120k - house or some sort of stock market investment?

jimjames

mike88 wrote: »

A house can give you a good rental return and is an appreciating asset. Stock market investments can and do fall. Remember the FTSE peaked in December 1999 so an investment made then in a Tracker for example would 14 years later have lost money.

Just to correct a couple of incorrect statements here:

1) There have certainly been stock market falls but you are ignoring property price falls. In many areas of the UK property prices are still lower than 2007 so not always an appreciating asset. From the crash in 1989 it took over 10 years for property prices to regain their previous highs.

2) Although the capital value of the FTSE currently below the level at the end of 1999, you are forgetting dividends. With those you are actually 60% up regardless of the actual index value.

3) A good investment portfolio would not be entirely focused on the FTSE but spread across worldwide - many of those markets are substantially higher than in 1999.

4) Income from shares is tax free inside an ISA. Rental income is taxed at your normal rate subject to expenses.

5) You can sell part of an investment - you can't easily sell part of a house if you need to raise £5k for something.

I have BTL property as well as equity investments but you need to be able to weigh up both sides. I'd just make sure you are fully aware of the positives and negatives of both options.

Unlike tenants, shares don't generate phone calls at 9am on Sunday morning saying that they have no hot water and it needs fixing. You either need a good tradesman available on call or to be DIY capable yourself - but my investments were certainly less hassle for me today than trying to fix a hot water problem.

binka

I am worried that now may not be the best time to invest in the stock market.

jimjames

binka wrote: »

I am worried that now may not be the best time to invest in the stock market.

Who knows!

But you wouldn't be investing all now. If you put in £11k each now and more in April that's already spread it. Then more the year after and you're feeding it in over time.

Personally I don't feel the market is overvalued but that's just my opinion. You shouldn't always put everything in UK anyway and other markets are lower than they have been.

kidmugsy

binka wrote: »

I am worried that now may not be the best time to invest in the stock market.

The main risk may be rising interest rates. But what do you suppose they'll do to house prices?

By the by, do consider spending the money on your own pleasures. For instance, would you like to move into a better house yourselves?

binka

Not bothered about moving house but it would be nice to be able to spend 1k a year roughly on a holiday. Don't want to fritter the capital away but we've just done camping for years and I'm realising that life's too short to keep putting stuff off/saving all the time.

jamesd

Which stock market are you worried about investing in? Lots of different ones. US is at quite high values, UK is OK but heading that way. Europe in general is below long term averages and lots of managers with flexibility have been moving into it.

There are also commercial property funds and a range of other investments.

BTL property can be OK to good but in general the way to do it is with a mortgage and several properties. Mortgage interest used to fund a property is an expense that can be deducted from rental income for income tax, up to the value of the property at the time it entered the letting business. Since you have a low mortgage on your own property the cheapest way to fund this would be to increase the mortgage on your own place and use that for the funding.

If viable what I'd consider doing is using mortgage(s) and acquiring perhaps three different properties. That way you'll get the tax break and the diversification of properties so you probably won't have voids for them all at the same time.

Does the inherited house have emotional value for anyone else? Might be best to let them have it if it has less value for you and they want it, then they can raise the mortgage to buy you out and you can purchase a property without emotional encumbrance.

atush

binka wrote: »

I am worried that now may not be the best time to invest in the stock market.

Pay in monthly. Look up Pound cost averaging.

kidmugsy

binka wrote: »

Not bothered about moving house but it would be nice to be able to spend 1k a year roughly on a holiday. Don't want to fritter the capital away but we've just done camping for years and I'm realising that life's too short to keep putting stuff off/saving all the time.

We've enjoyed camping in the past - Normandy, Brittany, in summer. But the holiday that was a revelation to us was to go and get some winter sunshine for a week. We went to Madeira in early January, just as the prices fell after Xmas-New Year. Marvellous - we repeated it twice. We've also particularly enjoyed Tuscany in September and in May. And Venice in May. As long as you avoid the school holidays none of these need cost a fortune, and you can afford decent hotels.

DonM

My first concern would be for your husband and his lack of retirement plans.
As for investment options the house offering approx 5% yield is a high risk option for the return. By the same token putting all the money in the stock market could be construed as equally high risk especially at current levels. To reduce risk consider drip feeding the money into a diversified portfolio (across asset classes - shares, commodities, land etc - and regions). Consider using top managed funds as well as trackers (investments that track the market) because the fees can be worthwhile. Always consider net return and volatility.

Although you could look to do this yourself it may be worthwhile to seek professional advice.

atush

I agree, both of you should have pensions of some type- surely one of you has an employer who pays into a pension (given the law)?