What would you do?

KGriff

brasso wrote: »

The people you describe sound as if they have total financial security for the present and for the future. Presuming that is/was their financial goal, why would they need to invest in anything at all that carried any risk? They have already reached their destination, I presume.

What seems to set this couple apart from most of us is that they have (I'm presuming) had relatively very large disposable incomes through their working lives. I'll presume they deserved their incomes and did everything legally so good luck to them. They've had enough disposable income over a long enough period to be able simply to stack up cash piles without incurring much risk. Most of us are not in that position, either because our earnings are low or (my case) it took me a while to realise that I needed to think about my retirement. It was only when I got to the age of about 40 and my salary allowed me to start putting money aside, that I got interested in investment because I calculated that simple cash savings wasn't going to cut it.

All that said, the original question was "What would you do with 40-50K with the view of making some income/investment?" which, to be honest, is not really relevant to your long description of this enviable couple's position. The "advice" given to the OP from 'TCOTP' was not, in my opinion, ideal, or certainly not without knowing much more about their circumstances.

The couple have always been extremely finically savvy (from their 30’s onwards at least).

The man received £59,000 in his late 30’s (from inheritance when his parents died).

The holiday bungalow by the sea was inherited when his wife's parents died and left the 'family home' to her and her sister.

The couples monthly income, from work (combined), was in the region of £4000 per month (net) in 2008.

The man received an annual 'christmas' bonus at work over his 30 years, which was in the region of £1000 annually, which he always used to pay the capital off his mortgage early. Remember house prices were a lot less in those days... I think his mortgage was in the region £30,000, but they added another 1/3rd deposit on top of that. They have lived in the same house for 30+ years.

They never took 'expensive' holidays, but enjoyed camping in the UK etc. with their children. They also would stay with her parents for holidays, in the bungalow by the sea.

When the man retired in 2009, he received £160,000 as a lump sum part of his final salary pension.

Dishonesty played absolutely no part in this couples investments, or life.

The point I think that TakeCareOfThePennies is stating, is that aggressive investment in stocks and shares ISA's is not always right for everyone and my postings here, were simply to help justify that position.

It does depend on people's position in life and shifting almost ALL the cash into stocks and shares ISA's is not for everyone.

This couple looked for a balance and opted to make cash ISA's a bit more of their priority, whilst taking a proportion of risk (both high and balanced) to build their retirement plan.

They were more aggressive in their earlier investing days (obviously), but as they moved towards retirement, I think they were completely justified to have changed their position, year or year, to a more balanced and cautious investment approach.

Finding the right balance is the issue, over a lifetime ... and I think where we have people here saying they cannot understand why people invest any more, in cash ISA's or that cash ISA's no longer have a role to play in today's saving and investment strategy, is not a view I agree with.

I think TakeCareOfThePennies is trying to highlight that point. Of course we all have different views over 'balancing' our investment strategies, we are all different, not least because we are probably at different places in the investment curve, but I simply cannot standby and watch people tip the scales completely towards a high risk strategy and rule out the cash ISA completely. That simply has to be wrong, judging by the true-life scenario in my earlier post.

KGriff

brasso wrote: »

All that said, the original question was "What would you do with 40-50K with the view of making some income/investment?" which, to be honest, is not really relevant to your long description of this enviable couple's position. The "advice" given to the OP from 'TCOTP' was not, in my opinion, ideal, or certainly not without knowing much more about their circumstances.

It is completely relevant brasso, because the advice I gave to tiamaria at the beginning of this thread is more or less identical to the advice given to the couple in my true-life scenario, when they were in their early thirties and by that I mean the 'principles' of the strategy not the actual savings accounts or investments obviously, because things have changed enormously over the years.

Others completely disagreed with some of the advice and opted to begin quite an overly-aggressive investment strategy by jumping in two feet first into the stock and shares world, with a majority of the 40-50K of tiamaria's hard earned cash.

Building a secure foundation first, has to hold priority is my view and it's also the mans view in the true-life scenario. The more aggressive stage of investing follows later before then moving back, year on year, to a balanced and more cautious approach to the point where tiamaria retires and lives happily ever after.

That is my view and I think the viewpoint of TakeCareOfThePennies unless I'm very much mistaken.

The approach certainly seemed to work well for the couple I mentioned, but I appreciate very much too, that everyone is different.

Advice is quite simply that and it is for others to see where that advice best fits their own world.

bowlhead99

KGriff wrote: »

....rather than choosing to save a majority of their money in cash ISA's, but this strategy is not for everyone.

...I can add, that they see their cash ISA money (£170,000) as being completely safe and despite them having a good income from their two final salary pensions and 10 year plans etc. they would never ever consider moving any part of that cash to their stocks and shares ISA and to be brutally honest, I don't blame them.

...but first they are aiming to get their cash ISA's to total £200,000 (£100,000 each) in the next couple of years

...I'm not saying this couple have an ideal scenario, but I really appreciate why they both now decline to move any more of their cash ISA money to stocks and share ISA's ...

...help show why some people have a difference of opinion, when it comes to cash ISA's and why I do not think that cash ISA's are dead for everyone.

KGriff wrote: »

The point I think that TakeCareOfThePennies is stating, is that aggressive investment in stocks and shares ISA's is not always right for everyone and my postings here, were simply to help justify that position.

... and I think where we have people here saying they cannot understand why people invest any more, in cash ISA's or that cash ISA's no longer have a role to play in today's saving and investment strategy, is not a view I agree with.

...I simply cannot standby and watch people tip the scales completely towards a high risk strategy and rule out the cash ISA completely. That simply has to be wrong, judging by the true-life scenario in my earlier post.

I wonder if you are perhaps mixing together in your mind this thread and the recent 'debate' on the "is the cash ISA dead" thread and were perhaps trying to answer that thread on this thread?

There seems to be a lot of reference within your last two posts to cash ISAs and how everyone is saying cash ISAs don't have a role and people should not rule out cash ISAs. It seems like you are trying to draw a conclusion to that other thread (which also featured posters such as jimjames, TCOTP etc etc) with this lengthy example of a couple who have hundreds of thousands of pounds of net worth and are choosing, for some reason, to shelter their target £200k cash in ISAs, rather than shelter their £40k investment funds or £35k S&S trading accounts in those wrappers.

This couple-of-thousand words example you give (rivalling my own for lack of brevity), and the long debate on the 'is the cash ISA dead' thread, seem quite far removed from the OP on this thread, which was the following:

tiamaria wrote: »

What would you do with 40-50K with the view of making some income/investment?

After posing this one-line throwaway question with no further information or context, the OP did not stick around for the answer - presumably one is not genuinely being sought.

But still, with £40-50k looking for a home "with view of making income", I think it is highly unlikely that the answer is, "get a cash ISA", as such products only deliver 1.5% a year and inflation from here is projected at approx 1.5% a year or more (depending on the specific measure of inflation chosen). So, I'm not sure why cash ISAs are being defended to the hilt, other than maybe you thought you were on a different thread where cash ISAs were being attacked.

I would maintain that if you have £40-50k looking for an investment target, which is presumably after having first considered your needs for cash in the short and medium term, S&S products are a sensible route. If you have not first considered your needs for cash in the short and medium term, you should do that first. I think the suggestion from TCOTP that you should first deposit "equivalent of 6 to 12 months worth of your salary" in cash before doing anything else, is over the top.

As an aside, if the 'real life' couple are in fact simply a 'couple you know well' and not you and your other half, they should probably make sure they act quickly to get you on some sort of stalker's list.

anoncol

gregj2209 wrote: »

Is that all the money in the world you've got ?

Out of interest, how old are you and what do you do for a living? I'd love to have £50k stashed away in the bank, but frankly life doesn't really allow me to do that (for reference I've got zero debt apart from our mortgage and we save every month). I've got a decent amount that would become an emergency fund if required. Outgoings could easily be cut - Sky, fibre broadband, type of food we buy etc. etc. Even logically things like petrol goes down if you're not working.

The reason I ask about how old you as is I was having a conversation about house prices with my parents not too long ago and I pointed out that their house has roughly trebled in value since then bought it in the 90s, despite the crash. In that time salaries haven't anywhere near done that, hence I couldn't afford to buy that house now but I'm fairly confident myself and my wife earn either more or close to what my parents did at their earnings peak. My point is having a massive savings stash can depend hugely on how old you are (and I don't just mean because you've been able to save for longer) given the various factors that come into play there.

Granted, I'm not particularly savings savvy, hence a query I've asked on this forum but I take issue with your response to that original poster.

I think i am very much in your boat reading your post.

anoncol

paramaniac1 wrote: »

If is the middle word in life! Investing in an ordinary index will get you about 8% a year for a few minutes of your time and effort. A bit more time and effort investing directly in shares could get you to the 10-20% return. I have managed to make 31% per annum in US shares since 2008 so it’s by no means impossible. Remember that you WILL, definitely, have a 0% return if you do not invest.

I'm fed up apparently of my 0%, though thats just wrong.

I would have asked your advice on how to get 8%, but after you've talked such rubbish about 0% i dont think i'll bother.

KGriff

bowlhead99 wrote: »

I wonder if you are perhaps mixing together in your mind this thread and the recent 'debate' on the "is the cash ISA dead" thread and were perhaps trying to answer that thread on this thread?

Yes it was relevant to both threads, but I chose to post it just once here, rather than in both. I felt it was pertinent to both. I did briefly refer to 'other posts' on the MSE forum.

bowlhead99 wrote: »

As an aside, if the 'real life' couple are in fact simply a 'couple you know well' and not you and your other half, they should probably make sure they act quickly to get you on some sort of stalker's list.

Yes indeed, I promise to write to you again from my prison cell

paramaniac1

jimjames wrote: »

Operative word being IF.

You could also have nothing after a year.

jimjames wrote: »

Not sure how you work that out.

You can get a guaranteed 5% on cash at the moment with limited amounts but more than most people need.

anoncol wrote: »

I'm fed up apparently of my 0%, though thats just wrong.

I would have asked your advice on how to get 8%, but after you've talked such rubbish about 0% i dont think i'll bother.

Do you understand that if you do not buy a lottery ticket you will not win the lottery?
I had taken the original posters implied question to be what is the most they could make by investing £40-50K. Using spreadbetting to leverage your money and making a 10% return would net you £40,000 on your initial investment of £50,000 which is an 80% return. If you consider that the stock market indexes return approx 8% per annum you could simply invest the £50,000 in an index with little risk. Were you to continue to make 8% a year return for 10 years your initial £50,000 would be worth £860,000. Tax free!

brasso

paramaniac1 wrote: »

Do you understand that if you do not buy a lottery ticket you will not win the lottery?
I had taken the original posters implied question to be what is the most they could make by investing £40-50K. Using spreadbetting to leverage your money and making a 10% return would net you £40,000 on your initial investment of £50,000 which is an 80% return. If you consider that the stock market indexes return approx 8% per annum you could simply invest the £50,000 in an index with little risk. Were you to continue to make 8% a year return for 10 years your initial £50,000 would be worth £860,000. Tax free!

Crikey, that's incredible.

So you must be a multi-millionaire by now, I guess?

jimjames

paramaniac1 wrote: »

Do you understand that if you do not buy a lottery ticket you will not win the lottery?
I had taken the original posters implied question to be what is the most they could make by investing £40-50K. Using spreadbetting to leverage your money and making a 10% return would net you £40,000 on your initial investment of £50,000 which is an 80% return. If you consider that the stock market indexes return approx 8% per annum you could simply invest the £50,000 in an index with little risk. Were you to continue to make 8% a year return for 10 years your initial £50,000 would be worth £860,000. Tax free!

It's true that I'll never win the lottery. I'm £100 a year up on that one.

What about the years when they don't return 8% and actually drop 50%? How much would you have then? Leverage works both ways.

Rather ironic that I'm now arguing against investment after the previous posts!

paramaniac1

brasso wrote: »

Crikey, that's incredible.

So you must be a multi-millionaire by now, I guess?

Comfortable thanks.