funds are also becoming more cautious about the possibility of bad loans and are switching away from the highest yielding bonds.

Commercial property that holds real property is more interesting, perhaps, but the commercial property funds have seen a big money influx and aren't necessarily going to yield more than a savings account - and might yield less.

You could look at global high yield bonds or UK equity income or UK absolute return funds as more volatile but still not hugely volatile options.

You could probably limit yourself to no more than a 10% or so downside with a mixture of those things, but 20% is more realistic and might get you 10%+ a year total return. That's not an unreasonable risk for your 3-5 year timescale because the returns should shield you from the drop after a couple of years... but still, there's a risk that they won't.

Now it's really up to you to form your own view about the merits of the potential returns higher than savings accounts and yielding more than residential property does in much of the UK (but not geared...) and decide if the risk of delaying your property buying is worth taking.

That's an excellent reply, just for me to decide now. Having said that I'm now researching investing in residential property overseas and particular in Panama city. I am a great fan of property because of the effects of gearing on the investment.

Thanks again.

EdInvestor

missile wrote: »

I took out a Norwich Union WP bond for 100K in Jan 2002 taking 7.5% per annum and @ Jan 2007 value had recovered to my initial investment.

Your capital should show considerable improvement over the period - mine is up 50% for a portfolio of a similar risk level taking a similar income.

For your equities, you might like to take a look at the HYP concept:

http://www.fool.co.uk/specials/2006/specials060208.htm

Getting rid of the charges and taxes levied by investment bonds makes a big difference.:

dunstonh

Your capital should show considerable improvement over the period - mine is up 50% for a portfolio of a similar risk level taking a similar income.

You are not comparing like for like. The NU portfolio bond had a guarantee of capital and that period had a special offer of no MVR after 5th anniversary.

Getting rid of the charges and taxes levied by investment bonds makes a big difference.:

The NU portfolio bond is one of the lowest charged bonds you can get. Even on maximum commission taken, there would be no initial charge and a reduction in yield over 10 years of 1%.

As usual, not saying whether the bond is right or wrong but just pointing out the inaccurate information.

jamesd

EdInvestor, you've determined that missile is not a higher rate tax payer, won't have a taxable income over 20,000 in retirement and doesn't have any need to shield the income from benefits or care fees, right? Any of those can make the investment bonds a better idea and places like Hargreaves Lansdown or undoubteldy quite a few other IFAs have eminently reasonable charges.

missile

I am not suggesting WP bonds, were a good investment then or now. However, IMHO, Norwich Union WP did reasonably well during 2002-7 and better than any of my investments linked to stocks during the same 5 year period.