where best to invest £180,000?

neilsolaris

Hi,

I'm wondering if people could give their opinions on the best place for me to invest some cash please?

I have £180,000 to invest. I have £72,000 left on my mortgage, so I'm planning to pay that off in full, as I'm paying almost 4% on the mortgage, and I think I'll struggle to match that interest elsewhere. Do people agree with me that this is a good idea?

I'm almost at my ISA allowance for the year, so I can't invest much more there.

So that leaves me £108,000 to invest somewhere. I have a low-medium risk appetite. I'm thinking about mutual bond investment, would that be a good idea?

Any other suggestions?

Many thanks for your help.

Archi_Bald

When do you need the money? What are your pension arrangements? What tax band are you in, how old are you? What is any financial dependents do you have? What is your emergency cash fund, relative to your salary?

kidmugsy

neilsolaris wrote: »

I have £180,000 to invest. I have £72,000 left on my mortgage, so I'm planning to pay that off in full, as I'm paying almost 4% on the mortgage, and I think I'll struggle to match that interest elsewhere. Do people agree with me that this is a good idea?

It is a good idea, given that you "have a low-medium risk appetite".

neilsolaris wrote: »

I'm almost at my ISA allowance for the year, so I can't invest much more there.

So that leaves me £108,000 to invest somewhere. I have a low-medium risk appetite. I'm thinking about mutual bond investment, would that be a good idea?

If by that you mean an insurance bond, then in your shoes I wouldn't. You can probably get a roughly equally conservative investment at lower cost and with greater flexibility. How about putting as much as you can into interest-bearing current accounts at TSB, Nationwide, Lloyds, Santander etc? Then you could plunk the rest into a couple of investment companies whose priority is to preserve your capital and only then to grow it.
Ruffer Investment Company.
Personal Assets Trust.

But if you expect to spend a lot of that £108k within, say, the next five years, then shares probably aren't the way to go. And nor is an insurance bond.

dunstonh

I have a low-medium risk appetite.

What does that mean in context? One persons low-medium is another persons low or high.

I'm thinking about mutual bond investment, would that be a good idea?

Almost certainly not unless you are a higher rate taxpayer who will become a basic rate taxpayer in the future. What is it about that tax wrapper that makes you think that is better than unwrapped investments? (and one assumes you would use the ISA allowance each year too - although you havent mentioned it)

neilsolaris

Archi_Bald wrote: »

When do you need the money? What are your pension arrangements? What tax band are you in, how old are you? What is any financial dependents do you have? What is your emergency cash fund, relative to your salary?

Thanks for your help. I don't know exactly when I need the money. Possibly when I decide to move house and want to upgrade, which could be late 2015.

I'm currently a basic rate tax payer, but from next tax year I will be higher rate tax payer, for between 1-3 years, depending how long I stay in the job.

I'm 42 years old, with no dependents. I'm not sure what my emergency cash fund is. There's about £22,000 in my ISA, which could be used in an emergency.

Linton

Before identifying the "best" investment you need to decide what you want the money for, how much you will want, and when. If you dont know there is no "best". Note that you dont have to do the same thing with the entire pot, it may be helpful to split it up in your mind.

With that knowledge you can begin to think about risk. So for example..

1) You must buy a house in 2 years time, you already have sufficient money. The risk is that you dont have the money in 2 years time.

Under those circumstances the "best" would presumably be one that guarantees the money would be available in 2 years time. The return is a minor consideration. So go for accounts spread across a number of the major banks.

2) You would very much like to retire in 20 years time, but could carry on working if absolutely necessary. You certainly couldnt afford to retire now. The risk is that you have insufficient money to retire in 20 years time.

The fact that your money is "safe" is probably less important than the accumulation of extra money which must certainly exceed inflation.
Here "best" must include share investments which over a period of 20 years is almost certain to provide a reasonable return but could include investments to safeguard some of your wealth at the expense of return if the maths works out right. Bank interest on its own would fail to provide the extra money you need.

Once you have decided how much of each sort of investment is required you can then work out how to hold it. For example if you dont actually need much bank interest but do need share investment convert your cash ISAs into S&S/NISAs. Most money for retirement is probably best held in a pension.

neilsolaris

dunstonh wrote: »

What does that mean in context? One persons low-medium is another persons low or high.

I don't know how to answer that question really. I just don't want to lose too much of my capital, that's all. But I want a better return than a risk free investment, and I feel if I leave my money in a bank account the capital will get eroded due to inflation.



Almost certainly not unless you are a higher rate taxpayer who will become a basic rate taxpayer in the future. What is it about that tax wrapper that makes you think that is better than unwrapped investments? (and one assumes you would use the ISA allowance each year too - although you havent mentioned it)

I haven't decided whether I'd like to keep using my ISA allowance. That pretty much depends on the advice here. I'm not sure what you mean by tax wrap.

Ryan_Futuristics

Certainly pay off the loan and any debts ... I'd agree putting as much as you can in high-rate savings accounts ... Bond funds would normally be a good idea, but with interest rates rising next year, you're likely to take a hit to capital

I think P2P lending could be a very useful new asset class (with bonds looking unappealing at present) - I may move as much as 10% of my portfolio into Funding Circle (using Autobid, investing no more than 1% into any one company, to spread out risk ... My returns after bad debt and fees are estimated 7%)

With half your money in relatively safe/stable assets, I'd be inclined to allocate a portion to a good equity income fund (my no-brainer investment fund for the UK is Woodford Equity Income - where you'll get 4% returns paid back quarterly, and the potential for long-term capital growth far exceeding other investments) ... With 25% of your investment in shares, a worst case scenario (of the market crashing and your shares halving in value) wouldn't be a huge loss, and markets rarely stay down for long (so just avoid the mistake of selling and think of it as a long-term investment which provides a steady income) ... But if you're unsure, an independent financial advisor would be sensible with that kind of money

neilsolaris

Linton wrote: »

Before identifying the "best" investment you need to decide what you want the money for, how much you will want, and when. If you dont know there is no "best". Note that you dont have to do the same thing with the entire pot, it may be helpful to split it up in your mind.

With that knowledge you can begin to think about risk. So for example..

1) You must buy a house in 2 years time, you already have sufficient money. The risk is that you dont have the money in 2 years time.

Under those circumstances the "best" would presumably be one that guarantees the money would be available in 2 years time. The return is a minor consideration. So go for accounts spread across a number of the major banks.

2) You would very much like to retire in 20 years time, but could carry on working if absolutely necessary. You certainly couldnt afford to retire now. The risk is that you have insufficient money to retire in 20 years time.

The fact that your money is "safe" is probably less important than the accumulation of extra money which must certainly exceed inflation.
Here "best" must include share investments which over a period of 20 years is almost certain to provide a reasonable return but could include investments to safeguard some of your wealth at the expense of return if the maths works out right. Bank interest on its own would fail to provide the extra money you need.

Once you have decided how much of each sort of investment is required you can then work out how to hold it. For example if you dont actually need much bank interest but do need share investment convert your cash ISAs into S&S/NISAs. Most money for retirement is probably best held in a pension.

Thanks Linton, that clarifies it a lot. I currently don't have any sort of pension, so that's something I'd like to look into. I formed the impression that I'd maybe left it too late though. I'm 42. What do you think?

neilsolaris

Ryan_Futuristics wrote: »

Certainly pay off the loan and any debts ... I'd agree putting as much as you can in high-rate savings accounts ... Bond funds would normally be a good idea, but with interest rates rising next year, you're likely to take a hit to capital

I think P2P lending could be a very useful new asset class (with bonds looking unappealing at present) - I may move as much as 10% of my portfolio into Funding Circle (using Autobid, investing no more than 1% into any one company, to spread out risk ... My returns after bad debt and fees are estimated 7%)

With half your money in relatively safe/stable assets, I'd be inclined to allocate a portion to a good equity income fund (my no-brainer investment fund for the UK is Woodford Equity Income - where you'll get 4% returns paid back quarterly, and the potential for long-term capital growth far exceeding other investments) ... With 25% of your investment in shares, a worst case scenario (of the market crashing and your shares halving in value) wouldn't be a huge loss, and markets rarely stay down for long (so just avoid the mistake of selling and think of it as a long-term investment which provides a steady income) ... But if you're unsure, an independent financial advisor would be sensible with that kind of money

Thanks Ryan, that's really useful advice.

neilsolaris

By the way, I may have to go offline for a while, but I'll come back later. Sorry if there's a delay in replying to any of you.