£120k to Invest - I get to keep the Interest...

nonnatus

My Mum has moved in with me and my kids. It's a great arrangement for all concerned.


She's now sold her little Bungalow and has made a good amount of money. She's keeping £50k to play with, take some holidays and just spoil herself.


That leaves £120k to "save" (or invest) somewhere. She's happy for me to take charge of this (we've written Wills together to make things official and I have POA in place for the (hopefully far off) future). In return, she says I can keep any / all the interest that the money earns.


I DON'T want to risk losing any of the capital. I can't see that we will need to call on the money for at least 5 years, so it can happily be locked away. I'm self-employed and would love to spend time learning a bit about Proper Grown-Up investing - there was a 2-page article in the Daily Fail at the weekend about where best to Invest £100k and I found it really interesting but does anyone here have any suggestions for me?
I'm not going to be the next Warren Buffet but surely there are ways to make such a good Lump of Cash make a profit for me, even in the current climate...?


(I realise this thread follows on from the Troll who pretended to have £100k to invest and who promised it wasn't a joke, but this is genuine. I haven't got the patience or the memory to waste time starting fake, threads!!)

Lokolo

Without any investment risk? No.

Inflation is high (resonably) and interest rates are low. You can choose to either risk lowering the value of your money by putting it in cash, or risk the money on investments.

xylophone

"To take charge of" - does she mean that the money is to be saved or invested in her own name but that she will make you a gift of any interest earned?

A_Flock_Of_Sheep

You could do a completely radical thing and just donate it all to the poor and or/the Homeless?

Shelter or Crisis?

That then removes the headache/stress/confusion on what and how to do with it all leaving you to just get on with life with a warm glow inside knowing you have done a good deed. :T

ChesterDog

You won't make much money from it in savings - you need to invest it to do that.

On the other hand...

You won't lose any of it (except to inflation) in savings - you need to invest it to do that.

ChesterDog

Just an idea - this is broadly the way I like to do things myself:

You could put half into savings (pretty safe there).
Half into funds and trackers at the lower end of the risk spectrum.
Half into other investments like peer-to-peer, property (eg The Housecrowd, if you don't want to do the buy-to-let thing yourself), a little in premium bonds, and a little into funds or similar at a low-to-middling risk.

Edit: Hang on, how many halves did I just create? :-) Better call them thirds. You get the idea, though. I am, after all, just a dog.

Annisele

nonnatus wrote: »

I DON'T want to risk losing any of the capital.

In that case, you can't invest it. Sorry, but it's simply not possible to invest without any capital risk.

Even if you invest in a product with a 100% capital guarantee, you're still subject to counterparty risk (meaning that the entity providing the guarantee might go under). Counterparty risk bit a lot of people when Lehman Brothers was the counterparty...

The "take charge of" concerns me a little - whose money is this, and who will be paying the tax on any income/gains it makes?

dunstonh

I DON'T want to risk losing any of the capital.

Instead you are putting it at inflation risk and shortfall risk (of any future target). Cash avoids investment risk but is not actually risk free. It just has different risks. Risk is not on/off. It is a slding scale.

Effectively, if you dont want investment risk then you shouldnt invest. However, if you spend some time to understand investments and how they work, your views may change.

nonnatus

Hmmm. Thanks for all the thoughts.


Flock of Sheep - giving it away is a lovely idea, but it's not mine and now is not the right time to get all charitable.


ChesterDog, I like your thinking best and will research further the things that you say. I like the idea of splitting it up and doing different things with different bits of it.


Xylophone and Annisele - the money is all Mum's and will remain so, but she's giving me permission to play with it for her. I understand that the earnings will be taxable. As the money remains in her name, so the earnings will return to her and she will pay any tax due. The amount that's left over at the end of the year will be £XX. Mum will give me that same £XX as a "gift". Does that make more sense?


I'm off to Google Counterparty Risk...!

gt94sss2

nonnatus wrote: »

As the money remains in her name, so the earnings will return to her and she will pay any tax due. The amount that's left over at the end of the year will be £XX. Mum will give me that same £XX as a "gift". Does that make more sense?

Such 'gifts' may be liable to income/inheritance tax.

Does your mother 'understand' inflation and realise that over time, the original sum will be worth less and less in real terms?

Regards
Sunil

CLAPTON

nonnatus wrote: »

Hmmm. Thanks for all the thoughts.


Flock of Sheep - giving it away is a lovely idea, but it's not mine and now is not the right time to get all charitable.


ChesterDog, I like your thinking best and will research further the things that you say. I like the idea of splitting it up and doing different things with different bits of it.


Xylophone and Annisele - the money is all Mum's and will remain so, but she's giving me permission to play with it for her. I understand that the earnings will be taxable. As the money remains in her name, so the earnings will return to her and she will pay any tax due. The amount that's left over at the end of the year will be £XX. Mum will give me that same £XX as a "gift". Does that make more sense?


I'm off to Google Counterparty Risk...!

no it doesn't really make sense.

how old is your mum?

inflation varies but assume say 3%

in 10 years her money, if held in a savings account will have the purchasing power reduced by 30%
in 20 years her purchasing power will be reduced by 60%
is that acceptable to her?

so giving away the 'interest' is the same as giving away the capital

she should at least aim to maintain at least the purchasing power of her money before giving anything away i.e. 100,000 needs to grow to 103,000 after 1 year if inflation is 3% before gifts unless she accepts giving capital away

what makes sense depends a lot upon how old she is.