£50k to Invest for a monthly return

Smudger78

Hi,
As the title suggests I will shortly have £50k which I would like to invest for a monthly return. I am hoping I can get 4% per annum return in order to be able to draw around £200/month without significantly diminishing the capital. Would be interested in the views of people with similar arrangements in place or experience of setting them up for others to get a feel for options and what kind of return might be possible. In terms of attitude to risk I would describe myself as medium/middle of the road.

Thanks

Another_Saver

What do you mean by monthly return?
What is your age, pension situation, mortgage/homeowning situation, cash savings, and do you have currently have any investments not in a pension (PEPs, stocks and shares ISAs, company shares, inherited or gifted shares, bonds, funds etc.)
£200/mo of £50k is a starting withdrawal rate of 4.8% which is a bit high to be sustainable indefinitely.
For now, a bit of education about investing (there's been another recent thread about it I'll link it here in a mo) and sticking the lot in NS&I premium bonds is my suggestion.

Smudger78

Another_Saver said:

What do you mean by monthly return?
What is your age, pension situation, mortgage/homeowning situation, cash savings, and do you have currently have any investments not in a pension (PEPs, stocks and shares ISAs, company shares, inherited or gifted shares, bonds, funds etc.)
£200/mo of £50k is a starting withdrawal rate of 4.8% which is a bit high to be sustainable indefinitely.
For now, a bit of education about investing (there's been another recent thread about it I'll link it here in a mo) and sticking the lot in NS&I premium bonds is my suggestion.

Thanks for the fast response, in answer to your questions:
- 42 and have three workplace pensions from previous employers. 

- Although I realise pensions are a tax efficient way of investing I do not want the money locked away in case I need to access it in an emergency.
- I currently have a stocks and shares ISA 
- What I mean by “monthly return” is I would like to receive a set amount of income from the fund each month and I am hoping over a year the majority of this would be funded from the return on the investment.
- I was hoping 4-5% would be achievable, I know this can be beaten on things like P2P lending but appreciate this is probably higher risk

Hope this helps clarify things...

csgohan4

if you invest outside of a tax wrapper, the gains will be taxed if you sell, or any dividends above 2k a year will be taxed accordingly.

investing is also long term 5-10+ years, would you be happy if your investment dipped 50% like most things in March 2020?

If you want a high return, it will come with a risk as well

Your best bet is to max out your tax efficiencies first, so pension, ISA, maybe consider salary sacrifice to drop down to the lower tax band if your higher for example and use the money you have to live on.

Another_Saver

The only way you're getting either a guaranteed set amount, or a likely set amount each month, is premium bonds or a savings account that pays monthly.
Definitely max out your tax efficiencies, so if you do want to invest, stick £20k in your stocks and shares ISA now, another £20k in April (unless you've already maxed it out).
There are few funds available that offer monthly income.
Medium risk + high income is not currently an option because bond yields are so low. Your only option if you want to invest this money to generate an income close to your target, other than buy to let, is equity income.
There are active funds available in this space.
I only use index funds.
 An equity, high income fund you could buy a FTSE all share index fund, as the UK's dividend yield is much higher than the rest of the world's right now, or VHYL, which holds the highest yielding stocks globally 

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-high-dividend-yield-ucits-etf-usd-distributing/overview

Vhyl pays dividends quarterly.
However, any 100% equity investment carries the usual equity risks, and both of these options have specific risks - concentrating your money in the UK, or focusing on higher dividend yielding stocks can be riskier than the wider global market and both strategies have done much worse than the wider global market over the past 5-10 years. 

You could also pick an accumulation class of a fund and some platforms will let you set up an automatic monthly withdrawal from it. This is not the same as receiving an income, this is just automating a sale of the capital and accumulated income.
A final point, don't think in terms of not touching the capital but in total return terms.
If you buy a fund, it goes up 30% one year and pays a 2% dividend, why be scared of selling another 2% from the fund to get some more income?

AnotherJoe

Smudger78 said:

Hi,
As the title suggests I will shortly have £50k which I would like to invest for a monthly return. I am hoping I can get 4% per annum return in order to be able to draw around £200/month without significantly diminishing the capital. Would be interested in the views of people with similar arrangements in place or experience of setting them up for others to get a feel for options and what kind of return might be possible. In terms of attitude to risk I would describe myself as medium/middle of the road.

Thanks

So you want the moon on a stick?

Might be available in an income focussed IT but not without significant risk of say, losing a substantial % in a  market  "correction"

Smudger78

Another_Saver said:

The only way you're getting either a guaranteed set amount, or a likely set amount each month, is premium bonds or a savings account that pays monthly.
Definitely max out your tax efficiencies, so if you do want to invest, stick £20k in your stocks and shares ISA now, another £20k in April (unless you've already maxed it out).
There are few funds available that offer monthly income.
Medium risk + high income is not currently an option because bond yields are so low. Your only option if you want to invest this money to generate an income close to your target, other than buy to let, is equity income.
There are active funds available in this space.
I only use index funds.
 An equity, high income fund you could buy a FTSE all share index fund, as the UK's dividend yield is much higher than the rest of the world's right now, or VHYL, which holds the highest yielding stocks globally 

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-high-dividend-yield-ucits-etf-usd-distributing/overview

Vhyl pays dividends quarterly.
However, any 100% equity investment carries the usual equity risks, and both of these options have specific risks - concentrating your money in the UK, or focusing on higher dividend yielding stocks can be riskier than the wider global market and both strategies have done much worse than the wider global market over the past 5-10 years. 

You could also pick an accumulation class of a fund and some platforms will let you set up an automatic monthly withdrawal from it. This is not the same as receiving an income, this is just automating a sale of the capital and accumulated income.
A final point, don't think in terms of not touching the capital but in total return terms.
If you buy a fund, it goes up 30% one year and pays a 2% dividend, why be scared of selling another 2% from the fund to get some more income?

Thanks for the offer and comprehensive response. In terms of Premium Bonds and Savings accounts the returns don’t appeal much to be honest, though I appreciate they are virtually risk free. I have considered BTL as we already have a portfolio however this reduces liquidity and makes access to the funds in an emergency more difficult.

I quite like the sounds of the index funds so will explore this option further with our FA when I meet him in the New Year. My current Stocks & Shares ISA is on the Old Mutual Wealth Platform so would need to check whether it accommodates setting up monthly sales as you describe.

Thanks again....

Alexland

Another_Saver said:

The only way you're getting either a guaranteed set amount, or a likely set amount each month, is premium bonds or a savings account that pays monthly.

There are some investment trusts that provide regular smoothed divis (not usually monthly if that really matters) at around that level which seem likely to be sustainable however their ability to grow capital or income in line with inflation is less certain and they would be above the OP's stated medium risk profile. I wouldn't go passive with high income as there are plenty of traps out there.

AnotherJoe

Here's a candidate for you OP, TRIG ( I own it).

Aims to pays 5% annualised, quarterly so you'd have to smooth out the payment yourself, but does it really need to be monthly, that would be quite limiting in terms of investment choice? 

The income comes from long term (c25year) energy supply contracts, mostly wind with a bit of solar IIRC.

If you look at the share price its been reasonably steady.

Its probably somewhat riskier than you might want because although the payout is backed, end of the day its just one companies income unlike an income IT which might have 50 companies to provide the income. BUt ist a higher payout to compensate for that.

Another_Saver

Smudger78 said:

Another_Saver said:

The only way you're getting either a guaranteed set amount, or a likely set amount each month, is premium bonds or a savings account that pays monthly.
Definitely max out your tax efficiencies, so if you do want to invest, stick £20k in your stocks and shares ISA now, another £20k in April (unless you've already maxed it out).
There are few funds available that offer monthly income.
Medium risk + high income is not currently an option because bond yields are so low. Your only option if you want to invest this money to generate an income close to your target, other than buy to let, is equity income.
There are active funds available in this space.
I only use index funds.
 An equity, high income fund you could buy a FTSE all share index fund, as the UK's dividend yield is much higher than the rest of the world's right now, or VHYL, which holds the highest yielding stocks globally 

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-high-dividend-yield-ucits-etf-usd-distributing/overview

Vhyl pays dividends quarterly.
However, any 100% equity investment carries the usual equity risks, and both of these options have specific risks - concentrating your money in the UK, or focusing on higher dividend yielding stocks can be riskier than the wider global market and both strategies have done much worse than the wider global market over the past 5-10 years. 

You could also pick an accumulation class of a fund and some platforms will let you set up an automatic monthly withdrawal from it. This is not the same as receiving an income, this is just automating a sale of the capital and accumulated income.
A final point, don't think in terms of not touching the capital but in total return terms.
If you buy a fund, it goes up 30% one year and pays a 2% dividend, why be scared of selling another 2% from the fund to get some more income?

Thanks for the offer and comprehensive response. In terms of Premium Bonds and Savings accounts the returns don’t appeal much to be honest, though I appreciate they are virtually risk free. I have considered BTL as we already have a portfolio however this reduces liquidity and makes access to the funds in an emergency more difficult.
The same mindset should apply to investing. If you think you may need to access this month quickly in the short term, that sounds more like you want to stay in cash.
I quite like the sounds of the index funds so will explore this option further with our FA when I meet him in the New Year. My current Stocks & Shares ISA is on the Old Mutual Wealth Platform so would need to check whether it accommodates setting up monthly sales as you describe.
Thanks again....

There have also been some excellent suggestions from @alexland, @anotherjoe and @csgohan4, and please tell me you have an independent financial advisor not a restricted one!

Alexland

If you are willing to take more capital risk there are some well established investment trusts on the AIC website and you could get access to them via iWeb. The income smoothing, leverage and discount / premium do make them more complicated than a modern fund so do your research but the UK Income ones are offering attractive yields at the moment due to Brexit uncertainty.
https://www.theaic.co.uk/income-finder/dividend-heroes