What return could you expect on £100k per year?

longwalks1

Just out of interest really, what sort of return could you expect on £100k per year, and where would you invest it?

Would, say... 10% be achievable?

Aegis

britishboy wrote: »

Just out of interest really, what sort of return could you expect on £100k per year, and where would you invest it?

Would, say... 10% be achievable?

10% average returns would represent a very high risk investment. Bear in mind that a diversified portfolio of equities has historically generated returns of about 5% over inflation, so if you assume inflation at about 3% a high risk portfolio (i.e. only equities) would be averaging about 8% a year. For lower levels of risk, the return would need to come down from that point, sometimes significantly.

If you need consistency (e.g. income paid yearly) then you need to aim lower than this figure.

Audaxer

britishboy wrote: »

Just out of interest really, what sort of return could you expect on £100k per year, and where would you invest it?

Would, say... 10% be achievable?

Maybe it would have been achievable on some portfolios over the last 5 years, but very unlikely over the next 5 years.

To have a good chance of an average return above inflation, it needs to be invested long term for at the very least 10 years, and be invested in a diversified global portfolio of funds. The higher percentage of equities will most likely provide better returns long term, but will be more volatile than a balanced portfolio of equities and bonds. If you invested in 100% equities, then you must be prepared for the value of your investments to fall by up to 50% when there is an equity crash, so you need to establish your capacity for risk before you invest, because the worst thing you can do is panic and sell your investment when prices do drop 40% or 50%.

I would recommend learning as much as you can on this forum and sites like Monevator before starting to invest.

Prism

britishboy wrote: »

Just out of interest really, what sort of return could you expect on £100k per year, and where would you invest it?

Would, say... 10% be achievable?

Achievable? Of course. If you had invested that 100,000 totally in Amazon shares just 3 years ago they would today be worth almost 400,000. Basically a 300% rise.

Likely? had you diluted that investment with a fund holding many other shares you would be only looking at a small proportion of that gain. If you were looking at a longer term, lets say the last 20 years from Feb 1998, then an index fund that invested in the US stock market S&P 500 would have returned about 7% - not bad considering that dotcom bubble and financial crisis happened throughout that period.

Thats the problem though. How to not invest just before a crash and not want your returns just after one. Had you invested that 100k in february 2000 and needed your money back in february 2009 you would be down over 30k.

BananaRepublic

The nature of equities is that you cannot be certain of anything. Generally to get higher returns you need to take higher risk, and by definition that means that you could end up in clover, or poop. As said above, diversification is a good way to reduce that risk, which in simple terms is the avoidance of betting the farm on one horse. You diversify over many countries, and over many sectors such as small companies, large cap and so on. Another way to reduce risk is to invest for the long term.

Investing in equities is not gambling, but there are no certainties. As said above, it would have been better to have started five years ago. I have done quite well over the last 20 years, having taken the view that equities would be a good long term punt, and that the markets would behave according to past macro trends ie lots of wobbles, some crashes and overall growth.

How much can one expect to gain? Well you could for example look at historical data for returns from index funds in the S&P, the FTSE 100 and 250, the Nikkei etc. Tho data in the investors key information includes charges in the returns. 20 year data will include the GFC so it is probably the most interesting. When I look at my own investments, UK index funds were mediocre, a European index fund was okay, European active funds were good to excellent, and a Japanese active fund was execrable, losing money over 15 years despite numerous predictions of a recovery, which did eventually take hold. So to answer your question, I have no expected percentage gain, just a belief that wise investing will provide me with a comfortable retirement, and thus far the gods are obliging.

Thrugelmir

britishboy wrote: »

Just out of interest really, what sort of return could you expect on £100k per year, and where would you invest it?

Would, say... 10% be achievable?

How much are prepared to lose? Plenty of speculative investments available.

thenewcomer

10%.. maybe in ISA.

thenewcomer

10% returns on 100k will give you 1000 quids a month.

you can actually live on that amount. FINANCIAL INDEPENDENCE achieved

Thrugelmir

Prism wrote: »

Achievable? Of course. If you had invested that 100,000 totally in Amazon shares just 3 years ago they would today be worth almost 400,000. Basically a 300% rise.

Easy to use hindsight to substantiate a view. UK investors could have bought into Fevertree. Alternatively bought Apple at $2.40 in 2004.......

eskbanker

thenewcomer wrote: »

10%.. maybe in ISA.

Since ISA is just a wrapper, within which a vast array of investments of many different risks and returns can be held (all of which can be held outside an ISA too), that is a nonsensical comment. Not to mention the fact that the annual limit means that it would take five years to get £100K into ISA sheltering....

thenewcomer wrote: »

10% returns on 100k will give you 1000 quids a month.

What about the other two months of the year though?

thenewcomer wrote: »

you can actually live on that amount. FINANCIAL INDEPENDENCE achieved

Sub minimum wage breadline poverty achieved....

dunstonh

thenewcomer wrote: »

10%.. maybe in ISA.

If you are only prepared to accept a 10% loss then you are only looking at around 3-4%ish p.a.