where to invest for the next five years?

ejfield

Following the sale of a property, I have about £230000 to invest, for up to five years, at which point I hope to pay off the mortgage and retire!  The problem is, what should I do with the money?  Property prices seem likely to fall in the short term.  I'm not sure whether five years is long enough to invest in stocks and shares and expect a reasonable return.  Savings accounts still offer minimal returns, but they are safe.  Are there any other options?

thegentleway

What’s the interest rate on your mortgage?
I guess the other option is to repay your mortgage now/earlier.

Albermarle

ejfield said:

Following the sale of a property, I have about £230000 to invest, for up to five years, at which point I hope to pay off the mortgage and retire!  The problem is, what should I do with the money?  Property prices seem likely to fall in the short term.  I'm not sure whether five years is long enough to invest in stocks and shares and expect a reasonable return.  Savings accounts still offer minimal returns, but they are safe.  Are there any other options?

5 years is usually the quoted minimum time period to invest based on historical statistics and the risk of making a loss over that period ( about 10%). Ideally you should invest for longer. If you are investing over a shorter time period, you would probably be better with a medium risk multi asset fund.
Anyway it is not necessary to be 100% in any direction. You could invest some and save some. Savings rates are increasing.

ejfield

thegentleway said:

What’s the interest rate on your mortgage?
I guess the other option is to repay your mortgage now/earlier.

Mortgage interest rate is 1.45%, fixed for the next five years, so I would hope to get a better return by investing, even without the early repayment penalties.

thegentleway

ejfield said:

thegentleway said:

What’s the interest rate on your mortgage?
I guess the other option is to repay your mortgage now/earlier.

Mortgage interest rate is 1.45%, fixed for the next five years, so I would hope to get a better return by investing, even without the early repayment penalties.

That’s a great rate so you are likely to get better return. Can you remortgage/pay it off later if in 5years investments have underperformed?

ejfield

thegentleway said:

ejfield said:

thegentleway said:

What’s the interest rate on your mortgage?
I guess the other option is to repay your mortgage now/earlier.

Mortgage interest rate is 1.45%, fixed for the next five years, so I would hope to get a better return by investing, even without the early repayment penalties.

That’s a great rate so you are likely to get better return. Can you remortgage/pay it off later if in 5years investments have underperformed?

Probably not, even if I wanted to!

biscan25

This all depends on your level of risk aversion.
If you are the most risk averse, I would buy gilt TG27 https://www.londonstockexchange.com/stock/TG27/united-kingdom/company-page
Which yields 4.4% pa until maturity, and is reasonably tax efficient. You could invest in enough just to cover your mortgage and take more risk with the remainder if you wanted.

If you are happy to take on more risk, you could add some corporate bonds of appropriate term, or some equity if inflation protection is a priority, and you are happy to accept significant volatility.

Multi assets funds as suggested by @Albermarle could do this for you.

Have you thought about making significant pension contributions? These could be tax efficient if you are still employed, and you can draw 25% tax-free when you retire.

Albermarle

Have you thought about making significant pension contributions? These could be tax efficient if you are still employed, and you can draw 25% tax-free when you retire.

OP you should also consider this option, due to the tax relief available. However there are some limits on how much you can contribute in a tax year.

thegentleway

ejfield said:

thegentleway said:

ejfield said:

thegentleway said:

What’s the interest rate on your mortgage?
I guess the other option is to repay your mortgage now/earlier.

Mortgage interest rate is 1.45%, fixed for the next five years, so I would hope to get a better return by investing, even without the early repayment penalties.

That’s a great rate so you are likely to get better return. Can you remortgage/pay it off later if in 5years investments have underperformed?

Probably not, even if I wanted to!

You can't afford to invest it then?

biscan25 said:

This all depends on your level of risk aversion.
If you are the most risk averse, I would buy gilt TG27 https://www.londonstockexchange.com/stock/TG27/united-kingdom/company-page
Which yields 4.4% pa until maturity, and is reasonably tax efficient. You could invest in enough just to cover your mortgage and take more risk with the remainder if you wanted.

Most risk adverse would be savings?

Considering mortgage needs paying off in 5 years and you can get similar interest rate from savings, why risk it?