Investment options - £40k possibly?

sandspider2000

Hi all

I'm in the very fortunate position of having been gifted a quite large sum of money (by my standards anyway) by a relative. I just need to pay the cheque in!

However, I'm not then quite sure what to do with the money... I will make the maximum mortgage overpayment, put some aside for a rainy day (and in case of any tax implication from the gift) and would like to get more than a measly 0.5% on the rest. I don't mind a bit of risk, perhaps for a portion of the funds, but don't want to go crazy. So I'll top up cash ISAs, open a Santander123 account, divide the money amongst different providers for the savings guarantee etc. I've dabbled in shares previously, and did quite well briefly, but held for too long and ended up in the red, so not really looking to invest in individual shares. I don't have much time at the moment either, so a minimum input option would be desirable. I was looking at passive investing in index trackers (minimal fees), probably drip fed to smooth out bumps and troughs. Vanguard lifestrategy, as recommended on Monevator? Via an ISA if possible.

But I would also like to diversify. Property? Bitcoin? Gold? ETFs? I can hopefully leave the money in whatever investment I choose for a reasonable length of time.
I do have a pension, and my contributions are taken via PAYE. I'm mid 30s. I have a reasonably hefty mortgage.

Am I missing anything? I suppose I could consult an IFA, but wouldn't want them to recommend whatever was best for them rather than for me, and am a little confused by all the options. Does anyone have thoughts, or suggestions for things I've missed?

Many thanks.

bostonerimus

You say you don't want too much risk and then mention very risky things like gold and bitcoin. Forget about those, continue your reading and learning and just drip feed your spare funds into a VLS fund that you are comfortable with inside an ISA. Also make sure you are contributing as much as you can to your pension and understand how it is invested. Given your age and that you say you don't mind risk you should consider an fairly high percentage of equities,

Alexland

If you have over 60% of the property value outstanding on the mortgage then I would use half the money to overpay. Otherwise I would invest for a slightly higher return.

Eco_Miser

sandspider2000 wrote: »

and would like to get more than a measly 0.5% on the rest.

0.75% is available from NS&I, and over 1% elsewhere, on instant access savings accounts without tricky conditions, and nearly unlimited amounts.
5% is available on limited amounts with extra requirements.

sandspider2000 wrote: »

So I'll top up cash ISAs,

Why?
There are good reasons for a few people, but for most, the best idea is to transfer them to S&S ISAs, or to the aforementioned bank accounts, depending on when the money may be needed.

sandspider2000 wrote: »

open a Santander123 account,

it's the current account that pays interest on the largest amount, but a combination of other accounts may be better.

sandspider2000 wrote: »

I've dabbled in shares previously, and did quite well briefly, but held for too long and ended up in the red, so not really looking to invest in individual shares. I don't have much time at the moment either, so a minimum input option would be desirable. I was looking at passive investing in index trackers (minimal fees), probably drip fed to smooth out bumps and troughs.

Drip feeding reduces regret if the market drops the day after you put the whole lot in as a lump sum, but not if the market drops the day after you made the final payment in a drip feed scheme. It also doesn't help if the market rises continually while you're drip feeding (and that's what you're hoping it will do after you're fully invested, right?)

sandspider2000 wrote: »

Vanguard lifestrategy, as recommended on Monevator? Via an ISA if possible.

It's certainly possible to put the contents of your cash ISA plus whatever part of this year's £20000 allowance you haven't used yet into an S&S ISA, and buy VLS with it. Blackrock, HSBC and L&G also have multi-asset funds often mentioned here.

sandspider2000 wrote: »

But I would also like to diversify. Property? Bitcoin? Gold? ETFs?

Funds that own actual commercial properties should provide a useful diversification to equities. Funds investing in property companies, less so.
ETFs are funds with different legal structure to UTs/OEICs, and are considered riskier.
Gold and bitcoin are pure speculation that you can find a bigger fool when you come to sell.

sandspider2000 wrote: »

I suppose I could consult an IFA, but wouldn't want them to recommend whatever was best for them rather than for me

There are regulations in place to prevent Independent FAs doing that.

Alexland

@EcoMiser did you mean to point to L&G rather than M&G multi asset funds? M&G are strong in active bond management (as part of a DIY portfolio) and their index tracker fund is ok (0.46% for a uk all share tracker ISA) if thats all you want.

sandspider2000

Thank you all for the thoughts - especially Eco Miser for the detailed response. Lots to think about.

I was aiming to put some money into cash ISAs as my easy access pot, but given the tax free nature of savings interest up to £1000, this is probably not important now.

I was thinking of drip feeding as I'm aware that I can't predict what the markets will do! And at least pound cost averaging means I should do OK in the longer term rather than aiming to buy low and missing it...

As I said, I don't mind a bit of risk - perhaps not bitcoin levels of risk. Just trying to think of other ways to diversify. A fund owning commercial properties may be a better way of doing this, thanks.

Presumably I can hold VLS funds via any S&S Isa provider of my choice, not just in Vanguard's own ISA? Monevator suggests that Close Brothers or Cavendish online are the cheapest way to hold small to medium amounts of funds. Vanguard's own S&S ISA seems to have lower headline management fees however...

Alexland

Cash ISAs are mostly a waste of time for low values use 5% regular savers that come with certain bank accounts. If your bank doesn't do a regular saver switch to Nationwide (5% on Flex Direct balances too) or HSBC and get a switching bonus. The trick is to have enough regular savers that expire at different times to keep a rolling balance in cash.

Yes you can hold Vanguard funds on most if not all DIY platforms but you would usually pay at least 0.10% extra compared to going direct.

The exception would be if you had a large and/or static enough Vanguard fund in which case a fixed fee platform such as Halifax/iWeb or Interactive Investor might be cheaper. I hold my static six figure VLS in a Halifax SIPP and it's costing me less than the 0.15% (or £375 cap) that Vanguard charge for ISAs.

Another option is to use a Vanguard ISA this tax year and then a DIY account next tax year for your more interesting investments?

Alex

Eco_Miser

Alexland wrote: »

@EcoMiser did you mean to point to L&G rather than M&G multi asset funds?

Yes I did, thank you.
I've used both companies in the past, and I really should not post as late as 5 am.:o

sandspider2000

Alexland wrote: »

Cash ISAs are mostly a waste of time for low values use 5% regular savers that come with certain bank accounts. If your bank doesn't do a regular saver switch to Nationwide (5% on Flex Direct balances too) or HSBC and get a switching bonus. The trick is to have enough regular savers that expire at different times to keep a rolling balance in cash.

Yes you can hold Vanguard funds on most if not all DIY platforms but you would usually pay at least 0.10% extra compared to going direct.

The exception would be if you had a large and/or static enough Vanguard fund in which case a fixed fee platform such as Halifax/iWeb or Interactive Investor might be cheaper. I hold my static six figure VLS in a Halifax SIPP and it's costing me less than the 0.15% (or £375 cap) that Vanguard charge for ISAs.

Another option is to use a Vanguard ISA this tax year and then a DIY account next tax year for your more interesting investments?

Alex

Thanks Alex. I don't currently have a SIP, just a workplace pension all done via PAYE. More to think about!

Can anyone recommend a good IFA near Bristol?!

Cheers.

capital0ne

sandspider2000 wrote: »

Thanks Alex. I don't currently have a SIP, just a workplace pension all done via PAYE. More to think about!

Can anyone recommend a good IFA near Bristol?!

Cheers.

With only £40k an IFA wouldn't be any help or be interested, just open a S&S ISA max it out with £20k and by VLS80 ACC and open a S&S account with the remaining £20k and do the same, next April B&B the £20k into the ISA account, and just leave it to slowly mature.

bostonerimus

sandspider2000 wrote: »

Thanks Alex. I don't currently have a SIP, just a workplace pension all done via PAYE. More to think about!

Can anyone recommend a good IFA near Bristol?!

Cheers.

I don't think you need an IFA. Your situation is quite simple. Understand your workplace pension. Is it DC or DB, how is it invested and how much goes in each month from you and your employer.......you should know the answers the those questions immediately. Next put 6 months of spending money in the bank and put what's left in a multi-asset fund inside an ISA. I'd use Vanguard and buy something like VLS80. Keep funding your pension and ISA for 30 years and you will be able to retire comfortably.