worthwhile SAFE investments

lisashaw_2

Hi, i am about to come into a huge chunk of money and am wondering what is the best investment for my money. Ideally something that will grow for my children inlater years when i have gone?

Thanks

jimjames

By putting the word SAFE in capitals do you mean that you only want suggestions for bank accounts where your capital is guaranteed?

If so then you will also pretty much guarantee that the spending power of that money in the future will be less and it will be eaten up by inflation. Your £100 will still be £100 but will only buy as much as £50 would do now for example.

You might want to consider what you really mean by safe.

Voyager2002

There is no such thing as an investment that is absolutely safe, yet maintains or increases the value of your money. The solution is make a fairly large number of different investments: the likelihood is that while a few will fail, most will succeed and earn enough to cover your losses from those that fail with a good deal more on top.

lisashaw_2

i just meant that i dont want stocks and shares as an investment, something that i will lose a fair chunk...something where i can gain throughinterest etc...or am i deluded?

Linton

Three questions......

What do you mean by safe?

a) Never decrease in £ terms

You are not going to do much better than a bank deposit account which may not keep pace with inflation, especially after the income tax on the interest.

b) May fluctuate perhaps by say 20% but, barring global armageddon wont lose money in the long term.

A portfolio of cautious funds investing in large companies and low risk bonds. Should beat inflation over the long term - say an average of 5% growth.

c) Wont lose all the money but may fluctuate considerably in the short term

Any normal fund will invest in a large number of companies, possibly world wide. The chance of them all failing is pretty close to zero, barring of course end of the world scenarios. Some higher risk funds I have held for the past 10+ years show an average 10%-15% annual growth. They typically dropped by 50% during the credit crunch but are now 50% above their highest value pre 2008.

Whats your timescale?

How long are you planning to stay around? If its 5-10 years then option (b) could be appropriate. If its less than 5 years then option (a) is best. The longer the time scale the more it makes sense to go for option (c).

How much money?

If you are talking about a sum > £50K you should consider advice from a local IFA, perhaps > £500K I would be considering advice from specialists.

These are my views, others may disagree. Any numbers given are to suggest orders of magnitude, rather than to be taken as gospel.

dunstonh

Every single option carries risk. The key risks are as follows:
1 - investment risk,
2 - shortfall risk (need an amount by a date and the risk of not achieving that)
3 - inflation risk (are returns keeping up with inflation and giving you growth)
4 - provider risk (important with savings, less so with unit linked investments but important with guaranteed style investments)
5 - legislation risk (will Government change rules)

You may consider savings "safe" but savings can suffer risk 2, 3, 4 and 5. Not much you can do about 5 most of the time but 2 & 3 are key.

Cash can be safe for short timescales but becomes increasingly risky for longer timescales.

i just meant that i dont want stocks and shares as an investment, something that i will lose a fair chunk...something where i can gain throughinterest etc...or am i deluded?

You need to think about risk more. If your timescale is long term then cash savings gets increasingly risky as it is eroded by inflation and interest rates barely keep up. £100,000 will be worth around £60,000 in ten years time in real terms. Savings rates will go some way to get it to around £90,000 in spending power. So, your "safe" option will likely see it lose money in real terms.

Risk is not on/off. It is a sliding scale. If we used a risk scale of 1-10 for conventional options (so any unusual, unregulated or weird options are above 10), you are saying you want every penny to be at level 1. That is a very unusual position for someone to take and one where inflation risk is going to hit. You dont need to jump to risk 10 or beyond. You can find a sensible level in between.

atush

lisashaw wrote: »

i just meant that i dont want stocks and shares as an investment, something that i will lose a fair chunk...something where i can gain throughinterest etc...or am i deluded?

yes, you are deluded, in that SOME of the money (not all) should be in equities if this investment is meant to be a long term one.

kidmugsy

1 Think this over http://earlyretirementextreme.com/wiki/index.php?title=Permanent_Portfolio

If you find the idea of executing that yourself intimidating, consider
2 Ruffer Investment Company.
3 Personal Assets Trust

Also, it's worth considering an investment that didn't exist when first Harry Browne wrote about such matters
4 Index-linked gilts.

Whatever you do
(i) Diversify across different sorts of investments, and
(ii) Use tax shelters, and
(iii) Honour the investment protection limits: £85k for bank accounts, £50k for share and bond accounts.

If you buy gilts direct from the government ("DMO") then your protection is as complete as you are likely to get in Britain. Similarly savings at ns&i are secure. You might, though, want to put some of your investment overseas: for a British voter, is Switzerland likely to be safer than the UK? I don't know.