Investing £65k for income?

LeadFarmer

I'm looking for advice on how best to invest a lump sum of £65k.

Ive been offered a redundancy package of £65k which I'm finding tempting as I have an offer of another job.

Im 45 and in 15yrs time I can draw a company pension at age 60.

If I accept the package then I would be wanting to invest it, and then in 5 yrs time at age 50 I might want to reduce my working hours so I might want to draw £500/month from it to compensate for reduced income.

So, assuming I don't put it towards my mortgage, where might a good place be to invest £65k for an initial period of 5 yrs (till I'm 50) and then have it invested somewhere where I can draw £6k/year from it?

18cc

General Wisdom is that if you are investing for 5 years or more you should have some exposure to the stock market and therefore you consider investing in income or dividend generating shares or funds however there is a risk associated with this it all depends on your risk profile

LeadFarmer

Thanks 18cc

I would plan on definitely not needing to touch the lump sum for the first 5 yrs (maybe longer?). But I may then want to draw from the pot at the 5 yr stage.

ValiantSon

LeadFarmer wrote: »

Thanks 18cc

I would plan on definitely not needing to touch the lump sum for the first 5 yrs (maybe longer?). But I may then want to draw from the pot at the 5 yr stage.

If you aren't going to touch it for at least five years then you would be better investing in accumulation funds, rather than income funds. The dividends will be reinvested resulting in better growth (accepting the fact that investments can go down in value). If in five years' time you decide you do want to draw an income from this then you could sell the accumulation funds and buy income funds instead.

dividendhero

With £65k and your situation I'd put half in CTY and other half in MYI.

Yes value will fluctuate, but both trusts have a dare I say it.."strong and stable" record for income

LeadFarmer

dividendhero wrote: »

With £65k and your situation I'd put half in CTY and other half in MYI.

What do you mean by CTY and MYI please?

C_Mababejive

CTY= City of London investment trust
MYI=Murray international Trust

Both investment trusts. Check them out on HL or similar.

ValiantSon

LeadFarmer wrote: »

What do you mean by CTY and MYI please?

They are both investment trusts.

CTY = City of London Investment Trust https://www2.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ITCTY&univ=T

[URL="http://tools.morningstar.co.uk/uk/cefreport/default.aspx?SecurityToken=E0GBR00QXA]2]0]FCGBR$$ALL"]http://tools.morningstar.co.uk/uk/cefreport/default.aspx?SecurityToken=E0GBR00QXA]2]0]FCGBR$$ALL[/URL]

MYI = Murray International Trust https://www2.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ITMYI&univ=T

[URL="http://tools.morningstar.co.uk/uk/cefreport/default.aspx?SecurityToken=E0GBR00V37]2]0]FCGBR$$ALL"]http://tools.morningstar.co.uk/uk/cefreport/default.aspx?SecurityToken=E0GBR00V37]2]0]FCGBR$$ALL[/URL]

It can be rather unhelpful when people post abbreviations and acronyms, but I think sometimes we can all forget that not everyone knows what we are referring to.

The links above are to fund information on Trustnet and Morningstar. Hope this helps.

LeadFarmer

Thanks. I did google the abbreviations and got those results, only I wasn't sure if it was correct.

Audaxer

LeadFarmer wrote: »

What do you mean by CTY and MYI please?

They are both Investment Trusts - City of London IT and Murray International IT. They are both good ITs and have a very good record of years of dividend growth and currently yield just under 4% per annum. However I would not invest all £65k in these two ITs as they are 100% equity and too volatile in my opinion, especially MYI. You would also need to learn a good bit about ITs as they are more complex than Unit Trusts/funds. In my opinion it would be better to consider globally diverse funds first to suit your risk level. I would suggest you learn as much as you can about starting investing on this forum and sites like Monevator before even starting investing.

I would say that drawing £6k a year in 5 years time from your investments is likely to be unsustainable even if your £65k grows significantly in the 5 years, and in such a short time frame there is no guarantee that it will grow at all.

LeadFarmer

Audaxer wrote: »

I would say that drawing £6k a year in 5 years time from your investments is likely to be unsustainable even if your £65k grows significantly in the 5 years, and in such a short time frame there is no guarantee that it will grow at all.

Sorry I should have explained better, I realise that drawing £6k each year will eventually deplete the investment completely over the 10 years I'd want to be drawing from it. But by then I will be receiving my pension.

Of course this is all just a consideration at this time.