Redundancy, should i invest?

smithers1981

Hi i was made redundant 2 months ago and with cashing in shares and redundancy payment i have £62k.

I have started a new job albeit with an agency, where i have taken significant pay cut, but am managing to tick over without touching my redundancy payment.

Am hoping to be taken on full time in next 3 to 6 month, and if this happens my income will be very close to what i was on before.

i'm almost 40 with wife and mortgage plus one daughter.

My cash is currently £59k in Marcus, and £3k spread over 2 TSB current accounts.

I have no other debts apart from mortgage, am considering investing part of my cash as opposed to paying some off my mortgage.

Would people advise for or against this, my main concern being i'm working for an agency, but do i really need this much sitting as cash?

Would welcome advise considering investing my £20k allowance for this year in one fund, i am not risk adverse, could tolerate a 10%-20% drop in short term....i think.

Also i am no expert so wouldn't be looking to beat the market would Vanguard LS 60, be a sensible place to start?

Thanks for taking time to read this.

MovingForwards

I would be slightly cautious in your situation.

Is your wife working? If so what % does she contribute towards outgoings?

What if you are not taken on in 6 months, as you hope but are then either not working or working in a lower paid job?

In your situation I would keep a floating fund of 1 or 2 years expenses ie bills, food, clothes, petrol, kid clubs etc all into one account, then work out what is left. From that some would be put into an instant cash account, just for a float of emergency repairs say £5k. Then split the remainder into 1, 2, 3 and 5 year bonds. What is left would then be saved into higher interest accounts and some into S&S.

I wouldn't put all of it into S&S as that's a lot of money to risk.

Also consider a bit more into your pension and your wife's, probably overpay the mortgage a bit and put £1k into the kids account.

You do not want to leave yourself short.

smithers1981

Thanks for reply wife pays 50% of all bills we split everything 50-50, I will look into bonds as never considered them before.

JohnRo

smithers1981 wrote: »

My cash is currently £59k in Marcus, and £3k spread over 2 TSB current accounts.

Would welcome advise considering investing my £20k allowance for this year in one fund, i am not risk adverse, could tolerate a 10%-20% drop in short term....i think.

First part suggests you are risk averse, as for second part, if you haven't invested before and don't know how you will feel, I can tell you it will be uncomfortable at first and possibly unsettling to the point you may even consider cutting your losses which would be a disaster.

The problem is if/when it gets to -20% and doesn't just shoot straight back to a gain as it has recently, what if it went to -25%, -30% ? Still hadn't recovered losses after a year, two years ?

That's the nature of the equity market. Doesn't matter how many times you tell yourself now that it will all be fine in the long run, when it's happening for real, that's the only time you will understand how it affects you.

What matters is not only how much of a loss you think you can stomach but also equally as important is for how long.

If you're investing it needs to be money you don't need to touch for many years, then when things don't go the way you would like you have at least given yourself the time needed for it to recover. Anything less is really just gambling on a favourable outcome.

Not saying don't do it but give it some serious consideration and weigh up what you might need this money for in the shorter term.
Also worth considering is that we are in a long equity bull market and the noises about it coming to an end with the inevitable downturn, though always there, are growing.

Nothing wrong with VLS60 itself, but given what you've said it might not be the best time to be tying up £20K. Perhaps feed in a smaller amount over the year (if cost neutral) to get more of a feel for investing.

Just be sure locking it up in an investment is what you want to do.

AlanP_2

smithers1981 wrote: »

Thanks for reply wife pays 50% of all bills we split everything 50-50, I will look into bonds as never considered them before.

Just be wary when you start looking at Bonds - the term is abused to hide high risk (as in 100% loss) non-FSCS protected investments.

See the LC&F thread on here.

What is being suggested for your situation is Savings Bonds from mainstream Building Societies etc.

Apologies if that was obvious to you but we see many threads on here from people thinking about the former, or worse, have purchased them and are now in a hole.

Paul_DNAP

What's your pension provisions looking like? So you have a transferrable pension, or a SIPP, you could add some of it into?

smithers1981

Pension pot currently £49k and is in standard life pension fund. Reluctant to add any to it at present, if secure full time job from agency company pension put in double what I put in so will aim to put maximum matched into it then.

Agency have auto enrolled me into another pension so hopefully when job situation settles down I can merge them all into one pot.

As for the bonds on MSE 2.03% for Atom is highest on site for 1 year fix so will look to put some into that.

Would like to put a proportion into a fund and forget about it for 5 years.

Thrugelmir

Does your mortgage expose you to a potentially damaging financial situation in the future?