What would you do if you had £1m and you wanted to setup income generating asset(s)?

grey_gym_sock

whilst property is a valid approach, at least for some of your capital, it is not essential. and it's a lot of hassle, even using a agent. personally, i would skip that, and stick to a mixture of shares & bonds.

(though i might well allocate 10% of capital to property shares or property funds, giving you some exposure to property without the hassle. but that is a detail, and not essential.)

note that you don't necessarily need to generate an income equal to what you are going to spend. a lot of the return from shares will come in the form of capital growth, and you don't know when that will turn up. there is of course still some (unknown) limit to how much you can spend without depleting your capital. spending 3% would be fairly cautious, IMHO.

but suppose your mixture of shares and bonds only pays 2% income, and you plan to spend 3% ... then you might invest 90% of your capital, keeping the other 10% in cash. each year, you'd spend the 2% income from your investments, plus c. 1% of the cash. that would run the cash down after c. 10 years. so at some point within those 10 years, you could cash in some of your investments, picking a time when they've just gone up. the cash buffer means you wouldn't have to do this every year; some years, investments are down and you wouldn't want to sell them.

or, if you hold your investments in shares and bonds separately (e.g. bigfreddiel's suggestion of VLS100 for shares, VGOV for bonds), you could sell some of whichever of those has done better each year. it is possible that both will have fallen, but in any case bonds don't fall as much as shares when they do fall.

bigfreddiel's suggestion may be simplistic, but it is not silly, and could easily end up beating more complicated strategies. however, you do need to understand what to expect: the VLS100 half is to be expected to fall dramatically in value from time to time (perhaps by 50%), but is likely to bounce back afterwards. you need to be prepared to hang on, not to sell out at the low point, which would turn a temporary loss of capital into a permanent one.

VLS100 is 100% shares, which makes its price volatile, but it is well-diversified across shares from all parts of the world. that is much better than going for just e.g. a FTSE100 tracker, which only contains big UK shares (which are also included in VLS100). there are arguably even better ways of diversifying your shares than just using VLS100, but VLS100 is OK.

do take time to read more and become confident about what you're doing before making any big move. all investments will rise and fall in different periods; you don't want to pile into something, see it fall, not know whether that's acceptable or you've made a mistake, and sell in a panic. it won't do any major harm to stay in cash for a while while you do more research.

pizza_lord

Pincher wrote: »

Sadly, they are planning to make ex-pats pay capital gains in the future.

That already happened. From beginning of April 2015