How to invest 35000 for a small regular income

mylifemyrules

Hi, 

I've come into a inheritance of 35000, Ideally I want to invest it in a way that would give me a small regular income as I'm ill and can't work.  I'm not sure if such a thing is possible but hopefully someone can give me a idea. Do you have any advice please on what type of investment could do this for me. I have no debts (apart from mortgage which has 97000 left on it) 

Any advice would be great, thank you 🙂

The_Unready

What is your appetite for investment risk, and what rate are you currently paying on your mortgage? Are you still in an ERC period for the mortgage?

Much more info needed before anybody can offer sound advice.

mylifemyrules

Well I don't mind a bit of risk but I wouldn't want to risk it all. No ERC. I can't remember the rate I'll need to look that up. 

Daliah

If you stick to saving, as opposed to investing, the best rate you can currently get is 3.5%. This would pay you a monthly £100, unchanged for the next 5 years.

Obviously, £100 today has higher buying power than £100 in 5 years' time.

Savings will preserve your capital sum but it cannot preserve the buying power of your £35,000. Investing might give you a better return but it would be unlikely to meet the current inflation rate, and you have no guarantee that your capital gets preserved, or that you can take a monthly income without affecting the capital.

Can you make an overpayment on your mortgage, and if so, how would it affect your monthly repayments?

Looking more to the future: what are your pension arrangements?

Albermarle

mylifemyrules said:

Well I don't mind a bit of risk but I wouldn't want to risk it all. No ERC. I can't remember the rate I'll need to look that up. 

When we talk about investment risk in this context, we are not normally talking about the risk of losing 100%. That is assuming we are talking about mainstream diversified investments ( not individual company shares, or Bolivian rain forests. cryptocurrency etc).
The risk is that the value of the investment will go down, and be worth less than when you bought it when you need to take/use the money. However over the long term the risk of loss decreases as the long term trend is generally up.
So a high risk investment in this context means it will probably go up and down a lot, sometimes quite alarmingly, but in the long run should grow well.
A lower risk investment will not go up and down so dramatically, but long term growth will only be modest.
So the time scale is important. Over 10 years is best.

dunstonh

mylifemyrules said:

Well I don't mind a bit of risk but I wouldn't want to risk it all. No ERC. I can't remember the rate I'll need to look that up. 

There is no risk free option when it comes to income provision.

Cash savings where you draw the interest will be ravished by inflation.  £35k in savings will be worth around £22,750 in 10 years time and £14,780 10 years after that.   You will eventually start needing to eat the capital and it will start a spiral resulting in all the money being used up.

Investments suffer investment risk but are less likely to suffer inflation risk.    

So, it's more about what risks you are willing to accept.

Paying down the mortgage is probably the closest risk free option here.

BML

I have been lucky enough never having had to worry about money in that I always had a job and was marred to a woman who kept me on the straight and narrow. I opened my account with Barclays over 60 years ago in the good old days when one could actually speak to a Bank Manager and there were banks all over the place rather than automated machines designed to protect the bank from such inconveniences as customers.
I have just received my bank statement from Barclays and knowing what their loan rates are I was rather miffed at noting that on our Everyday saver of £3,260.77 we were paid £0.03 and I thought, enough is enough and after not looking at this forum for a long time I opened it finding a ferocious amount of heartening information headed with highlights such as 5% and spreading one's risk. The first thing I'm going to move is to remove the excess money from my current account and the second is to seek advice from an expertso hear goes and many thanks to everyone that contributed to my awakening.  

kassy64

mylifemyrules said:

Well I don't mind a bit of risk but I wouldn't want to risk it all. No ERC. I can't remember the rate I'll need to look that up. 

There is no risk free option when it comes to income provision.

Cash savings where you draw the interest will be ravished by inflation.  £35k in savings will be worth around £22,750 in 10 years time and £14,780 10 years after that.   You will eventually start needing to eat the capital and it will start a spiral resulting in all the money being used up.

Investments suffer investment risk but are less likely to suffer inflation risk.    

So, it's more about what risks you are willing to accept.

Paying down the mortgage is probably the closest risk free option here.

A bank or building society offer you a fixed 3% interest on your £35k for example 3 years,

giving you a guaranteed income of £80 odd a month (before any potential tax liability) how is that ‘not’ classed as risk free?

eskbanker

kassy64 said:

A bank or building society offer you a fixed 3% interest on your £35k for example 3 years,

giving you a guaranteed income of £80 odd a month (before any potential tax liability) how is that ‘not’ classed as risk free?

There's no risk of capital loss, but there is inflation risk, i.e. if inflation exceeds 3% (as it currently does by some margin) then the money loses real-terms value....

dunstonh

kassy64 said:

mylifemyrules said:

Well I don't mind a bit of risk but I wouldn't want to risk it all. No ERC. I can't remember the rate I'll need to look that up. 

There is no risk free option when it comes to income provision.

Cash savings where you draw the interest will be ravished by inflation.  £35k in savings will be worth around £22,750 in 10 years time and £14,780 10 years after that.   You will eventually start needing to eat the capital and it will start a spiral resulting in all the money being used up.

Investments suffer investment risk but are less likely to suffer inflation risk.    

So, it's more about what risks you are willing to accept.

Paying down the mortgage is probably the closest risk free option here.

A bank or building society offer you a fixed 3% interest on your £35k for example 3 years,

giving you a guaranteed income of £80 odd a month (before any potential tax liability) how is that ‘not’ classed as risk free?

If you draw the 3% interest, the £35k remains at £35k on the statements.   However, inflation erodes the value in real terms.
  Over a 10-year period using typical inflation rates,  that £35k won't have the spending power of £35k as we know it today.  It will have a spending power of around £22,750.

And not only that, the 3% interest of £1050 will have a spending power of around £682.

Sooner or later, that level of interest will be insufficient and it will become necessary to start drawing against the £35k.

Using cash savings for income provision is actually a fairly high risk if it is for the long term.

kassy64

Opening poster mentions nothing about protecting the £35k against inflation (which is probably impossible in todays climate) just wants to ‘give him/herself a small monthly income’.