400k to invest/put in savings

ttmatt

I have 400k to play with after a recent house sale/downsizing. I am mortgage free and have another property which gives me regular monthly income of around £3000. I would like some advice on how to invest this 400k so that i can increase my monthly income. I have seen a private financial adviser who showed me a number of options but i want a very safe place to put it i.e a good savings account or look into buying another property to let out as my current buy to let property seems quite a safe bet. Thanks in advance.

SonOf

I would like some advice on how to invest this 400k so that i can increase my monthly income.

That requires a lot more information than you have given us so far. Tax position (now and future), age, draw rates, occupation, spouse/partner or financial dependents and much more.

I have seen a private financial adviser who showed me a number of options but i want a very safe place to put it i.e a good savings account or look into buying another property to let out as my current buy to let property seems quite a safe bet.

You should not see an FA but an IFA.

However, you appear confused about risk. A good IFA would explain risks but you can also help yourself by learning it yourself.

When you wish to draw an income, there is no risk free option.
Cash savings may not suffer investment risk but you will suffer inflation risk and shortfall risk. These can actually be more damaging over the remainder of your life than taking sensible investment risk.

e.g. 400k in cash savings where you only draw the interest may mean you dont have enough interest at times to pay all your bills (including capital bills - like replacement boiler, car etc). So, you end up drawing against the £400k. This will in turn reduce the interest and make it more likely you will draw more of the capital. This creates a spiral of reducing capital value which could result in you running out of money before you die.

Buying another buy to let means taking on more risk. Risk of damage to property. Risk of a dead period in rental income. And an asset that is subject to ever increasing taxation. It can be a viable option but to narrow your options to cash savings or property seems very narrow minded and unlikely to make things very efficient. Rental yields in many areas are not attractive either. The days of easy money as a landlord are gone. It is still possible to do well but you need more knowledge and experience and be pickier with property types.

By ignoring investments, you are ignoring the tax perks that come with the various tax wrappers.

Albermarle

but i want a very safe place to put it i.e a good savings account

All savings accounts have a max £85K compensation limit in case of the savings institution going bust.
It's not that likely to happen but you wouldn't want £400K in one place .
The exception is National Savings and Investments which is the government basically . However they do not have the most competitive interest rates.
Most of the regular posters on here will tell you that putting the money in a savings account means it will slowly lose value as interest rates are below inflation rates ( in fact there is not that much difference at the moment but that is a temporary situation)
If you do not need the bulk of the money for over 10 years then the normal route is to invest it to get better returns than inflation.

Malkytheheed

I would spend £200k on another property. Rent it out. (income)
Put 115K on the stock market mostly in index tracker accumulation funds, don't draw from this. (assests and growth).
Lock 40K away in a long term saving account. (Safe, balancing out the risk)
Put the remainng 45K into a Marcus instant access account or similar. (Safe again)

For me that would be an acceptable level or growth, risk and income.

ttmatt

Wow, thanks for the advice thus far, wasn't expecting responses so quick as i've never used the forum to post.

I am 37 year old teacher but hoping to give up my job so i can spend more time with my young son.

I get about 36k a year from my rental income so tax wise i would be 'normal' tax payer i guess as i wouldn't be over the threshold. I really an extra 2k would be great a month but at least 1k would easily be achievable. What type of investment would you suggest Sonof, thanks

GiddyInvestor

Hope you don't have any Capital Gains Tax exposure from the house sale. This might need to be considered.

george4064

ttmatt wrote: »

I have 400k to play with after a recent house sale/downsizing. I am mortgage free and have another property which gives me regular monthly income of around £3000. I would like some advice on how to invest this 400k so that i can increase my monthly income. I have seen a private financial adviser who showed me a number of options but i want a very safe place to put it i.e a good savings account or look into buying another property to let out as my current buy to let property seems quite a safe bet. Thanks in advance.

These two bolded pieces of text completely contradict each other, there is a trade-off between risk and return. More risk you take the more potential return you can make, and vice versa.

You can't simply say that you want a high return or high income at low risk, it's like saying I'd like to go on a luxuriously exotic 5 star holiday on a budget!

Dazed_and_confused

I am 37 year old teacher but hoping to give up my job so i can spend more time with my young son.

I get about 36k a year from my rental income so tax wise i would be 'normal' tax payer i guess as i wouldn't be over the threshold

By normal do you mean basic rate (or intermediate rate)?

If so either you haven't told us the whole story or you must be very part time.

What "threshold" are you referring to?

ttmatt

Dazed_and_confused wrote: »

By normal do you mean basic rate (or intermediate rate)?

If so either you haven't told us the whole story or you must be very part time.

What "threshold" are you referring to?

sorry basic rate, (never heard of the intermediate rate ...)

And not open to any capital gains thankfully from the house sale

Dazed_and_confused

The intermediate rate applies to non savings and non dividend income (taxable pay, rents, pension income etc) if you are Scottish resident for tax purposes.

If you want a "very safe" place then you might struggle to make £1k/month never mind £2k.

Albermarle

What type of investment would you suggest Sonof, thanks

You have two separate things to think about .
Firstly what type of investments to invest in and the first step here is to find out what your 'risk tolerance 'is . From what you said it is quite low. However low risk means potentially lower returns and of course low risk does not mean no risk.
Secondly is how/where you hold these investments. Normally they are best held within pensions and/or Stocks and shares ISA's. This is because within these you are sheltered from any tax issues and especially in the case of pensions here are actual real tax benefits .However there are some limits as to how much you can invest in a pension or S&S ISA each year and with the pension the limit is partly linked to your earnings .