Where to invest £1m to generate 10%+ income with some risk

gm0

My thinking on portfolio design would be time in the market to capture long term returns (which may be less than historic average for a while from current start point (this will clearly be true for a spell at some point but who can say when that will be).  Variable income to avoid depletion during a "normal" valuation correction cycle.  Low cost. 

Portfolio design implication - a mix of funds anchored by global trackers adding some EM and Small capitalisation for additional equities diversification.  Not just global at weight with an arguable overconcentration in overheated US tech (despite recent mild correction)

If you like investment as a hobby and have knowledge of a particular market and sector than why not use that "edge" to invest a % selectively in something you know.

Also consider Value (sceptically evaluate fund contents or consider some anchor value stocks

I can't see the point of long bond funds at the moment and I dislike crappier corporate bonds as well due to the pre-pandemic overexpansion of low quality US credit.  Chickens which have yet to roost. 

So short bonds if any bonds at all alongside equities.  -ve return with interest rate rise downside risk - no thanks.

You need to decide how you feel about long tail risks and thus about gold and also the array of stuff being shilled as the digital equivalent "outside" of the central banks reach by the harbingers of central banking doom.

I am presently designing a long term hold and deaccumulate SIPP and ISA portfolio around these principles.  And waiting on an IFA who is going to recommend the advised offer they think best suits my situation and risk appetite.

fizio

gm0 said:

My thinking on portfolio design would be time in the market to capture long term returns (which may be less than historic average for a while from current start point (this will clearly be true for a spell at some point but who can say when that will be).  Variable income to avoid depletion during a "normal" valuation correction cycle.  Low cost. 

Portfolio design implication - a mix of funds anchored by global trackers adding some EM and Small capitalisation for additional equities diversification.  Not just global at weight with an arguable overconcentration in overheated US tech (despite recent mild correction)

If you like investment as a hobby and have knowledge of a particular market and sector than why not use that "edge" to invest a % selectively in something you know.

I am presently designing a long term hold and deaccumulate SIPP and ISA portfolio around these principles.  And waiting on an IFA who is going to recommend the advised offer they think best suits my situation and risk appetite.

That is the most helpful post to my thread so I very much appreciate you taking the time to go through it. My background is big Tech so I will be doing some inviting in that space for sure - but as you say I will start with some core global trackers. Would love to hear what you end up doing as it seems similar to what I'm trying to do - though I understand you can't get too specific about your own situation
Thanks again 

Steve182

There are plenty of investment trusts that have exceeded 10% or even 20% annualised growth over the past decade, most biased towards US/China tech etc.

However I think you may be wanting to jump on the bandwagon a bit late. The rally seen during the past decade or so cannot continue indefinitely.

I'm heavily invested in Scottish Mortgage, Amazon, Alibaba, JD.com etc but I have been for the past 4 to 5 years  and have profited handsomely. If I lose 10 or 20% of my portfolio in a dip I can just say, oh well, I'm still  50% up now (or whatever) from where I started so think less of it.  You would not be in that position if you dipped your toes in now.

Also I find it odd that someone currently sitting on £500K in cash would be considering higher risk investments. They are the polar opposite to cash. How would you feel if you bought say £250K in Scottish Mortgage, Tesla, etc etc then see 30% wiped off in 3 weeks, which is what happened in February?

[Deleted User]

Steve182 said:

However I think you may be wanting to jump on the bandwagon a bit late. The rally seen during the past decade or so cannot continue indefinitely.

True. Half a million in cash = time you can never get back.
You may come unstuck trying to catch up.

[Deleted User]

ZingPowZing said:

Steve182 said:

However I think you may be wanting to jump on the bandwagon a bit late. The rally seen during the past decade or so cannot continue indefinitely.

True. Half a million in cash = time you can never get back.
You may come unstuck trying to catch up.

That’s true but sounds like he does not need the money so objective has been met.

Going forward, I would have zero cash if all my needs are already  met with a DB pension. Go 100% stocks.  Diversified, low cost, world portfolio.  Leave 5% to play with and invest into individual stocks like Tesla or GME if you want excitement. 

You can never guarantee 10% return (assuming thats what you mean when you say income).  

[Deleted User]

Deleted_User said:

ZingPowZing said:

Steve182 said:

However I think you may be wanting to jump on the bandwagon a bit late. The rally seen during the past decade or so cannot continue indefinitely.

True. Half a million in cash = time you can never get back.
You may come unstuck trying to catch up.

That’s true but sounds like he does not need the money 

Only speculating but my sense is that the OP has easy money rolling in:
Landlord/Landlady? 

pete1975

out of interest how did you world tracker do,  im at the other end of the scale and i want to start a world tracker porfolio and i know past success is no measure of the future but just wondered if its performed reasonable well for you

Secret2ndAccount

fizio said:

I'll start by saying 'its a nice problem to have' and that I am in a fortunate position. Just retired in my late 50's and have a DB pension plus some property and no debts. This combination alone generates more than enough income for my needs inc normal holidays/treats etc - but by no means excessive. 
As a couple we have various investments through SIPP/ISA/etc and it roughly adds up to £1m. At the moment I am 50% in 'low risk' vanguard life strategy style funds and 50% cash. Now that I have a lot more time on my hands I am looking to get more 'hands on' and more adventurous with my investments. 
So I am researching as much as I can around managed funds, sectors, countries, etc to come up with a portfolio mix that will generate better than my global tracker. At this stage I am not looking at individual stocks. I will stay 50% in global tracker as a safety net. 
So the feedback I am looking for is suggestions around what kinds of portfolios other people have - who are looking for that 10-20% growth (with downside risk) and are fairly active. I have read about funds in US tech, US growth, china growth, semi-conductor and other specialist etf's etc 

"I've got enough money, but I could sure use some more". Seems like a very reasonable position, so no judgementalism from me. However, 10% per year, long term is very hard to achieve.

10% in one year is entirely doable. Half the people on here say they did it last year. Even over 5 years things have been pretty good. However, depending where you look for your data, stock market returns average out more like 5%.

Here's the thing: risk and reward largely travel hand in hand. So, if you invest 60% in equities, diversified across oceans and industries, and you keep 40% in fixed income (generally lower growth, but much better protected in case of a crash), you can feel pretty safe that you will get a return of 3% or more every year, on average. If you want more than 3%, you take some of the safe, fixed income investment, and move it to the more volatile equities. If equities have a good year, you see a greater return. If this happens to be the year when equities crash, or just drop a little, you will be left wishing you had kept that money in fixed income. The long term average return is bigger, but the volatility is greater too.

There is no free lunch. If there was some investment which would give a great return with low risk, everyone would buy it, the price would go up, and it would no longer be a great investment.

That's not to say you can't have an influence on your portfolio and its success. For example, US equities have returned more than UK equities for a number of years. Do you decide that a return to the mean is coming, and put your money in UK, or do you think that the trillions Biden is pouring into the economy will keep USA in the lead, and invest there. Or do you go average and buy some of each, in proportion to the size of the economies? This is what makes a market. Some people will gain, and others will lose.

So, if you realise what you are up against, and you want to go for 10%, what can you do? One choice would be to jump on what's been working for the last few years. Examples for the UK would be Baillie Gifford Global Discovery or Scottish Mortgage Trust (almost the same thing), or for US, Cathie Wood's Ark Invest funds. Your question there is whether these funds have seen most of their growth, or can keep picking the best stocks year after year. That's your call and your risk. China is another place where some expect to see significant growth over the next few years. Again, you may think that prices already reflect this.

Clearly there are plenty of people out there who have turned a small amount of money into a fortune. So what did they do? Well, some of them were good, or lucky. Plenty of people lose their shirt dabbling in the stock market, so there's money to be hoovered up by people on the other side. However, my view is that most people who are making big gains long term are getting in at ground level. Think Dragon's Den, only serious. They meet with small but growing businesses and have a good nose for the one that has the product, the addressable market, and the business sense and determination to make it. Invest a modest sum there, and you can turn it into a fortune. If you don't feel you have the contacts or the knowledge to do this yourself, I guess you could look into Venture Capital Trusts. They are risky, but returns can be good, and there are big tax benefits to be had. It's hard for the little guy to get in on it, but there is also turnaround investing. You buy in to a company that is performing badly, and turn the business around. The stock price goes up, and you make money - again a return that beats the market.

One thing to be very wary of is charges. Most of the people who get rich from the stock market are people charging others for their services. Be clear about how much of your profit you are giving up each year for the benefit of someone's expertise. They get their cut whether you win or lose.

[Deleted User]

ZingPowZing said:

Deleted_User said:

ZingPowZing said:

Steve182 said:

However I think you may be wanting to jump on the bandwagon a bit late. The rally seen during the past decade or so cannot continue indefinitely.

True. Half a million in cash = time you can never get back.
You may come unstuck trying to catch up.

That’s true but sounds like he does not need the money 

Only speculating but my sense is that the OP has easy money rolling in:
Landlord/Landlady? 

Yes; hard to get to 1M liquid on top of DB if you keep this much cash.  Inheritance? Sold property? Not that its any of our business. 

Barry_Bear

"to come up with a portfolio mix that will generate better than my global tracker. At this stage I am not looking at individual stocks."
https://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/