£100k - Lump sum or drip?

bigadaj

JustAnotherSaver wrote: »

Personally i don't know how you received a thanks for your post.

You seem to be implying the OP is forcing (or trying to persuade) his partner to put it into a S&S ISA.

Why?

OP only said they were discussing it.

Or was you at the breakfast table to see how the conversation went?

KidMugsy makes a perfectly valid point, the difficulty in using terms like that he criticised is that it's frequently the language used either by people scamming or those with little knowledge. I'm not suggesting this is the OP but it is a lazy phrase that raises alarm bells whenever I hear it.

There's no hint that the criticism includes any cajoling or duress, that's certainly something you have got wrong. It's a question of matching risk against liabilities and/ or timescale and making sure that the investor understands the risk, even with a long investing horizon we frequently hear of or see people panicking after a market fall, sell out at the bottom and miss out on large future gains when they moan about shares being gambling.

I don't think they 'was' at the breakfast table though, was they bruv?

Linton

If you and your wife are working, have you considered using the excess cash to finance an increase in your pension contributions?

I think Kidmugsy is OTT. Of course you could invest in areas which will drop by 50% every decade or two. You could invest in areas which will drop far less but still perform better than a cash ISA. It is up to you to set up a diversified portfolio in line with your risk/reward acceptance.

Beyond say £20k for safety, emergencies and short term spending, in my view a cash ISA is a very poor use of the money. That is unless you have more than enough money to meet all possible needs or wants for the rest of your lives and beyond.

p00hsticks

Bravepants wrote: »

It's a huge amount of money and the question I have is whether she should transfer as a lump sum, or take it out and drip feed say £20k per year to pound cost average?

It's probably just lazy language, but you need to avoid taking money out of an ISA if you don't want to lose the tax free status, especially as she has more than a years worth in there.

At todays dismal interest rates she wouldn't be losing much by transfer the whole £20k from a cash ISA to a S&S one but not actively investing all of it in one go.

atush

Bravepants wrote: »

Thank you all for your comments. I think our conclusion is that she needs to preserve her capital and not risk it. £100k is a lot of money to invest all at once! I shall suggest that, if she wants to invest, she drips feeds a few hundred from her salary.

Personally i think you both need to re think this. She is actually losing money to inflation daily on her 100K.

If you think a sudden drop would shock her, and upset her, then drip feeding in 1K per month or more into S&S is the way to go. And you dont have to take it out of an ISA to do this (although you may have to transfer to another provider- where is the 100k?).

I think she should preserve some cash, up to say 50K worth. But i would invest some/all of the other 50K. if you are talking a long term investment of 10 years or more.

Another thing to help with sudden drops is to use global investments or mixed asset funds that include investment other than equities/shares. Dont use a UK only fund.

Thrugelmir

Linton wrote: »

I think Kidmugsy is OTT. Of course you could invest in areas which will drop by 50% every decade or two.

A 50% fall is melodramatic. Historically there's a 15% possibility that the markets will fall during the course of any one year. Investing at the peak of the market in 1999. Would still now be showing a disappointing level of return even with income reinvested. With many stocks still off the highs reached.

atush

Yes, and dont neglect pensions, esp if your employer has one- join it. Dont opt out

Alice_Holt

One factor to consider is your own (or partner's) psychological and emotional reactions to market turbulence.
The easiest way to destroy wealth is to react to markets highs by over- investing in risk assets only to flee to cash after a market decline. It is remarkably difficult to keep these greed and fear responses under control - even for hardened investors.

I favour monthly DD's into a broadly diversified fund using the most cost-efficient funds and platform, and making use of available tax shelters.
Set it up and forget about it. Try not to meddle.
Invariably my investing mistakes occur when I try to time / predict the market, or favour specialised market sectors.

Good article here:
http://monevator.com/automatic-investing/

So, it's drip feeding into the market for me - and with a time scale of 10 year plus (at least) before you might need to access that investment.

Bravepants

Thanks again all.

I have been investing since age 40 or so, both in AVCs and S&S ISA. I'm 49. I use global index tracker funds, with a percentage into bonds. My main fund is VLS 60. My partner has also a S&S ISA, setup this year, with £15k in VLS 60.

My partner is 45 this year, so has a 10 year time frame to early retirement at 55. She also has a DC pension from years ago, which she hasn't paid into for a while. It's with FriendsLife, worth £25k, and she has contacted them to re-instate monthly payments, BUT they want 5% initial charges per monthly unit purchase! Which is particularly steep I think...so her money loses 5% on each purchase? No thank you. So we are thinking of transferring it to a SIPP.

Only thinking mind...I've not chained her to some medieval torture equipment until she yields to my despotic whim! (we're too old for that sort of shenanegans anyway! :-) )

We also both have DB occupational pensions. We have been considering options for early retirement you see, and so we are trying to get all our ducks in a row, and figuring out how we can do it. I don't want my partner to have to stay working for years with me not! Her other £100k could also form part of that plan.

I'm a 40% tax payer, so pay into AVCs, which I can draw from 55.
I also have a S&S ISA, which I aim to use for early retirement until I reach 60 when one of my DB pensions kicks in. We want a plan you see!

Also, as far as "money working for you" is concerned, look at point number 2 of this...

http://www.mrmoneymustache.com/2011/04/10/post-4-what-am-i-supposed-to-do-with-all-this-money/

By the way kids...stop arguing...

"I didn't come here to cause any trouble,
I just came to do the money saving shuffle"


Kind regards,
Paul