Views on advisors

Alexland

ChilliBob said:

2. I'd quite like the cash I receive to provide a steady stream of income I can live off (potentially forever!)

Would around 2% of the cash you recieve support your living costs for the average year?

If so you are very fortunate to be able to retire at 37.

ChilliBob

Audaxer said:

ChilliBob said:

2. I'd quite like the cash I receive to provide a steady stream of income I can live off (potentially forever!)

3. I'll use what I get to clear off any debts (just a small mortgage) before any kind of investing.

7. I'm not restricting investments to stocks/shares/bonds but sense that's a good starting point.

In answer to the points above:
2. As you are only 37, you would need a very large investment portfolio if you are intending that to provide your main income forever.
3. That's a good plan to clear all debts first.
7. I would say you should stick with stocks/shares/bonds as investments not just as a starting point, but invest in funds rather than individual shares or bonds. In my view there is no need to eventually move on to any more complicated investments, especially as you are naturally cautious.

Regarding point 2. Clearly everyone has different standards of living, but what sort of 'pot' would you feel is needed to acomplish this?!

Funds, yes, 100% compared to stocks, unless in vary rare circumstances I feel

ChilliBob

Alexland said:

ChilliBob said:

2. I'd quite like the cash I receive to provide a steady stream of income I can live off (potentially forever!)

Would around 2% of the cash you recieve support your living costs for the average year?

If so you are very fortunate to be able to retire at 37.

I'd have to do some calculations and figure out the tax on what I am due to receive, at this stage with uncertainty I'm not 100% sure, it's not impossible though

NottinghamKnight

Sustainable income is often taken as 3-4% from a portfolio but if you are risk averse then this could be lower which aligns with the 2% noted above. So £1 million might sustain a long term income of around £20-30k per year. 

Audaxer

ChilliBob said:

Audaxer said:

ChilliBob said:

2. I'd quite like the cash I receive to provide a steady stream of income I can live off (potentially forever!)

3. I'll use what I get to clear off any debts (just a small mortgage) before any kind of investing.

7. I'm not restricting investments to stocks/shares/bonds but sense that's a good starting point.

In answer to the points above:
2. As you are only 37, you would need a very large investment portfolio if you are intending that to provide your main income forever.
3. That's a good plan to clear all debts first.
7. I would say you should stick with stocks/shares/bonds as investments not just as a starting point, but invest in funds rather than individual shares or bonds. In my view there is no need to eventually move on to any more complicated investments, especially as you are naturally cautious.

Regarding point 2. Clearly everyone has different standards of living, but what sort of 'pot' would you feel is needed to acomplish this?!

Well, it depends how much income per year you need to live on. It will be over 30 years before you are able to claim the State Pension, so is the income from your pot going to be your only income until then?

An often quoted safe withdrawal rate for a 30 year retirement is 4% each year rising with inflation, although some say that is too high to be classed as really safe. I'm not sure what is deemed a safe withdrawal rate for a possible 50 year or more retirement.

ChilliBob

Really interesting percentages here, and the good news is they're aligning with initiall thoughts. I actually have a call lined up next week with someone else at a firm I was using for mortgage brokers, so will be interesting to hear if my ideas are validated or trashed! 

Another_Saver

ChilliBob said:

Thank you guys, that's very helpful. As regards my situation.. 
1. Just been made redundant, a, condition of which is selling the equity I held in the company. I'm 37, I wasn't planning on leaving or having to do anything with this equity for a few years!
would need more info about your other savings and invesments and how much this equity sale is, it may also be sensible to see an IFA one off for advice about capital gains and other tax implications, if you need somewhere to park it while you decide what to with it you can keep £4,050,000 in NS&I, fully backed by the Treasury
2. I'd quite like the cash I receive to provide a steady stream of income I can live off (potentially forever!)

You would need 25x your annual expenses as a bare minimum, many on the forum would suggest 3% as a safe withdrawal rate these days. Also check your national insurance record (set up a government gateway acocunt if you haven't already) to see how many qualifying years towards the 35 you need to claim to get the max state pension when you get to state pension age (which I think is 68 for you). More info about your other pensions would be useful

3. I'll use what I get to clear off any debts (just a small mortgage) before any kind of investing.
If you have a very good/low mortgage rate maybe keep the minimum amount on and just pay the interest. That way you have access to a cheap credit facility.
4. My background is in Data Engineering within the Alternative Assets space. So I'm comfortable with Excel, SQL and other associated technologies, and have some knowledge of finance from work and some broader concepts from my Economics degree (quite a while ago!) 
probably helpful
5. I'm naturally a *very* cautious person which I think I will find tricky in this situation!
er....
6. I love researching stuff tonnes, and I love data!
oh good
7. I'm not restricting investments to stocks/shares/bonds but sense that's a good starting point.
yep
8. I will have some time to devote to this, alongside keeping up with my industry etc for when I want to jump back into work
ah ok, well I've suggested a few resources below to get you started
Sorry, I thought that was going to be about 3 points!

Cheers if you've read this far!

Monevator, Lars Kroijer, Jack Bogle (youtube interviews and The Little Book of Common Sense Investing, I'm also reading The Battle for the Soul of Capitalism), Benjamin Graham's Securities Analysis and The Intelligent Investor, and Robert Shiller's Irrational Exuberance are all good resources. Also see the pages on this site about investing, stocks and shares ISAs, SIPPs, platforms etc.

You really don't need any great deal of financial mathematics, but since you need something to do why not try and come up with a time series model of capital supply over the next 30 years as the 60s baby boomers divest into retirement and us Millennails start accumulating capital for retiring sometime in the 2050s (you were born after 1980, you're a Millennial).

If you can understand that if a stock market goes up by an average 4% a year for 30 years, and has an average dividend yield of 4%, an inflation was 2%, then the nominal total return was 8% and the real total return was 6%; and that if interest rates rise bond prices fall - that's all the maths you need.

Good cheap index funds and multi-asset funds are your friend.

Other general interest research:

Thomas Piketty's Capital in the 21 Century

The Great Demographic Reversal - though the authors also published a paper you can find for free and David Willett's lecture at the Royal Society earlier this year explains some of the same things (https://www.youtube.com/watch?v=ZuXzvjBYW8A)

For historical context, Peter Zeihan (any of his videos, presentations or bookswill do) offers an American-centric perspective, while Kraut's delightful dissection of Trump's Biggest Failure offers a Sino-centric perspective (https://www.youtube.com/watch?v=hhMAt3BluAU - politics trigger warning)

starcapital.de for questionably reliable market valuations data

multpl.com and St Louis FRED for more accurate, US specific data

UK Government Actuary's Department and Bank of England research and statistics

US treasury yields can be found here: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield (this is important because the US has the highest yielding developed government bonds right now, and in the UK you can access them via hedged funds and ETFs)

Pensioncraft

Barclays Equity Gilts Study (if you google it you can find free versions)

Credit Suisse Global Equity Returns Yearbook summary edition (google it)

https://www.researchaffiliates.com/documents/FAJ-2003-Two-Percent-Dilution.pdf

https://www.wiley.com/college/miles/0471988456/sample_chapters/ch07.pdf

http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=E7B84C94CEEF8A318EE6060FFC172302?doi=10.1.1.183.1514&rep=rep1&type=pdf

https://globalfinancialdata.com/finance-and-transports-in-britain-in-the-1800s-from-countercyclical-to-benchmark

https://topforeignstocks.com/2017/03/08/ftse-100-exposure-by-geographic-revenue-vs-domicile/

https://www.ukvalueinvestor.com/category/market-valuations-and-forecasts/

https://scholarlycommons.law.hofstra.edu/cgi/viewcontent.cgi?article=1205&context=jibl

https://site.warrington.ufl.edu/ritter/files/2015/04/Economic-growth-and-equity-returns-2005.pdf

AJ Bell Dividend Dashboard (https://www.youinvest.co.uk/our-services/free-dividend-dashboard)

Warren Buffett's letters, past and present, to Berkshire Hathaway shareholders (https://www.berkshirehathaway.com/letters/letters.html)

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.959.5232&rep=rep1&type=pdf

https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2018

For precise UK equity index data go to the "all factsheets" page of ftserussell.com

And a few from the Financials Analyst's Journal: https://www.tandfonline.com/doi/abs/10.2469/faj.v66.n1.5, https://www.tandfonline.com/doi/abs/10.2469/faj.v62.n3.4157?src=recsys, https://www.tandfonline.com/doi/abs/10.2469/faj.v59.n1.2504?src=recsys

Now for some don'ts:

DO NOT "TRADE"

don't gamble

don't do anything that feels like investing but is actually gambling

don't "play" the markets

don't try to time the markets

if you think you know better than the markets you have to be wrong, first, cheating, or actually very clever

don't buy bitcoin

don't buy gold (ok some people may suggest buying some gold and our resident gold hobbyists would suggest swapping all your fiat money for gold)

don't make an investment decision because of the news

don't panic

don't panic sell

don't try and time when you get back in the market once you have panis sold, just get back in

don't look at charts

past performance is the worst indicator of future performance

this year's rainfall is more correllated with how the market will do next year than "analyst forecasts"

everything reverts to the mean

nothing lasts forever

don't buy something because "it's been doing well recently"

don't buy something because "my mate said it was a good idea"

don't buy something because "it's gone down so it looks cheap"

don't overcomplicate

don't buy something because a talking head on a screen said it was a good idea

stay the course

And remember the golden rule: if you can't find it mentioned on MSE, assume it's a scam.

Alexland

NottinghamKnight said:

Sustainable income is often taken as 3-4% from a portfolio but if you are risk averse then this could be lower which aligns with the 2% noted above. 

3-4% is based on burning down the capital but for such a long retirement it would probably be better to just draw natural yield and not slant the investments to be too heavily income focused incase it harms the growth required for inflation protection. Something like 2% seems reasonably likely to work provided costs are kept low. It would still require the OP to take investment risk. If the OP made NI contributions the state pension could provide some additional protection in later years.

ChilliBob

Guys, I'm blown away by the replies and help here. I will give some proper replies tomorrow or early next week (still actually going through stuff at work!). 

Key thing I need to suss out now is where to tell my boss to put the cash, I thought NS&I was the way, but recent posts suggest it's a hideous idea, so I was going to go down crappy current account routes then feed H&L active savings until I had some kind of investing approach understood and setup. Which I won't rush into if I'm spread and safe. 

Once again, thanks so much, I'll reply again very soon  

Cus

To answer the original question, for me I pay a wealth management firm to manage my portfolio.  The fee I pay includes an IFA advising separately on all other items excluding the portfolio.