Investing £30,000

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Hello there, I have a lump sum of over £30,000. I had originally intended to put into savings accounts, but then I considered buying, with my parents, a cheap flat to either long term let or holiday let. However they are now using their own money for something else so I do not have enough for property. The interest rates are so low though. Does anyone have other ideas what I could do with this money? I should add it is compensation for a serious accident so I do not want to risk losing it. Thank you.

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  • JohnRo
    JohnRo Posts: 2,887 Forumite
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    What do you need this money to do for you?

    Provide a bigger lump sum in 20 years? Generate an income?

    That amount will fit nicely into a slew of (relatively) high interest rate current accounts. The initial set up hassle factor is also high though, compared to having one or two accounts.

    The problem you face is that the interest rates these accounts offer are likely to fall in the next few months just as inflation is set to rise.

    Santander has already jumped, their headline 3% will be reduced to 1.5% so that might be a portent of general cuts across the board.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
  • Pincher
    Pincher Posts: 6,552 Forumite
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    Bertha123 wrote: »
    Does anyone have other ideas what I could do with this money? I should add it is compensation for a serious accident so I do not want to risk losing it.

    http://www.channel4.com/info/press/programme-information/flying-to-the-ends-of-the-earth

    Pitch your idea for a TV special.

    Invest the money in a make over, so you have more camera appeal.

    Versus

    Conventional wisdom is low risk, low return.
  • Bertha123
    Bertha123 Posts: 11 Forumite
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    Thank you for your reply. In all honesty I am not sure, and in a way do not mind! As long as I am not losing anything which effectively is what is happening now with it not gaining anything, stuck in my current account! I would like it to generate an income perhaps more so which is why a long term let was appealing.


    Yes I am concerned about the current state of the savings accounts... I think hassle is what has put me off previously and therefore never done much with it. I had a few accounts but was so confusing once the term ended I pulled my money out.

    JohnRo wrote: »
    What do you need this money to do for you?

    Provide a bigger lump sum in 20 years? Generate an income?

    That amount will fit nicely into a slew of (relatively) high interest rate current accounts. The initial set up hassle factor is also high though, compared to having one or two accounts.

    The problem you face is that the interest rates these accounts offer are likely to fall in the next few months just as inflation is set to rise.

    Santander has already jumped, their headline 3% will be reduced to 1.5% so that might be a portent of general cuts across the board.
  • JohnRo
    JohnRo Posts: 2,887 Forumite
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    Bertha123 wrote: »
    As long as I am not losing anything which effectively is what is happening now with it not gaining anything, stuck in my current account! I would like it to generate an income perhaps more so which is why a long term let was appealing.

    You could reasonably expect to earn 3-4% p.a. from a suitable equity income investment but that, as with all things, carries a significant element of risk.

    Accepting that risk means you'd have to be prepared to see your £30K capital balance go up, and more importantly down, without panicking when it inevitably will at some point and then selling up in fear of it continuing to fall in value.

    For that you need to be really honest and ask yourself whether you really can stomach seeing your £30K potentially become £20K or even £15K (albeit temporarily) while it continues to pay out about £75-£100 a month which you could then either spend or ideally reinvest.

    The problem with spending versus reinvesting income is that the hidden hand of the money printers will erode your income spending power significantly over time.

    By spending now you gain that initial disposable income boost but unfortunately that will (historically) quite rapidly dwindle due to inflation. Dividend increases may or may not offset inflation.

    Or, you decide to reinvest and so defer spending that disposable income now by reinvesting it and thus boosting both the capital and (historically) the income derived from it.

    Instant gratification versus much longer term and potentially substantial gains in capital and income.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
  • xylophone
    xylophone Posts: 44,593 Forumite
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    edited 16 August 2016 at 3:28PM
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    http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html



    Or the current account merry go round for as long as it lasts.

    CPI July is 0.6 but RPI is 1.9 - both may now be on an upward curve....

    How clever of the Government to limit inflation increases on Additional Pension, public service salaries etc to CPI eh?
  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    xylophone wrote: »
    http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html



    Or the current account merry go round for as long as it lasts.

    CPI July is 0.6 but RPI is 1.9 - both may now be on an upward curve....

    How clever of the Government to limit inflation increases on Additional Pension, public service salaries etc to CPI eh?

    Oh, I don't know, would make a nice change for a government to actually get something right for a change.
  • [Deleted User]
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    Anything besides a savings account, which is protected up to £75k, would involve an element of risk.

    Personally I'm a big fan of bonds. Government issued bonds - gilts - are some of the safest investments but the interest rate reflects that. Just having a cursory look over the Barclays site there are bonds with interest of up to 1.2% depending on how long you want to lock your money in. Not great, but better then an ISA at the moment. Wouldn't recommend buying those 30 year ones or something, however!

    For big interest rates P2P lending is probably your best bet. Ratesetter for example offers around 8% a year for a 5 year investment - but no one really knows how these companies would fair in an economic crisis, so there's the risk!

    In between these stocks and shares are useful, but you may be happier investing in a fund if you're unsure on which ones to pick. Your best buying shares, however, if you plan on investing for a long time - long enough that any downturns are ironed out. Historically the long you hold onto share, the great your chance of making a profit!
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