How to invest inheritance money

Help123help

Hello all! 

Please help me make a good decision on how I should invest my inheritance. 

I have acquired £60,000.
prior to this I bought a flat, 40 year mortgage 4.5%. I am overpaying £200 a month on that from my salary. 

So back to the 60k.
so far I have put 10k in a 5.5% 18 month bond.
i plan to put 20k in a cash isa at 4.5% for 1 year.
I am thinking for now 10k on ETF / index funds. 

But where do I start with this and how do I choose! 

Thanks! 

Mark_d

In my opinion there is little value in using your ISA allowance for cash.  You will earn a bigger capital gain & dividends from shares/funds and this is what you need to protect from taxes.  So after putting 10k in your 5.5% bond, I would put 20k in an S&S ISA.  Perhaps put the remainder in a tracker fund that targets capital growth.

Help123help

Thanks! How do I choose which s and s ? 

friolento

When do you need the money?

What are your pension provisions?

What is your tax band?
What is your age?

How much of the money could you afford to lose?

Help123help

friolento said:

When do you need the money?

What are your pension provisions?

What is your tax band?
What is your age?

How much of the money could you afford to lose?

Don’t need the money anytime soon. Investing do long term!
I am 28.
I have an nhs person which I have maxed out since I was 22.
I mean I can afford to lose all of it, but I don’t want too 😁

leosayer

Hard to say without a lot more detail about your circumstances and future plans but maybe you could split as follows:

£15k pay off mortgage if you can overpay that much without penalty
£15k in an ISA invested in global equity index fund for 10+ years
£15k in savings accounts for rainy day money if you don't already have it
£15k on a memorable holiday and raise a glass to your departed benefactor

Mark_d

Help123help said:

Thanks! How do I choose which s and s ? 

https://www.vanguardinvestor.co.uk/what-we-offer/index-active-products

I would go for an index fund (lower charges).  Use income shares inside an ISA (since they're more stable) but go for accumulation shares outside the ISA (as they'd be more efficient for tax reasons).

I tend to prefer UK investments since I have a better understanding of our economic climate and less of an understanding of exchange rates etc.

I also tend to prefer a high level of risk since we are several decades away from retirement.

But these are personal choices and not necessarily a suggestion.

Cisco001

ETF / index funds with shock and share isa. I personally don't want to calculate capital gain tax

El_Torro

The first step is to decide how much you want to keep in cash. You may have done this already since you are planning to keep £30k in cash. An emergency fund is typically between 3 and 6 months worth of expenditure. Since you just bought a flat I guess you're not saving up for a deposit or other big expenditures. 

The rest can go into your mortgage, your pension, Stocks & Shares ISAs, or a combination of the 3. How much you should put in each depends on your circumstances and what you feel most comfortable doing. 

If you're looking for tips on where to invest then a global tracker or multi asset fund is suitable for most people who are looking to invest for 10 years or more. Monevator has a summary of the most popular multi asset funds: https://monevator.com/passive-fund-of-funds-the-rivals/

Albermarle

How to invest in a stocks and shares Isa: The quick and easy guide | This is Money

EthicsGradient

Mark_d said:

Help123help said:

Thanks! How do I choose which s and s ? 

https://www.vanguardinvestor.co.uk/what-we-offer/index-active-products

I would go for an index fund (lower charges).  Use income shares inside an ISA (since they're more stable) but go for accumulation shares outside the ISA (as they'd be more efficient for tax reasons).

I tend to prefer UK investments since I have a better understanding of our economic climate and less of an understanding of exchange rates etc.

I also tend to prefer a high level of risk since we are several decades away from retirement.

But these are personal choices and not necessarily a suggestion.

"Income shares are more stable"? Not sure what you're trying to say here, but it sounds wrong. Accumulation shares are not "more tax efficient"; you pay the same tax, but documenting it becomes more complicated with accumulation shares (and you end up pooling everything in the same investment, so that there's only one option is you decide to sell part of it; with income shares, you could invest in one fund, and then use the income from it and future contributions to go into another. That then gives you the choice later of which to sell, which might be the difference between paying capital gains tax and not).

The typical advice is the other way round; use accumulation shares inside an ISA (no tax worries, and you can just leave it alone until you want to sell), and income shares outside (simpler to sort out tax, and more flexible for ways to avoid CGT).