Advice re short term investment of funds

annie42

I have 65k to invest for a maximum of six months. I have a Santander 123 account so I can get 3% on 20k of it but would welcome advice on where to put the remainder.

Archi_Bald

Investing is for 5+ years. 6 months is saving.

Don't expect to get rich as the max you could make on £65K over 6 months if you got 3% AER is about £780 after BR tax. Unfortunately, you won't be able to get 3% on the lot unless you have a partner who you can trust with up to half of your money. If both of you have perfect credit histories, if both of you can afford several searches on your CRA files, and if both of you can get to grips with multi-accounting, it is possible (tons of information about multi-accounting on the forum). If not, then look at the NS&I or various building society offerings which would pay you token interest.

annie42

Many thanks. I did wonder about premium bonds but they don't seem to be as attractive as they used to be.

bowlhead99

They were never that attractive anyway - it's not like they gave a return double the rates of conventional savings. The interest rates have simply fallen in line with the market. At the same time, the contribution limits on other tax advantaged accounts (e.g. cash ISAs) have tripled since 2010 while the limit on PBs has gone up relatively less.

The real change to the attractiveness of PBs comes from the fact that everyone has the internet now and can compare savings accounts and ISAs and current accounts and government schemes such as PBs in the blink of an eye. You can easily see that if you have 1 x £1 premium bond it will only win once in 26,000 months and when it does, the prize is extraordinarily likely to be the lowest prize possible, i.e. £25. You have to wait to win 930,000 prizes (at one every 26,000 months) to 'expect' to win the jackpot. And only by winning the jackpot (anticipated once every 24.2 billion months) would you be expected to hit the headline return of 1.35% per year. Even if you have £1000 in premium bonds instead of £1, the expected win during a calendar year, is zero. You need tens of thousands of them to hit prizes properly regularly.

Whereas in the 'olden days' people thought PBs were a good wheeze. Partially because the rates were a bit higher (because bank base rates were not on the floor) but mostly because they didn't have so many comparison sites telling them about other opportunities, and they had heard that a friend of a friend's auntie had a nice win on the PBs so they would like to have a go on that, because it was tax free. In truth it was not an inflation busting investment.

When Archi is talking about using NS&I, I assume he's talking about the monthly investment bonds that actually pay interest at 1.26% AER, rather than PBs where any interest is just put in a pot and gambled. It is a hassle free way of investing your remaining £45k. Obviously if you have not already maxed out the various 3%, 4%, 5% current accounts from other banks and building societies alongside your Santander account, it could be worth doing all them to make a few hundred quid more than NS&I, it depends how much work you want to put into it.

MrTotoro

I think fundamentally what your trying to achieve is a bit flawed, better off sticking it in a decent cash savings account and doing something more useful with your time.

Other option is to take more risk, buy some individual shares, but with a 6 month time frame I do not recommend this.

Or accept that you will need to hold for a longer period than that.

James

annie42

Apologies for not thanking you for taking to the time to reply. I was overtaken by family matters.