Is it worthwhile investing £10k?

Blibble

colsten said:

@Blibble, how will your partner's pension (state and works/private) provisions be kept alive once she stops working? 

Thanks for the query! She's not planning on being out of work for a significant period and will be looking for something new in the autumn, so we've not made any plans in that regard. That said, I'm also at a bit of a loss as to what we could do except save the contributions which would have gone in to her workplace pension when she's out of work; let me know if there's other options available, though!

pjcox2005

colsten said:

A word of warning: if your donor dies within 7 years of gifting you the money, some or all of it will still form part of their estate and inheritance tax might become due on it. Make sure you know where you stand. https://www.gov.uk/inheritance-tax/gifts

For clarity, whilst it may form part of the donors estate within that 7 year period, there would be no additional tax for you to pay. That £30k gift is permanent, it may just be that additional tax is required to be paid out of the Donor's final assets (although inheritance tax reliefs could exempt it).

Alexland

Blibble said:

Can you advise why that would be a risk of up to 50% crash short-term? From my limited reading, products marked as "global" reflect the whole range of the market better and are a lower risk?. All Cap appears to be a safer bet than "small cap" which appears to be riskier. Let me know what I'm missing!

While a diversified equities fund spreading money across lots of countries and sectors is highly unlikely to ever suffer total loss, markets are increasingly synchronised and there are periods when enough people lose confidence in asset values to cause them to crash. See below graph of the FTSE World index going back to the mid 90s where you can see the dot com crash, financial crisis and recent but unusually brief covid crash.

Crashes are only really a problem if you need to sell at the low prices (which is why most people say don't invest money you might need to spend in the next 5-7 year or whatever) or you are the nervous type who might sell low anyway. Just imagine how annoying it would have been to have invested a lum sum in the year 2000 although with dividends the recovery would have been a few years quicker.

So for people that don't want to see their money drop around 50% and possibly take years to recover they tend to mix in less volatile (but usually lower return) assets such as bonds which tend to move in their own cycles sometimes inversely correlated to equities. This can be done by adding a bond fund or just using a multi asset fund such as Vanguard LifeStrategy.

Blibble said:

Is this preferable to having a global / all-world product? If so, what's the benefit - is it just lower fees?

Yes if on the Vanguard platform by holding separate developed and emerging market funds the overall fund manager cost is lower than buying one that covers both. However on more expensive platforms that offer wider choice there are low cost funds that cover both anyway.

MaxiRobriguez

Alexland said:

Yes if on the Vanguard platform by holding separate developed and emerging market funds the overall fund manager cost is lower than buying one that covers both. However on more expensive platforms that offer wider choice there are low cost funds that cover both anyway.

For someone new to investing with a "small" amount of initial capital it's probably worthwhile them just having the one global fund to start with. It's easy to understand, doesn't require re-balancing thought and won't give the OP questions like "should I overweight EM slightly" if performances start to diverge. Cost might be ever so slightly higher but for £10 over a few years the OP will be more likely to stay the course, learn better habits etc.

thebarber

use the 10k as a deposit to buy a small flat then rent it out in 25 years time your tenant just bought your flat for you sell the flat for £180k and you just made a ton for doing nothing

Albermarle

thebarber said:

use the 10k as a deposit to buy a small flat then rent it out in 25 years time your tenant just bought your flat for you sell the flat for £180k and you just made a ton for doing nothing

The last previous post on this thread was 13 months ago.

inflationbuster

Stick your 10K across 5 to 10 dividend paying FTSE 100 stocks in an ISA.    Here's a list of all FTSE 100 companies.

https://en.wikipedia.org/wiki/FTSE_100_Index

For example: Aviva are paying near 7% yield.  BP are paying 4.3%.

Good luck!