investments for a 67 yr old

francohoops

Hi
My father is 67 and is retired. He doesn’t have a personal pension and relies on property income and savings to fund his retirement. He is looking to branch out from savings accounts to something that will pay a higher rate of interest.
He won’t necessarily need the investment to provide an income – he’s more interested in capital growth over the next 3-5years.
Given his age he doesn’t want to take on too much risk – so I was thinking of a good quality bonds fund. Does anyone have any recommendations (asset type, or actual funds/investment).
He’d be looking to invest a lump sum and maybe top up monthly or quarterly. Also, I’m wary of charges eating into returns. He doesn’t have a stock & shares ISA so it’d be good to use that to protect his returns.
Thanks in advance
F

CLAPTON

generalising somewhat; bonds tend to increase in price when interest rates fall
and they tend to reduce in price when interest rates rise

BoE interest rate is currently 0.5%
would you expect the rate to rise or fall

Linton

In my view, 3-5 years is too small a time period to safely invest in anything for capital growth. Although individual bonds have a fixed return and a fixed maturity value bond funds dont. Their capital value depends on the current market value of the un-matured bonds they hold. Such values go up and down depending on economic conditions.

At 67, assuming he is in good health, he can expect to live another 20 or so years. So a 3-5 year time frame for all his investments doesnt make sense to me.

But is it sensible for him to invest at all? Does he have sufficient cash and income such that he can afford to take some risks? If not, in my view the furthest he could sensibly go is to put a relatively small amount into the corporate bonds occasionally available from major companies such as Tesco.

If it is sensible for him to invest at all he should use an S&S ISA. I suggest he invests in a relatively highly bond weighted broad equity and bond portfolio, perhaps 50% bonds. Assuming he is not interested in managing a portfolio himself he could use a general cautious managed fund, and/or a fund that balances a range of global equity and bond investments.

CLAPTON

Linton wrote: »

In my view, 3-5 years is too small a time period to safely invest in anything for capital growth. Although individual bonds have a fixed return and a fixed maturity value bond funds dont. Their capital value depends on the current market value of the un-matured bonds they hold. Such values go up and down depending on economic conditions.

At 67, assuming he is in good health, he can expect to live another 20 or so years. So a 3-5 year time frame for all his investments doesnt make sense to me.

But is it sensible for him to invest at all? Does he have sufficient cash and income such that he can afford to take some risks? If not, in my view the furthest he could sensibly go is to put a relatively small amount into the corporate bonds occasionally available from major companies such as Tesco.

If it is sensible for him to invest at all he should use an S&S ISA. I suggest he invests in a relatively highly bond weighted broad equity and bond portfolio, perhaps 50% bonds. Assuming he is not interested in managing a portfolio himself he could use a general cautious managed fund, and/or a fund that balances a range of global equity and bond investments.

why do you think that bonds will show capital appreciation?

Linton

CLAPTON wrote: »

why do you think that bonds will show capital appreciation?

They wont - its more about reducing risk using bonds over the long term as a proxy for cash with better interest rates and rebalancing included.

CLAPTON

Linton wrote: »

They wont - its more about reducing risk using bonds over the long term as a proxy for cash with better interest rates and rebalancing included.

surely if interest rates rise (a certainty over the medium term) then bond prices will fall?

Linton

CLAPTON wrote: »

surely if interest rates rise (a certainty over the medium term) then bond prices will fall?

In the short-medium term yes but would be compensated for by the interest and by increasing equity prices as the world economy recovers. Also the managed balanced funds may well be moving into shorter term bonds which are much less impacted by changing interest rates. Over the long term, especially if drip feeding, the short term wont make any real difference and the net result should be better than bank interest.

As with everything else its a balance between risk and return. I am assuming the the OPs father, not being an investor, would be rather risk averse and would not want to be invested in anything needing maintenance.

However as I said in my original post this is only relevent if the OPs father has spare cash to take some, hopefully short term, risk with.

francohoops

Thanks for your posts - he has the spare cash (c£20k), and is prepared to take on some risk - he is also not going to need the cash for a while (5 plus years). His health is not an issue.

He's got a good income - and is frustrated like many by the low interest rates. He owns a number of properties and has cash tied up in fixed term accounts.

I was thinking of opening a S&S ISA and splitting £20k across 4 funds - a FTSE tracker being one. It's the other investments I am struggling with. Any suggestions?

Also - any recs on best S&S ISA providers?
Thanks
F

C_Mababejive

If he has enough spare cash to get out there and enjoy life then a safe(r) haven could be a good quality well rated UK corporate bond fund held within an ISA..