Large amount of cash to invest - what would you recommend?

bw99

Hi all,

I have recently had the mixed fortune of inheriting a large amount of cash - about 500k. I would be very grateful for any suggestions anyone may have about the best way to invest it. Of course that depends on my personal situation and goals, so a bit more about that:

- I own my own home
- I have modest rental income from one property
- I am not currently working and would prefer not to

Initially I thought about buying one or two rental properties, but the more I have looked into it, the less I like it - the management fees or legwork if I do it myself, the uncertainty of London demographics as brexit bites, etc.

My main aim would be to build up capital that can be gradually drawn upon as I get older, so at the moment my favoured plan would be:

Put the money (unsheltered) into tracker funds - probably a US S&P 500 ETF and a FTSE 100 ETF and each year sell up to the capital gains limit and transfer the money into my ISA and rebuy the ETF funds.

Does this seem sensible? I feel like I'm already diversified across property by owning my own home and the one rental property.

Should ETF funds hold up under inflation?

Apologies for the slightly unstructured post - lots of questions here I know.

Many thanks for your thoughts!

Brilley

...I would avoid property / rental. Not that good a return these days with lots of potential problems and risk. Best to see a good IFA and advise him of your needs. It will cost a bit of money but will be worth it...IMHO

bostonerimus

This sounds like the beginnings of a sensible plan. However, don't forget you can also contribute to a SIPP and you should obviously pay off any high interest debt. Also think about how to organize your bank and saving accounts for cash flow and look at some fixed income allocation and factor dividends into your income calculations as well as capital gains.

SonOf

Put the money (unsheltered) into tracker funds - probably a US S&P 500 ETF and a FTSE 100 ETF and each year sell up to the capital gains limit and transfer the money into my ISA and rebuy the ETF funds.

Strange mix of funds if that is all you are going for. Also, a very high risk spread which would be unusual for someone new to investing. Having such a large sum subject to losing nearly half of it in a loss period is something many would not tolerate.

GiddyInvestor

If you don't mind how old are you and if you had to work a bit longer when would you look to retire.

Linton

The first job is to decide exactly what you want the money for. Then how much you will need and when. Only then can you sensibly decide how to allocate your money to cash savings and investments, and what sort of investments are appropriate.

I will assume that you want it to provide the income you need until retirement and beyond. If so as a first approximation £500K could be invested to provide £17K/year inflation adjusted for the rest of your life. Assuming you have a full State Pension that could be rather more until you get it and rather less afterwards. Since you have not said how old you are and whether you have accrued a full SP one cant give any more detail. You also havent said whether you have a spouse or dependents as this could change matters.

Is that sufficient to meet your needs? If so what sort of investments do you need to provide it?

Have you taken tax into account? Until you can get a significant amount into ISAs CGT could be a problem. How will you minimise it?

Your next issue is that investments are volatile, or at least ones that should provide more than inflation matching returns are. How will you manage your finances if say the value drops 40% in a crash? What measures will you put in place to ensure that such an eventuality does not reduce you to (relative) poverty?

The point I am making is that there are far more issues than simply a choice of investments out of the thousands that are currently available. If you have the ability, interestand motivation to educate yourself to the level you need to work these things out for yourself it could be both financially worthwhile and personally satisfying.

If you dont want to do it all yourseelf, for £500K and the rinancial security of the rest of your life you need to talk to an Independent Financial Advisor (IFA), the "I" being essential.