Low risk investing for beginners

kate6000

Hi
We are in the position that due to husbands job we will be relocating.

We are thinking of selling our house as we do not want the responsibilities of renting the house out and we will also not be returning to the area we own our house in

However I am very concerned that when we come to buy another property in 8 years time (once husbands job has finished) the property market may have overtaken us

We will have roughly 135k from the house sale and another 20k we have currently in cash ISAs which is our emergency fund

I have been doing lots of reading and realise that the investment choice will very much be driven by our choice of risk

As we will need the money in 8 years’ time I would say we require a low risk route however I am unsure what our options are

It would be frustrating to be limited to regular savers/cash ISAs as their return is so low I know we wouldn’t keep up with any increases in the housing market

What would you do if you were in this situation?

Kate

Linton

If you dont want any serious risk of being down over 8 years I suggest something like 70-90% of your money in cash savings and the rest in perhaps a global tracker fund. The interest on the cash should pay for any reasonably possible loss on the global tracker, and the chances are over 8 years that the global tracker would be well in profit. And if the world economy and thus the global tracker really crashes there would be a good chance of house prices falling as well.

JohnRo

It will be well worth exploring the option of looking at interest rates, ditching the cash ISA accounts, putting the money instead into as many high interest current accounts as you can.
It might sound like one almighty faff (it is initially) but the rate differential is significant and if you need the money in eight years anyway it's not likely to matter at that point whether it's ISA wrapped or not.

mad_rich

JohnRo wrote: »

putting the money instead into as many high interest current accounts as you can.

With £135k? For someone who will be living abroad? For eight years?

Certainly possible, but it wouldn't be my first port of call for the OP.

OP - if you just want to 'stay in the property market' then you could look at Real Estate Investment Trusts (REITs). Most would advise you not to stick all your eggs in one basket, but that's exactly what you'd be doing if you held on to the house anyway.

(The housing market may crash in the coming eight years, of course, meaning your investment has lost money but the theory is that you wouldn't mind because the property you will come to purchase will have crashed equally. In reality, you might find it a bit galling!)

Why is it you don't want to let the existing property? If it's the faff factor, I know plenty of people who use agents for that sort of thing. Reduces your yield obviously, but makes it a lot easier. I can see why you wouldn't want the responsibility though.

JohnRo

mad_rich wrote: »

..For someone who will be living abroad?

Where is that mentioned?

mad_rich wrote: »

...if you just want to 'stay in the property market' then you could look at Real Estate Investment Trusts (REITs).

equating resindential bricks and mortar with a REIT is flawed, not to mention relatively high risk.

mad_rich

JohnRo wrote: »

Where is that mentioned?

You're right. I completely imagined that bit!

kate6000

Hi All
Thanks for the replys


We would not be moving abroad, just in the UK


The reason we don't want to rent the property out is due to the faff. We renovated the house ourselves so don't think we could handle seeing someone trash the place and not care for it like we would. Also its not really in a desirable rental location


Another factor that has just come to mind which I hadn't thought about would be our living expenses. We currently pay £650 mortgage a month and also overpay by £450. If we sold this would no longer be an expense and our rental property would be less than £100 a month so in theory we would be able to save £12k a year that we currently can't


Not really sure if that changes matters


K

xylophone

Make maximum use of high interest current accounts?

One Flexdirect joint and one sole each.

One TSB joint and one sole each.

One Club Lloyds joint and one sole each

One Santander joint and one sole each

One Tesco joint and two sole each

Tesco savers as well if you need DDs.

Three BOS sole each and a joint

Remember cycling round money as required.

Consider a stocks and shares isa each - Acc version of an equity income fund should be fairly steady.

http://monevator.com/compare-uk-cheapest-online-brokers/

kidmugsy

There are ways of investing in housing using ISAs. One is a company called Grainger that lets properties largely (only?) in England and Germany. There are also two outfits mentioned here.
http://www.telegraph.co.uk/finance/personalfinance/investing/9907051/A-buy-to-let-income-without-being-a-landlord.html

And another one here
https://www.lovemoney.com/news/39814/how-to-put-buytolet-property-into-your-pension

Googling may find others.

Personally I'd be in no hurry. I assume that the next government will be Labour, and under its present leader it could prove quite capable of fouling up the rented housing market. Anyone old enough to remember the consequences of the old Rent Act will shiver at the prospect.