Inheritance

theoretica

When I started investing, I did so with a relatively small sum to get used to seeing the value wobble up and down.  I seen relaxed and got bored of watching it.

If you are paying off a chunk of mortgage, will you be reducing your mortgage payments, or term?  Be sure to also budget for the payments you won't need to make to the mortgage.

Alice_Holt

granddaughter1980s said:

OK so I think the general consensus seems to be lump sum, which I'm fine with as the idea with at least some of this money is to just dump it somewhere and not look at it for 20 years and hope that when I do look at it it's not less than what it is now (which, to be brutally honest, is my main fear - having never done this before but learned a lot about the Wall Street Crash at school and having watched the Big Short).

Now I have further utterly naive questions...

1. Better to put it all in one pot or pop it in a couple of different options if the plan is to leave it for a while?
2. If we assume, as one poster put it, around 40-60k, if I put 20k in an ISA for easy access (found one at 4.5% for 5 years, allowing for short term panic), 20k in some kind of basic index fund and 20k in some kind of pension does that sound sensible or should I just put all of it in one place? I believe the term 'diversification' comes up a lot in the youtube videos I've been frantically watching so just wondering about how best to go about it.

And glad Albermarle brought up the psychological aspect of all of this - the main Vanguard page had performances over the last few years and even though only this year was negative it still made me panic a little. I think it's just because it's all a bit new but the idea of 100k not being worth 100k in 25 years time has put it all in a different light for me which is super helpful!

        If you are putting in a lump sum (and have already used your ISA allowance in a cash ISA) - then you need to be mindful of the tax impact of tax on capital gains (and dividends) of investment gains in a general investment fund.
(Especially with the reduction of the CG allowance from c.£12k to £3K).
        Personally I'd use the ISA £20k annual allowance for my S & S investment, as you have the £1k savings personal allowance to mitigate against tax on savings interest.

    The decision of lump sum or pound cost averaging, for me, entirely depends on how comfortable (or not) you would feel (psychologically) putting, say, £100k into a fund and then watching it reduce in value to, say, £70k, over the next months.
If you may panic and sell out (and crystallise a loss of £30k)- then pound cost averaging may be better.   

    BTW -  You won't get 4.5% on instant (easy) access savings - more like 2.5%.
5 year bonds require you to lock the money away for 5 years.  (As Albermarle has said) .That is not what you may want, for spend on home improvements, etc.    

The Vanguard funds are diversified IMO - in that they contain equities from the world markets and also an element of bonds (i.e 20% in the LS 80 fund). 

Albermarle

Mr._H_2 said:

Albermarle said:

I do not think there has ever been a 20 year period when markets went down. Even after disastrous events like the Wall Street crash, the markets did recover eventually. Even after 10 years you would have to be very unlucky to be seeing a loss.

Japan?

OP still hasn't given information about their existing mortgage.

There is always an outlier, but in practice it would be highly unusual for your average UK investor to have more than a few percent in Japan.

If you are putting in a lump sum (and have already used your ISA allowance in a cash ISA) - then you need to be mindful of the tax impact of tax on capital gains (and dividends) of investment gains in a general investment fund.
(Especially with the reduction of the CG allowance from c.£12k to £3K).
        Personally I'd use the ISA £20k annual allowance for my S & S investment, as you have the £1k savings personal allowance to mitigate against tax on savings interest.

Good point.

granddaughter1980s

S&S ISA route with vanguard seems a sensible place to start. Seeing as this is recent inheritance and I had pretty much zero savings prior to this point I can use all my ISA allowance this year and then open another one next April with another pot. So thinking ISA lifestrategy fund at 60/40 which seems sensible for the slightly risk averse...thoughts?

Mortgage has 20 years left and is at about 350k so definitely don't have enough to pay it off in total but have enough to either overpay monthly or put in a lump sum, not sure which is most efficient, have grand plans to call HSBC and enquire as to their opinions...

Mr._H_2

granddaughter1980s said:

Mortgage has 20 years left and is at about 350k so definitely don't have enough to pay it off in total but have enough to either overpay monthly or put in a lump sum

What is the interest rate at the moment? Fixed? Variable? If fixed when does fix end?

Yes, you should definitely double-check with HSBC what restrictions there are (if any) in terms of overpayment.

Albermarle

So thinking ISA lifestrategy fund at 60/40 which seems sensible for the slightly risk averse...thoughts?

A low cost multi asset medium risk fund such as VLS 60, is almost the default option for many new investors.

Only worth making the point that Vanguard are not the only providers of these products. This is worth a read.

Best multi-asset funds - Monevator

granddaughter1980s

Mr._H_2 said:

granddaughter1980s said:

Mortgage has 20 years left and is at about 350k so definitely don't have enough to pay it off in total but have enough to either overpay monthly or put in a lump sum

What is the interest rate at the moment? Fixed? Variable? If fixed when does fix end?

Yes, you should definitely double-check with HSBC what restrictions there are (if any) in terms of overpayment.

Currently fixed at 1.94% which ends at the end of 2024 and an overpayment max of 10% so currently deciding whether to funnel 10% all at once or to drip feed it month by month, I'm not sure how much difference it makes if we're on a fixed rate tbh....any thoughts?

Mr._H_2

granddaughter1980s said:

Mr._H_2 said:

granddaughter1980s said:

Mortgage has 20 years left and is at about 350k so definitely don't have enough to pay it off in total but have enough to either overpay monthly or put in a lump sum

What is the interest rate at the moment? Fixed? Variable? If fixed when does fix end?

Yes, you should definitely double-check with HSBC what restrictions there are (if any) in terms of overpayment.

Currently fixed at 1.94% which ends at the end of 2024 and an overpayment max of 10% so currently deciding whether to funnel 10% all at once or to drip feed it month by month, I'm not sure how much difference it makes if we're on a fixed rate tbh....any thoughts?

Consider taking the money you have earmarked for paying down the mortgage, and putting it all in a two-year fixed rate savings account instead; it is very likely that you can earn more interest, even after tax, depending on your income tax situation (at the enhanced rate of 45%, you'd need an account paying 3.53% to break even). This assumes that there’s no penalties on your mortgage once the fixed rate ends, and you’ll be able to pay off as much as you want at that point, if it make sense then.

Also, did you see my earlier post?

AlanP_2

What is your partner's situation as regards pension etc? Assuming you wouldn't object to putting some of your inheritance in to assets in their name.

Joint planning to maximise tax free allowances etc makes great sense

granddaughter1980s

Yep had plans to abuse some of his ISA allowance as well although he's paid much better than me and may want to actually put some of his salary into his allowance! Will go off on the hunt for some decent fixed savings accounts to save in for the next couple of years! Any pointers would be amazing!