How to invest 35000 for a small regular income

solidpro

Pay off £35,000 of your mortgage and use what saving on what you were paying in each month as additional monthly spending money.

mooneysaver

eskbanker said:

mooneysaver said:

eskbanker said:

Albermarle said:

mooneysaver said:

The best you can make risk free at the moment is 3.5% in a fized term savings account

Apart from the fact that after 12 months your money will be guaranteed to be worth around 7% less.

Strictly speaking, the money is more likely to be worth over 10% less, given that OP is looking to generate income from it and so would presumably be accessing the interest monthly rather than leaving it to compound.

However, 10% real terms value loss would be partially offset by that 3+% income, so yes, the net effect would be in 7% territory as you say.

Perhaps also worth noting that 3.5% is the AER, which assumes that the interest is left to compound, so withdrawing the interest every month would drop the interest rate to the gross 3.45%....

The other reason to choose AER is that they are FSCS protected, which means your money is protected and the 3.5% is totally risk free (better bet than going for slightly higher interest without the protection IMO).

I think you're missing the points I was making - the reference to AER was highlighting that someone such as OP depositing a lump sum in a savings account in order to generate income doesn't receive the AER as such but the (slightly) smaller gross rate, because of not leaving the interest in the account to compound.

And I'm certainly not advocating that OP invests rather than saving in a FSCS-protected deposit account, but the issue that you (and others) seem to be missing is that doing so isn't "totally risk free" - there is no risk of capital loss but there is clearly inflation risk, as discussed above and on the first page or two of this thread....

That's right AER are just one option for depositing a lump sum. OP just needs to check for FSCS protection as the government will back up to £85k, so the full £35k will benefit from risk free returns.

The risk free limit is actually higher though as it's £85k per institution. Although once you get to that level it's sensible to start looking at notice accounts as its unlikely you'll need the full balance for something which can't wait 90 days.

grumiofoundation

mooneysaver said:

eskbanker said:

mooneysaver said:

eskbanker said:

Albermarle said:

mooneysaver said:

The best you can make risk free at the moment is 3.5% in a fized term savings account

Apart from the fact that after 12 months your money will be guaranteed to be worth around 7% less.

Strictly speaking, the money is more likely to be worth over 10% less, given that OP is looking to generate income from it and so would presumably be accessing the interest monthly rather than leaving it to compound.

However, 10% real terms value loss would be partially offset by that 3+% income, so yes, the net effect would be in 7% territory as you say.

Perhaps also worth noting that 3.5% is the AER, which assumes that the interest is left to compound, so withdrawing the interest every month would drop the interest rate to the gross 3.45%....

The other reason to choose AER is that they are FSCS protected, which means your money is protected and the 3.5% is totally risk free (better bet than going for slightly higher interest without the protection IMO).

I think you're missing the points I was making - the reference to AER was highlighting that someone such as OP depositing a lump sum in a savings account in order to generate income doesn't receive the AER as such but the (slightly) smaller gross rate, because of not leaving the interest in the account to compound.

And I'm certainly not advocating that OP invests rather than saving in a FSCS-protected deposit account, but the issue that you (and others) seem to be missing is that doing so isn't "totally risk free" - there is no risk of capital loss but there is clearly inflation risk, as discussed above and on the first page or two of this thread....

That's right AER are just one option for depositing a lump sum. OP just needs to check for FSCS protection as the government will back up to £85k, so the full £35k will benefit from risk free returns.

The risk free limit is actually higher though as it's £85k per institution. Although once you get to that level it's sensible to start looking at notice accounts as its unlikely you'll need the full balance for something which can't wait 90 days.

To clarify AER is not a 'product', it is simply an acronym for annual equivalent rate (AER).

You mean savings account are an option.

At the risk of going round in circles ad infinitum the incompleteness of claiming savings are "risk-free" is discussed earlier in the thread.

(although the second risk free presumably actually refers to FSCS protection - another type of risk!)

Daliah

mooneysaver said:

That's right AER are just one option for depositing a lump sum. 

Who are AER?

Daliah

mooneysaver said:

OP just needs to check for FSCS protection as the government will back up to £85k.

To clarify: Government / the taxpayer doesn't provide the protection. FSCS is a statutory industry-funded scheme. 

MX5huggy

Change the question to I’ve got £350k to invest and the answers would be different, but why?

4% is generally accepted as a sustainable draw down amount. So put 20% (£7000) the best paying instant access savings account and the rest in an Global Tracker fund (Vanguard is cheap with no trading fees). Every month take out £116 (that’s 4% divided by 12 months) from either the Account or Fund. 

if the Account is more than 20% of the total value of the pot you take from the account if the Fund is more than 20% of the total value you take from that. 

The other thing to look at is your pension or if you don’t have earned income making £2880 contributions to a pension that are grossed up to £3600 if you are over 55 then you can take out the whole lot. You’ll get 25% out tax free and would pay tax on the rest if it takes you over personal allowance. 

Apodemus

MX5huggy said:

4% is generally accepted as a sustainable draw down amount. 

...amongst a certain type of (mainly American) financial commentator, perhaps.

mooneysaver

Daliah said:

mooneysaver said:

That's right AER are just one option for depositing a lump sum. 

Who are AER?

They are a savings provider recommended by Eskbanker, see his post on the previous page.

eskbanker

mooneysaver said:

Daliah said:

mooneysaver said:

That's right AER are just one option for depositing a lump sum. 

Who are AER?

They are a savings provider recommended by Eskbanker, see his post on the previous page.

I said nothing of the sort - my post was highlighting the difference between AER and gross interest (in response to a post about a 3.5% account that you'd referred to):

eskbanker said:

Albermarle said:

mooneysaver said:

The best you can make risk free at the moment is 3.5% in a fized term savings account

Apart from the fact that after 12 months your money will be guaranteed to be worth around 7% less.

Perhaps also worth noting that 3.5% is the AER, which assumes that the interest is left to compound, so withdrawing the interest every month would drop the interest rate to the gross 3.45%....