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Invest Lump Sum or Not Help....

10 replies 633 views
Hi everyone. 
May be a stupid question....
Looking for a bit of advice, myself and my partner both regularly invest monthly into Lifestrategy 80% & 100% over the last couple of years. I have pension which I have paid into for the last 10 years and hoping to be mortgage free in 10 years time, both aged 31 (Currently have what we would call a 'Life House') so no need to move. Have a emergency fund also. 

I have a additional lump sum of money £3500, but we need a new roof on the house (Thinking March 2021) and would like to add dormer etc (Old house), my question is should I use the money and put this towards the roof replacement will cost circa £5500, (Add some additional money in to top up £3500), OR take a small low interest loan to pay for the roof replacement and invest the £3500? 

We are planning to permanently hold our investments in Lifestratgey forever!

Thanks in advance 

Ashley 

Replies

  • maximoose94maximoose94 Forumite
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    MoneySaving Newbie
    Completely up to you and your loan rates, however, personally I wouldn't take a loan out if you have the funds. Look at it in flip reverse, you use the loan to pay for the investments and the cash you have to pay for the roof. Personally, I don't think it would be a good idea. 
  • SonOfSonOf Forumite
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    Maybe you shouldn't be overpaying the mortgage as much as you are if you are leaving yourself short of money?
    And your emergency fund/cash savings should be sufficient to cover short term needs.   So, £5500 spend should be factored into your cash savings and not your investments or overpaying the mortgage.
  • Trundley27Trundley27 Forumite
    36 posts
    Fourth Anniversary 10 Posts
    No not overpaying the mortgage, hugely reduced the term on remortgage. And not leaving self short of money I can save most months. Have good incomes. My initial thoughts were the long term benefits of investing vs a short term loan which would be better. 
  • ThrugelmirThrugelmir Forumite
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    If your investments underperform during the term of the loan. Then you've gained nothing. In fact you are exposing yourself to loss. Guess it depends if you believe that you've identified an opportunity in the markets that no one else has . What will the interest rate be on the loan? Is the potential gain worth the risk? 
    "Markets have been so good for so long. That many investors are trivialising the advantages of actively managing portfolio risk." - Gervais Williams
  • AlbermarleAlbermarle Forumite
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    We are planning to permanently hold our investments in Lifestratgey forever!

    As you have a long term view , then it could be better to invest more into your pension, and less outside a pension due to the tax advantage. Within most pensions you will be able to invest in similar funds to LS , or in many SIPPs you can invest directly in LS funds . A Vanguard SIPP will be available shortly as well.

  • barnstar2077barnstar2077 Forumite
    235 posts
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    eskbanker said:
    We are planning to permanently hold our investments in Lifestratgey forever!
    An interesting approach if taken literally - perhaps there's a market for a product called DeathStrategy.... ;)
    Haha, this made me chuckle! :  )
    If you don't have your own plan, then you're following someone else's!
  • NedSNedS Forumite
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    So basically, you are asking should I leverage now (at low interest rates) to invest for the long term? Yes, interest rates are low, and investing for the long term should provie a higher long term return than current rates, but I would not want to be leveraged at current market valuations. If it were me, I would pay for the new roof (and Dormer extension if desired) in cash whilst continuing to drip feed your pensions at a rate you can afford. I'm guessing a loan is going to cost ~3% and inflation is around 2%, so you'd need a 5% return to break even. Personally I will be happy not to lose money this year and would be delighted with a 3-5% real gain.
  • AudaxerAudaxer Forumite
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    I have a additional lump sum of money £3500, but we need a new roof on the house (Thinking March 2021) and would like to add dormer etc (Old house), my question is should I use the money and put this towards the roof replacement will cost circa £5500, (Add some additional money in to top up £3500), OR take a small low interest loan to pay for the roof replacement and invest the £3500? 
    If it was me I would hold the £3,500 to put towards the new roof in March next year. If the value of your investment has a significant fall within the next year, you might end up wishing you had kept the lump sum in cash to pay for the new roof rather than having to take out a loan.
  • AnotherJoeAnotherJoe Forumite
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    No not overpaying the mortgage, hugely reduced the term on remortgage. And not leaving self short of money I can save most months. Have good incomes. My initial thoughts were the long term benefits of investing vs a short term loan which would be better. 
    That amounts to the same thing except you've contractually  tied yourself into those overpayments 
    long term, by focussing on mortgage instead of pension, especially if you are a high rate taxpayer, you will be losing a lot of money. The upside is less worry about mortgage and flexibility of retirement date. 
    Re your question loaning to yourself will get you a better interest rate than from a third party, so do that, use the cash rather than invest. 
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
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