170K to invest, advice welcomed

marytee · 15 August 2018 at 3:41PM

Hi

I am selling a second home and will have 170K to invest. I don't know anything about how to start the process and would value advice
I don't want to rent the house as it may be hassle and I (fortunately) do not need to to draw on the cash

I have taken early retirement and work two days per week, I do not get my state pension for another 6 years. I have enough income to live well

I am risk averse

I have two grown up kids who have had a 'start'

Thanks for reading and any advice

xylophone · 15 August 2018 at 4:14PM

You might like to hold it all safely in NS&I while you consider your options.

https://www.nsandi.com/income-bonds

Have you obtained a state pension statement?

https://www.gov.uk/check-state-pension

You might consider contributing as much as possible to a personal pension.

You might consider opening a stocks and shares ISA.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

http://monevator.com/using-vanguard-lifestrategy-funds-life/

You might wish to use some mixture of savings accounts.

http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

You might wish to obtain advice from an Independent Financial Adviser.

https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser

https://adviserbook.co.uk/

kidmugsy · 15 August 2018 at 4:18PM

Because Wall Street seems to me to be very high I wouldn't rush to put it in equities just yet. (This logic is known as "market timing" and is reckoned a great sin in these parts.) Unfortunately lots of other assets are expensive too because governments/central banks have been indulging in low interest rates and "quantitive easing" for a decade.

So what would I do in your shoes? I'm not certain. I'd probably bung £50k into Premium Bonds: they return somewhere around 1.2% p.a. as a roughly regular flow of small monthly prizes, and give you a tiny chance of a big prize. Both small and large prizes are tax-free. They are sold by ns&i so they have a guarantee from H.M. Treasury.

I'd invest £20k into a stocks-and-shares ISA and invest in ... um, er, um ... I'd calculate whether it was worth my while also to tuck away some contributions into a pension: why spurn the opportunity to use a tax-shelter? The advantages of tax shelters might ameliorate any errors of timing in your investment decisions.

I'd also put a fair chunk of the money into cash savings accounts, because up to £1k p.a. of interest will be tax-free (£500 if you pay higher rate tax), and because you are risk-averse.

For equities/bonds I'll leave the opining to others, save to say that you'd be wise to ensure that the equities are scattered across several foreign stock markets - it's needlessly risky to keep all your equities invested in your domestic market.

I add that I would also look at diversifying some of my money into (i) commodities, and (ii) gold.

Lastly, when it comes to equity investment you would probably be wise to read the monevator blog, starting with today's post.
http://monevator.com/taking-more-risk-does-not-guarantee-more-reward/

atush · 15 August 2018 at 4:53PM

I would boost your pensions while you still have a wage coming in. Boost Spouse pension.

S&S isas for both of you.

OldMusicGuy · 15 August 2018 at 5:59PM

marytee wrote: »

I am risk averse

You need to think hard about what you mean by this.

If you want to invest some or all of your money to get returns that in the long run are likely to beat inflation, you will need to invest in funds that involve stocks and shares (I would not recommend investing in stocks and shares directly). You can do this in an ISA, a personal pension or even directly in the funds themselves.

These investments all have varying degrees of risk. However, with even the lower risk ones, your investment could go down as well as up. Over the long run (5 years plus), history tells us you should make above inflation returns. But nothing is guaranteed.

If you want a completely risk free home for your money, you will need to put the money into bank current accounts that pay interest and fixed interest savings products (see here: https://www.moneysavingexpert.com/banking/ ). However, these rates are at or below inflation, so although there is no risk, over time the value of your savings will likely fall in real terms.

NS&I is a safe place to put all of your money while you decide what to do. Don't rush into anything.

dunstonh · 15 August 2018 at 6:01PM

I am risk averse

What risks are you referring to?
Investment risk is one but there is also shortfall risk and inflation risk.

Risk is also not on/off. It is a sliding scale. Often being at either extreme (low or high risk) can be a bad thing. Its more about taking sensible risks.