Investing

Marhaba_Man

I have about 100000 to invest to generate and addition to my pension. i need this to provide capital to live from. I know little or nothing about where to put it I do not want to be too risky with my investmenst as it is ALL i will have to supply me with funds to live on. I dont want to put all my eggs in one basket but would appreciate some suggestions one suggestion was REIT but im not sure how risky these are and which of the options to consider if I went along that route. I had considered buying a property but again am not sure how viable this is I am considering putting some funds into the Coventry Building Society at 6.4 % for the over 60's

dunstonh

one suggestion was REIT but im not sure how risky these are

Just above medium/high risk in general.

I had considered buying a property but again am not sure how viable this is

Not very. Rental yields are often lower than 5% unless you happen to buy in the right place, at the right time and know what you are looking for. That 5% is taxable so its even lower. Plus there are costs and risks.

I am considering putting some funds into the Coventry Building Society at 6.4 % for the over 60's

6.4% after tax is 5.12%. If you draw that is income for the next 10 years, your £100k will be worth around £70k in real terms. In 20 years it will be worth 49k.

If you are over 65, will the interest take you above £20,900 a year income? If so, that will incur a further tax liability by reducing your age allowance.

There are plenty of options for the cautious individual. It depends on how cautious you are, what tax wrappers are best and how long the money is likely to be used for this purpose.

Marhaba_Man

Im 60 in this tax year my pension is 12000 pa so Im rwally looking for some tips where to put my cash without too great a risk would u avoid REIT's?

dunstonh

would u avoid REIT's?

Nothing wrong with including them as part of an overall spread. However, 100% into property is a foolish strategy. Property is down between 10-25% this year. That is not consistent with a cautious risk profile.

A low risk commericial property fund in conjunction with a wider spread of low risk assets would be a much better approach.

Marhaba_Man

so where would u suggest I consider please? I have no ideas really othe rthan the Coventry B/S Would U avoid REITS totally ?

dunstonh

so where would u suggest I consider please?

I have already said where generically. Cant do any more than that.

Would U avoid REITS totally

They are above your risk profile. It doesnt matter whatI would do. The investment has to be right for you. Not me.

Marhaba_Man

can anyone make any suggestions please?

cheerfulcat

Marhaba Man, if you need an income and complete safety of capital then gilts are your best option ( directly held, not in a fund ). Bear in mind that with plain vanilla gilts there may be some erosion of capital due to inflation and that if you buy them at more than the issue price ( normally £100 ) you also lose some capital. Index-linked gilts will guard somewhat against inflation but the income will be fairly low. I would not suggest a portfolio of gilts alone, though.

You could go for a combination of gilts and perhaps an equity income fund or two. There are also investment trusts which pay dividends - ITs generally pay more income, partly because the charges are lower than for unit trusts.

If you are feeling adventurous you could look at the High Yield Portfolio board on the Motley Fool. There is also a board covering investing for income on TMF which may be of interest.

HTH

Cheerfulcat

Flynn_2

There will be a lot of people more interested in such things and able to give better advice than me.
I’d think it would be worth your while having at least a free preliminary chat with an IFA. When you do bear in mind that most will in one way or another be working on commission so treat them with the same caution you would an estate agent or double-glazing salesman. In fact a lot seem to be ex estate agents and double glazing salesmen. Be sure to count your fingers after shaking hands. Remember too that if they were as sharp as they suggest at investing they’d be too busy investing their own money instead of wanting to invest yours for you.

If you will depend on the extra income to live on you’d need to be very cautious. Bear in mind that anyone who was flogged units trusts in 2000 could have seen the value halved over the next few years as the FTSE went from nearly 7000 to 3500. Even now, seven years on, they could still be worth way below cost while the salesman has pocketed commission on the deal every year and the unit trust managers have still taken their cut as the value plummetted.

Another option might be to buy an annuity but if you want it inflation linked and to be available to the surviving spouse you’re looking at just a few thousand a year. Or you could do as you’ve done and plonk the money in a building society or two which would have been a massively better option than buying into shares back in 2000. If you're lucky you may get a return that's a little ahead of inflation.

I’m sure someone much shrewder will be along to give you much better advice.

dunstonh

When you do bear in mind that most will in one way or another be working on commission so treat them with the same caution you would an estate agent or double-glazing salesman.

Not if you go on fee basis or CAR (customer agreed remuneration). These are independent of product/provider/tax wrapper so no bias can exist.

In fact a lot seem to be ex estate agents and double glazing salesmen.

Really? Not in my experience. Tied agents certainly had an influx from various sales professions years ago but whilst no doubt some did move on through to IFA, the numbers are not going to be significant.

Remember too that if they were as sharp as they suggest at investing they’d be too busy investing their own money instead of wanting to invest yours for you.

Have you seen a poor IFA recently?

Bear in mind that anyone who was flogged units trusts in 2000 could have seen the value halved over the next few years as the FTSE went from nearly 7000 to 3500.

No they wouldnt. Unit Trust is just a tax wrapper. Its not one fixed level of investment that matched the FTSE. There are 2000 unit trust funds and a good number have no stockmarket exposure at all, whilst others focus on the various sectors which may be lower risk or higher risk. You would expect to see most decent cautious spreads coming close to doubling in that period.

Even now, seven years on, they could still be worth way below cost while the salesman has pocketed commission on the deal every year and the unit trust managers have still taken their cut as the value plummetted.

Ironically, the funds most likely to be below their start point in 2000 are FTSE trackers which are the low cost versions. Plus a few very high risk funds such as tech funds. However, the performance of those has nothing to do with commission.

No offence Flynn, but your post came off as a slagging off of IFAs and of little benefit to the OP.

EdInvestor

I would suggest 50% in cash ( look at National Savings index linked certificates for 30k of it - competitive rate and paid tax free)

www.nsandi.co.uk

Then 30 % in either a High Yield Portfolio (see link above)or a selection of equity income funds.The latter are more complicated as the dividends they pay are usually not high enough due to the charges, so you have to do a bit of selling to get enough income. It's easier holding the shares direct with the HYP, which will pay 5% dividend income, so you don't need to do anything.

and then

20% in a couple of "bricks and mortar" property funds or investment trusts (not a REIT which is a share and significantly more risky).Again 5% income should be payable.Put these in your self select stocks and shares ISA over the next 3 years so as to avoid tax on the income.

Your shares and your property funds in your ISA could all be held in an account with a discount broker such as

www.selftrade.co.uk

This is an asset allocation for a low-risk very cautious investor.