Making the most of £60k

Greenstow

I've never earned or had much money and have little experience of saving so am after advice if possible.

I recently sold a small company I have run for 15 years. I have £60k profit from the sale. I'm on maternity leave and want that to last as long as possible.

I'm aware my post maternity earning potential won't be that great.

I feel like having this £60k is a once in a lifetime opportunity to get some security for my future and feel that you can make money if you have money! But I don't know where to start or how or what would be the best way to invest this money and make it grow.

What's the best way to get the biggest return? Who should i ask for advice?

Thanks in advance!!

inflationbuster

Well l invest my money in the stock markets to get a better return.

I don't mind telling you that l have £100K in the ISA and £200K in a trading account and have been investing the markets since 2008 but my views are my own and you should not act upon it without professional advice.

I'll explain my ISA stocks and shares account as that is what l recommend to friends and colleagues.

My ISA is setup as a growth portfolio so that means I've bought stocks in numerous FTSE100 and FTSE250 companies that pay a dividend (and must do to qualify in my portfolio) either every quarter or twice a year. The dividend is re-invested so the cash the company pays buys more shares in the company (in effect compounding). I get about £3000+ in dividends for my £100K's worth of investments, which is about 3.5x what my bank would pay before tax (it's actually a higher multiple than this because l have to pay 40% tax on savings).

£3000 is not brilliant but l hope for capital growth (share price rise) as well as dividend growth.

In your position, i'd probably leave £45K in a savings account and invest £15K in the stock market using an ISA and split the £15K into 5 dividend paying stocks from the FTSE100 and FTSE250. You could also investigate moving the £45K around to a number of saving accounts that pay a better return. Also consider if you have a mortgage to pay that down if possible assuming the interest is > 1%.

jamesd

The first thing to know is that savings accounts will lose you money due to inflation, because in general they do not pay as much as inflation. A few exceptions for regular saver accounts.

Next thing to know is that it's a common mistake to pay off a mortgage. Mortgage interest rates are normally lower than investment growth so paying off a mortgage makes you poorer than you could be.

Next, investment growth. The long term average growth of the UK stock market over the last hundred plus years has been a little over 5% plus inflation. Similar results can be obtained globally. This makes such investments the best long term and readily accessible investment option.

Since you are an inexperienced investor I suggest that you consider something like £50,000 in a global tracker fund like the one offered by Vanguard, about £10k in savings and current accounts for stability and very fast access. This assumes that growth long term is your objective and that you have no need for income. You can open a stocks and shares ISA account for this, also a fund and/or share account for the rest, then you can move it into the ISA over time.

You should be aware that a global or UK stock market tracker can be expected to drop by about 20% two or three times a decade and about 40-50% once or twice a decade. Think of it as a roller-coaster in reverse: upward trend but lots of ups and downs along the way. If you don't think that you can deal with such drops, say more about what drops you think you can handle so we can suggest alternatives.

You should also know that in the investing world bigger return means greater ups and downs. So it's a case of picking a mixture that you're comfortable with. If you really wanted greater returns you might add a global and/or UK smaller companies fund. That might drop by 60% in a bad year instead of 40% but would be expected to grow more over the long term.

If you want to take the time to learn more about investments and investing there's much more that can be written. At the moment I'm assuming that you probably don't want to do a lot of learning, so are after something simple that is still likely to work well.

edinburgher

and split the £15K into 5 dividend paying stocks from the FTSE100 and FTSE250

That's a terrible idea with a total lack of diversification for someone who does not appear to be an investor already.

Thankfully jamesd has dropped in with some practical suggestions (including learning) :T

inflationbuster

edinburgher wrote: »

That's a terrible idea with a total lack of diversification for someone who does not appear to be an investor already.

Thankfully jamesd has dropped in with some practical suggestions (including learning) :T

As opposed to stuffing £50,000 into a tracker? - you're having a laugh. That's putting most of the eggs into one basket.

Best thing for a newbie to do is start slowly and build an initial portfolio of stocks in an tax free wrapper & re-invest the dividends. You can always add new positions in the next tax year.

Avoid funds when you can easily manage your own stocks.

colsten

inflationbuster wrote: »

Avoid funds when you can easily manage your own stocks.

To suggest to an inexperienced investor to invest their £50K or £60K in shares is nothing short of totally irresponsible.

The point is that they will not know how to "easily manage their own stocks". They wouldn't even know where to find to financial data of companies, not to talk about how to interpret them, and how to monitor and react to developments in the companies. If you say none of this is necessary, you are a charlatan.

OP, jamesd has given you superb suggestions (as he usually does, check his other posts)

inflationbuster

colsten wrote: »

To suggest to an inexperienced investor to invest their £50K or £60K in shares is nothing short of totally irresponsible.

Where did l say that? Re-read what l said as if you can't understand then why bother commenting?

I said 15K in stocks as that's the maximum in one ISA year. £50K in a tracker is just bonkers.

colsten

Apologies, I didn't read your response properly, you are right. I have now, and it is even worse than I thought, as suggesting that investment decisions should be governed by the annual ISA limit is just plain irrational. Suggesting that anyone keeps £45K in savings accounts is madness, and to tell a newbie investor to pick 5 shares from the FTSE250 is - using your words now - just bonkers.

inflationbuster

FTSE100 and FTSE250 are good markets that provide global and UK exposure and no l didn't just say FTSE250 - again you mis-read.

It's not hard for *any* newbie to check companies listed on the FTSE 100 for example and attain global exposure. Pick 5 good quality stocks that cover different sectors and pay dividends.

I personally only pick stocks in the FTSE 100 and FTSE 250.

If l can do it anyone can.

AlanP_2

Out of interest inflationbuster have you compared the returns you achieve (after costs) with what you would have achieved using one of the Vanguard Life Style funds over the same period?

For the OP - I agree with others, to start with at least, use a low cost diversified fund if equity investing is what you wish to do as opposed to putting all your eggs into one basket.

Before making that decision though you need to consider what your objectives are and how this sum of money fits with where you are in your life and where things might go in the future.

For example Age, Mortgage, Pension arrangements, investment/savings time-scale (are you thinking 1, 3, 5, 10, 20+ years??) and other individual factors have a bearing.

Don't rush would be my immediate advice, taking a bit of time to get your thinking clear now could save a lot of grief down the line.

6022tivo

I have a similar amount to play with and I have been offered a house for £55k with reliable tenants paying £500 PCM.

Any reasons why this is a bad investment?