Question re 700K investment

sixpence.

Hello – I need some guidance and would very much appreciate whatever anyone on here has to say. I’ll try to keep things clear and concise! Would love it people read this and gave their two cents.

1. I am in the (very) fortunate and lucky position where I am about to be gifted 700 K. I am 30 years old. I already have a VLS (in my ISA) which I invest in for retirement. My mortgage is paid off.

2. My goal is to set up a form of passive income. I know I’m young, but please don’t suggest that I go for growth instead; a steady source of passive income is what I’m after. Not trying to sound shirty, just want to save time :j

3. I don’t think investing in property is a good idea (although it is what my older brother and sister have decided to do) bc of the economic uncertainty of well... everything. I think it is a good idea to invest in a diverse low risk fund income portfolio. My objective is to get 3-4% income (after charges). Basically I’m looking for the income equivalent of VLS, if there is such a thing!

4. I’m with Hargreaves Lansdown. They are offering free consultations this month so I’m going to take one with them. Will obviously take it with a pinch of salt. I would also like to consult another IFA. Does anyone have any IFA recommendations? I figure if the stamp duty for a property is 3-4% then there is no harm in speaking to a couple of IFAs, who I think normally charge about 1%.

5. I don’t want to rush into anything. I’m basically treating this as its own job/project. I’m doing a level 4 online investing course (mostly because it was very cheap so I thought I might as well!). I’ve read a few books (like the Intelligent Investor, Rich Dad Poor Dad et cetera) but if anyone has anything else to recommend I would really appreciate it: books, websites, online courses, welcome.

Thank you so much for reading this. Feel free to respond to anything here really.

Eco_Miser

The Monevator site can be very useful, in your situation the deaccumulation section https://monevator.com/category/deaccumulation-2/

Note that going for 'income' can result in greater volatility in price than going for 'growth' - but the income produced tends to be more stable.

Albermarle

Does anyone have any IFA recommendations?

You will not find anyone making specific IFA recommendations on the forum . Only to avoid large 'wealth management companies ' and try and find an IFA or small group of IFA's locally.

but please don’t suggest that I go for growth

Do not forget that some growth is needed if only to keep up with inflation.

barnstar2077

I love this guys passive income videos:

https://www.youtube.com/watch?v=6iSU1m3otd8

Yes he is based in America and he uses a platform (M1 Finance) that we can't use, but I highly suggest that you watch all of his videos to see how he chooses funds / shares / REITs.

bowlhead99

You mention that you'll take the free consultation with HL with a pinch of salt. Which is wise, as your interests will not be aligned with theirs, and they can only advise on what they sell - for example their own income portfolio suggestions and their own packaged funds of fees (sorry I mean packaged multi manager funds-of funds).

Importantly, any free guidance does not have any comeback on them because it's not purchased advice. And even the purchased type of advice from them is unlikely to be to "find a cheaper platform than them" or to "buy fully independent advice for an investor solution sourced from across the whole of the investment market".

I'm sure you recognise this (thus your pinch of salt reference) but the reason for my labouring the point is that in the next sentence you say that you would like to "consult another IFA". That would imply that HL were your first IFA and you were looking for another one. But they are not IFAs, even though they offer some paid advice. Really you should consult a few actual IFAs (like shopping for a builder or decorator, see three first to go through what they propose and for what price), rather than one HL and one IFA. Look a few up in your area via (e.g.) adviserbook or other available directories (ensuring you're filtering to independent ones).

I'm not sure what you would get from a "level 4 online investing course". Presumably that's not some sort of actual qualification like CFA or the ones that advisers themselves would take? If not, I have no idea what would make it a level 4 rather than level 2 or 200. While if it's issued by a university or professional industry standards organisation, the content would need to be seen in context of their other courses and exams and the professional and other experiences usually being gained at the same time as studying for it.

There are some free courses about which might cover some basics (and free is sometimes better than very cheap), such as Openlearn's 'managing my investments' course which builds on 'managing my money' ; (https://www.open.edu/openlearn/comment/27151)

Openlearn is a brand of Open University so no need to worry that the '.edu' instead of '.ac.uk' might imply its America focused.

I have little to offer in terms of reading materials other than to suggest you search the various other threads that ask for book and website recommendations, as there's no particular source that gave me my general knowledge -it was certainly helped along by a career in the investments sector and a broad curiosity. No real substitute for experience, but you can't get yourself a couple of decades of practical experience in the weeks before an inheritance arrives.

Rich Dad Poor Dad is accessible, if you're looking for a popcorn movie rather than an education, and Intelligent Investor was ahead of its time (though the time was literally seventy years ago and then revisited in the 1970s). They are not going to tell you whether you should prefer a REIT or PAIF or an investment trust holding privately owned infrastructure projects. Things like 'Harriman's New Book of Investing Rules', (£12 on Kindle or more for a hardback for your coffee table, unless you get one from the second-hand bin) might tell you what 'the world's best investors' consider to be 'Do's and Don'ts', but surprise surprise, people have contrarian views.

If you have a lot of free time, so that you can consider 'getting comfortable with owning £700k of investment assets' to be a job in its own right, it absolutely makes sense to consume as much literature as you can find. Until you have consumed it all, remember the adage that 'a little knowledge is dangerous' and that there's no one best way to do everything - no matter how passionately someone argued in the last thing that you read, that they were telling you very sensible things.

Until that point it is quite sensible to get an IFA to help (notwithstanding there are plenty of anti IFA people here) and as you mention, thousands of pounds worth of fees are not the end of the world, despite this being a money saving site. You could always become more 'hands on' in due course. Some will imply that compounding of IFA fees will cost you many hundreds of thousands or millions over the next fifty years, but it won't cost you that over the next five.

steampowered

The average return which has been generated by the major stock markets since the second world war is about 7-8% per year, so 3-4% is eminently achievable.

Of course you should remember that inflation will eat into the value of your investments over time. So you are really targeting 3-4% PLUS inflation if you want your £700k to have the same value later on that it has today.

If you are investing for the long term, i.e. potentially until retirement, I query whether a low risk approach is a good idea. A "low risk" approach generally means lower volatility for lower long term returns - i.e. lower investment risk, but higher inflation risk. Over the long term you have the flexibility to ride out short term volatility.

Thrugelmir

sixpence. wrote: »

I already have a VLS (in my ISA) which I invest in for retirement.

Why an ISA for retirement? Sounds as if pension provision needs to be your first port of call.

Eco_Miser

Thrugelmir wrote: »

Why an ISA for retirement? Sounds as if pension provision needs to be your first port of call.

One reason may be that it's locked away until you're 55, with a threat of that age increasing at the whim of the government.

Thrugelmir

Eco_Miser wrote: »

One reason may be that it's locked away until you're 55, with a threat of that age increasing at the whim of the government.

An incoming Labour Government could apply a wealth tax to ISA's at a whim. Little point in speculating about what might happen. Funds contained with pension wrappers have a number of benefits and advantages. Not least an initial boost through tax relief, the ability to pass funds over tax free on early death and not being included in the assessment for benefits.

bostonerimus

You won't get 3-4% from investment grade fixed income. You could get 2% from a 5 year saving bond ladder and maybe more if rates ever go up. So if you want 4% you will have to include some dividend and growth stocks, sounds like VLSxx would work ok or even one of the many ITs that are popular here. I own a thing in the US called Vanguard Wellesley which is a 40/60 multiasset fund which concentrates on dividend stocks and investment grade bonds

https://investor.vanguard.com/mutual-funds/profile/overview/vwiax

It pays 2.6% dividend and has consistent capital gains too. Maybe create a portfolio or find a UK fund that has a similar approach.

jamei305

I suggest you read this which is aimed at early retirees: https://www.madfientist.com/safe-withdrawal-rate/