5% Yield Target on Inheritance

MichelleN

aroominyork wrote: »

That sounds sensible, and I'd suggest you take your time. I started a thread in November about some changes I was thinking of making to my portfolio and I only finally implemented them this week. I find it's useful to let changes sit for a while and let my brain do some background ruminating - when I come back to the plan after a week or two I usually have a clearer picture in my mind of whether it makes good sense.[/QUOTE

That’s seems good advice, thank you, I will take my time to reflect. I looked at your previous thread on your new portfolio, would you mind me asking what you finally settled on?

aroominyork

MichelleN wrote: »

That’s seems good advice, thank you, I will take my time to reflect. I looked at your previous thread on your new portfolio, would you mind me asking what you finally settled on?

Oh dear, I hate that question because you might use it as your starting point when my portfolio is just one punt out of thousands of options. But OK then – it’s pretty much as mooted in post #1 except that I set Fundsmith and Smithson around 10%, chose Fidelity World Index instead of VLS100, and since Fidelity is developed markets only and not overweight UK, I added a bit to Vanguard EM and bought Vanguard UK All Share. Come back in five years and I’ll tell you if it worked out well!

StellaN

As others have already said, it sounds like a growth portfolio would be the way to go (especially if you don't need the money or any income) with maybe some WP (Wealth Preservation) funds into the mix to whatever risk level you are happy with.

It is a good idea to post back your suggested portfolio for some comments. Also as aroominyork mentioned its good to take your time and not rush into this and properly think it through before making any final decisions.

arwain

In your position I would almost certainly seek some professional advice from an IFA. The returns from a £620k portfolio would possibly move you into a higher tax bracket if you are already earning a decent wage. An IFA may be able to provide advice to minimise the tax you pay and at the very least should be able to provide some good options for you having established what exactly you want.

Albermarle

Really sorry, I used the wrong wording, I meant the 5% return should also take into account (include) the cost of inflation. So if inflation was a 2% then 5% is our aim.

Normally people have targets as X over inflation and after charges . So for example if you are looking/hoping for 2% above inflation ( which today is around 2% ) , then that means you need a total return of around 4.5 to 5% ( assuming charges of 0.5% to 1 % )

If in 10 years time if inflation was 6% , then you need a total return of 8.5 to 9 % etc

Sue58

StellaN wrote: »

As others have already said, it sounds like a growth portfolio would be the way to go (especially if you don't need the money or any income) with maybe some WP (Wealth Preservation) funds into the mix to whatever risk level you are happy with.

It is a good idea to post back your suggested portfolio for some comments. Also as aroominyork mentioned its good to take your time and not rush into this and properly think it through before making any final decisions.

Totally agree with your comments. I think most DIY investors make mistakes when they first start (definitely me included), so if you don't want to seek professional help (IFA) then take your time. As StellaN suggested no harm in posting an update of your portfolio for comments.

Eco_Miser

MichelleN wrote: »

My husband and I are very fortunate to have inherited £620K and will have the funds very soon to invest. We do not require our inheritance for income as I am still working

You're working, but your husband isn't? Perhaps you could use this inheritance to fix that and spend more time together?

MichelleN

Eco_Miser wrote: »

You're working, but your husband isn't? Perhaps you could use this inheritance to fix that and spend more time together?

Thank you for suggesting this but I really like my job and I'm self employed so with time management, I can spend a lot of time with my husband. We also manage to go abroad to our apartment 4/5 times a year for holidays so at the moment we're happy with our current situation. Who knows in the future.

Malthusian

Albermarle wrote: »

Normally people have targets as X over inflation and after charges . So for example if you are looking/hoping for 2% above inflation ( which today is around 2% ) , then that means you need a total return of around 4.5 to 5% ( assuming charges of 0.5% to 1 % )

If in 10 years time if inflation was 6% , then you need a total return of 8.5 to 9 % etc

But if inflation goes up to 6% then nominal growth in equities should increase accordingly. Companies will charge higher prices, make larger profits (in nominal terms) and the value of shares should correlate with the higher inflation rate. For fixed interest, existing securities will pay the same (and the value of existing coupons / maturities will decrease in real terms) but new debt issues will have to take the higher inflation rate into account.

Also, if this 6% inflation is limited to the UK only, Sterling will fall and the value of overseas assets will increase in Sterling terms.

So the amount of growth you want above inflation is the important figure. Then you look at whether it's a reasonable expectation and whether you can bear the level of risk required.

C_Mababejive

Also remember that there is published inflation and personal inflation. The two are often very different depending on your lifestyle etc