Investing

Marhaba_Man

What do u need to know
id like some definite suggestions areas of investment would be fine if u dont want to go into specifics

jem16

See post 4 of this thread;
http://forums.moneysavingexpert.com/showpost.html?p=6122349&postcount=4

and post 8;
http://forums.moneysavingexpert.com/showpost.html?p=6133083&postcount=8

and post 11;
http://forums.moneysavingexpert.com/showpost.html?p=6133654&postcount=11

All of these posts contain the definite suggestions for you to investigate further. There is no "one size fits all" for investing so no-one can say put your money here like suggesting Sainsbury's Bank as the best instant access savings account.

Going to see an IFA would probably be your best suggestion.

jamesd

Marhaba Man, please read Ok then - How do I choose a S&S ISA and the discussions linked from it to get an idea of what a sector allocation is and how you can select a range of investments to reduce your overall risk level. While it's discussing ISA investing the same applies to funds held outside an ISA.

Much of the money will probably be best placed in funds in the UK equity income, UK commercial property and UK corporate bond sectors, likely more than 50% of it.

You may find it more productive to use an IFA to handle investment selection for you, since you currently seem inexperienced with this. If so, the services you should ask for should include:

• Initial sector allocation using Watson Wyatt or comparable method.
• Investment selection advice within the sectors.
• Annual rebalancing.
• Advice on fund changes if a fund manager changes.

With 50,000 to manage the initial cost should be no more than two or perhaps three percent and no ongoing charge because the IFA will get 0.5% out of commission from the annual charges on the funds the money is invested in. The IFA is likely to deliver more than this in increased returns for you as a result of their experience.

Do avoid asking banks of building societies. They are very limited in what they can suggest and tend to have higher charges. It's the "sales environment" that dunstonh was writing about in his own background: not really satisfying to try to advise people when your hands are tied with limited products and he's now free to give good instead of limited advice. But this is almost mandatory as a way to get into the business, so it's no surprise that a lot of IFAs have worked in banks in the past.

This is more complicated than putting the money into a savings account but it is worth it: the best funds in the UK equity income sector have average returns of around 12-15% a year. That's enough to pay you 5% a year income, grow to keep up with inflation and still grow both the capital and income each year until it passes the savings account. Meanwhile the savings account could only pay 1% or so after inflation, a far less good result.

moneylover

jamesd wrote: »

You may find it more productive to use an IFA to handle investment selection for you, since you currently seem inexperienced with this. If so, the services you should ask for should include:

• Initial sector allocation using Watson Wyatt or comparable method.
• Investment selection advice within the sectors.
• Annual rebalancing.
• Advice on fund changes if a fund manager changes.

Is annual rebalancing normally enough if the IFA has made a good choices of sector allocation and good choices within each sector?

dunstonh

Is annual rebalancing normally enough if the IFA has made a good choices of sector allocation and good choices within each sector?

Annual is the ideal frequency. The longer you leave it, the more it goes out of sync and out of risk profile.

Marhaba_Man

[I guess I put it into a building society account then at 6% if im lucky

jem16

You are going to lose an awful lot to tax and inflation then.

Why don't you want to get some professional help to invest this? £100k is a lot of money.

EdInvestor

Marhabaman

Do you know what a REIT is?It's a commercial property share often found in a fund.There are basically two types of such funds - the ones that invest in actual buildings and the ones that invest in property shares.

IMHO you should aim for the first category, not the second as the second type (which includes REITS) is too risky.

Now if you want to invest in "bricks and mortar" property funds you should do it in an ISA, because otherwise the income from the funds will be taxed.

So step one is to open an ISA. You can put 7k of your money in your ISA every year ( actually from next year it will be 7.2k. (So let's take it gradually, put the rest on deposit).

Before you decide where to open your ISA, I have a question for you. Is your main interest in income (as opposed to capital growth)? I ask this because most property funds aren't likely to show much capital growth over the next few years, as they have run up a lot in the last few.

However if you pick the right ones, they can deliver around 5% a year in income and this should be stable.Growth in the capital will be of a medium long term thing.

Does that sound OK?

moneylover

Is annual rebalancing normally enough if the IFA has made a good choices of sector allocation and good choices within each sector?

dunstonh wrote: »

Annual is the ideal frequency. The longer you leave it, the more it goes out of sync and out of risk profile.

I can see that rebalancing should be considered annually but what happens if something unforseen in the markets changes the outlook for some of the allocations within a 12 month period? A good IFA would contact the client? And what would be the charging model for that? I am sure that I will use an IFA soon and I am just trying to get as much of a feel for the IFA/client relationship as possible.

dunstonh

I can see that rebalancing should be considered annually but what happens if something unforseen in the markets changes the outlook for some of the allocations within a 12 month period? A good IFA would contact the client?

Markets go up and down every day. You cannot micro manage investments otherwise you run the risk of altering things and missing out or doing more damage than good. That said, you do sometimes do things mid year. Change of manager, change of investment aims or charges may all have an impact. Also, there is a tolerance to going out of sync and rebalancing. The IFA may have software that flags that up when it happens. Some will, some wont.

And what would be the charging model for that? I am sure that I will use an IFA soon and I am just trying to get as much of a feel for the IFA/client relationship as possible.

It depends. If you have a small portfolio that is only generating trail commission of £100 a year, then dont expect your IFA to give you monthly reports unless you agree for servicing and you pay more for it. If you have an investment that generates £5000 a year then expect far more frequent reviews. Some will rebate all commission and work on fixed retention or fixed percentage.

Salesforce IFAs and employed or attached IFAs may not have the scope to discount. Plus, they are not really the type that is typically desirable for long term servicing. These groups tend to have higher staff turnover and get less of the remuneration so dont have the scope to discount as much. Plus, they often have sales targets and sales managers giving them grief. You dont want to get your advice from someone on a sales target (in any profession or business). Owner, partner, directors are best served to offer the long term service as they are likely to be there long term. Plus, they have the scope to negotiate commission/charges. Also, in my experience, they are also likely to be the higher qualified and better quality. Of course there are always exceptions to all this.