How would you invest £1M, starting from scratch?

MaxiRobriguez

Alexland said:

A million isn't much if you're looking to retire at 45 and still need to purchase a property. Say £250k into a property and then £750k into drawdown at 2% pa rising with inflation (trying to preserve the capital spending power) would start around 15k pa which would give a basic lifestyle. Maybe a bit more could be pulled forward and spread before SP age and some extra NI years could be purchased but I'd rather work a bit longer than take such a cut to my living standard.

This.

I think if it was me I'd buy house - probably mortgage it rather than outright own it, if you can find a mortgage anyway if earnings are slim, and assuming for £250k you can find a reasonable one in that area.

Use a small proportion of the remainder to drawdown small amounts to supplement any earned income for a few years. Say £10k annually.

That should leave you with £700k minimum in principal, more if you did manage to mortgage the property. After five years you'd hope that would be closer to £800k+ which could mean you drawdown c.£25k annually which you could reduce when state pension comes into play.

That said, £1m for someone who earns very little is quite the sum. It's almost certainly worth speaking to an IFA, even if it costs you a bit. Consider it insurance. 

MaxiRobriguez

maxsteam said:

jimjames said:

 Good luck if you can buy a house for £150k, round here starting price is £250k and for one you'd want to live in as a millionaire much more.

 Round here starting price is around £50k. £150k would get something really nice (a 6 bedroom, 3 bathroom town house in the city centre)

Careful with inadvertently giving potential personal information away online due to fraud risk. I can tell by that post you either live in Darlington or the 1970's.

Grumpy_chap

maxsteam said:

£150k would get something really nice (a 6 bedroom, 3 bathroom town house in the city centre or a 3 bed terraced house in a decent area with a new kitchen and a garden, for example).

Where?
If I could do that, I could retire right now.  Of course, assuming this generous accommodation is in an area I would want to live with good transport, good facilities / amenities, pleasant parks and open space, low crime rate, good community...

eskbanker

JakeHyde said:

...an Index fund like the SNP 500...

If Scotland ever achieves independence, this is presumably what its primary stock market index would be?   Although it would probably be more like the SNP 25....

maxsteam

Haha. Not Darlington, not 1970s. This is currently sold STC. It was used as offices. It's in the city centre. It's 2 minutes walk from the main library, 3 minutes walk from the main theatre. There are a couple of bars nearby which I would not visit but they are round the corner. It is likely to stay as offices but someone who likes such bars would be happy living here...



The point I am making is not that this house is right for everyone but that £150k will get considerably more than an entry-level property in much of the UK. I could list a dozen or more cities where similar properties are available, not down south and not tourist areas.

GeoffTF

JakeHyde said:

Hi guys,

Okay so... I have a ‘Friend’.

He’s 45.

Unmarried,

No dependants,

No house (Renting).

Although he’s a creative freelancer, in this current climate he has virtually no current meaningful source of employment, so we might as well assume he’s unemployed.

Out of the blue he wins £1M.

He has no intention of blowing it on parties or frivolous luxuries, but instead wants to make the money work for him - to grow and generate a healthy yearly income.

He has been assigned a financial advisor/potential fund manager, to help him make his money grow.  But from what I’ve been reading, a lot of people (inc. Warren Buffett) say sticking your money into an Index fund like the SNP 500 hands down beats any kind of professional fund manager, manually picking stocks and shares.

A fund manager usually charges 1%, while the Vanguard SNP 500 is something like 0.07%, but I think there is a platform charge on top of that.

Obviously my ‘Friend’ would like to own his own house, car, and a few other necessities. Maybe eventually buy his parents a new home closer to him.

But after that, what could he do to make this money grow? With as little effort as possible? Haha 😉

I was thinking: 

£50k Personal Money/Ventures 

£150-200k Own House

£200-250k Index Fund?

£50k National Savings Bonds

£400-500 Rental properties, maybe?

(But only if they wouldn’t become his full time job, and they could operate passively.)

£1k Crypto wild card 😜

I know nothing about index funds, is there a way to put the lions share into it, and somehow draw a yearly income from it without affecting any of the unit shares?

As someone who doesn’t come from money, but who greatly respects it and appreciates the freedom it can provide, I’d be grateful for any and all your advice. Thanks for taking the time to respond. 🙏😇

I would LOVE to see Martin Lewis do a segment on his show: “What to do with a Million Pounds” haha! But there’s no way I would broadcast such a question over Twitter, for all to see. Feel free to tag him! 😉

£1 million is not what it once was. It will not generate a large income for a 45 year old without a high chance of running out of money. Buying a house is sensible, Giving up the day job may not be sensible. The S&P 500 makes sense for US based investor, but a global tracker would be more sensible for a UK based investor. Putting half his money in one of those and the other half in fixed term savings accounts (with some ready cash) would make sense.

Prism

JakeHyde said:

I know nothing about index funds, is there a way to put the lions share into it, and somehow draw a yearly income from it without affecting any of the unit shares?

You simply sell some unit shares to the level of income you would like. You may also get a dividend too.

eskbanker

Prism said:

JakeHyde said:

I know nothing about index funds, is there a way to put the lions share into it, and somehow draw a yearly income from it without affecting any of the unit shares?

You simply sell some unit shares to the level of income you would like. You may also get a dividend too.

'Index funds' is of course a very broad term, given the range of indices available!  Anyone looking for income does indeed have the option of selling units of generalist funds chosen on the basis of total return, but there is the (decreasingly popular) alternative of specifically seeking high yield stocks, which can be tracked via the likes of FTSE All-World High Dividend Yield Index:

https://research.ftserussell.com/Analytics/FactSheets/temp/125be10c-0fc9-490d-bec1-4c7602907e8a.pdf

IvanOpinion

JakeHyde said:

I would LOVE to see Martin Lewis do a segment on his show: “What to do with a Million Pounds” haha! But there’s no way I would broadcast such a question over Twitter, for all to see. Feel free to tag him! 😉

The problem with your suggestion is that if you ask such a question of 10 different IFAs you would get at least 30 different answers.

Alexland

IvanOpinion said:

The problem with your suggestion is that if you ask such a question of 10 different IFAs you would get at least 30 different answers.

If paying IFA ongoing charges then the drawdown rate would need to be even more conservative so retiring at 45 probably wouldn't be possible and the best advice would likely be to keep working / get a job.