Advice for earning an income through investments??

Macka09

What’s the best way to earn a regular income from investments If you had £200k to use?

Would it be property or is it possible to make anything through investing that amount?

cheers guys 

wmb194

Macka09 said:

What’s the best way to earn a regular income from investments If you had £200k to use?

Would it be property or is it possible to make anything through investing that amount?

cheers guys 

Dividends from equities, property income distributions from Reits, interest from bonds, interest from savings accounts. In addition, you might look for some capital gains as well. What’s, “best” will depend on your circumstances and your appetite to risk.

Bigwheels1111

I opted for 5 & 7 year fixed rate savings.

With annual payout.

I keep an emergency fund around, in a Chip ISA 5.1%, I use this to fund Regular savers 13 or 14 of them as of today.

I wanted NO risk at all.

El_Torro

The problem with relying on cash is that over the long term interest on savings won't keep up with inflation. Currently interest rates are higher than inflation, this is not going to be the case indefinitely though. 

For this reason it makes sense to invest at least some of the money in the stock market. This isn't that straightforward though, investments are volatile so if you want a regular income you'll need to manage when you sell investments and you'll probably want a cash buffer too. 

Buy to Let is an option, though also not straightforward and definitely not without risk. Some people do have property that they rent out as part of their portfolio (myself included) though you really need to know what you're getting yourself into.

Albermarle

Macka09 said:

What’s the best way to earn a regular income from investments If you had £200k to use?

Would it be property or is it possible to make anything through investing that amount?

cheers guys 

Yes you can but would suggest when dealing with a large amount of money like this, then it would pay to spend some time learning more about savings, investments, pensions, tax issues etc
Savings - All Guides - MoneySavingExpert
Investing in stocks for beginners: How to get started – MSE (moneysavingexpert.com)

Bostonerimus1

Just a semantic point. Earned income comes from work. When it comes from investments it's passive income. Actually it's more than a semantic difference because earned and the various types of passive income are often taxed differently.

aroominyork

Bostonerimus1 said:

Just a semantic point. Earned income comes from work. When it comes from investments it's passive income. Actually it's more than a semantic difference because earned and the various types of passive income are often taxed differently.

It's more important than just semantics or tax. When we got to work to 'earn' income we have some certainty about what we will bring home at the end of the month. Having that mindset for investments is dangerous.

dunstonh

Bigwheels1111 said:

I opted for 5 & 7 year fixed rate savings.

With annual payout.

I keep an emergency fund around, in a Chip ISA 5.1%, I use this to fund Regular savers 13 or 14 of them as of today.

I wanted NO risk at all.

No such thing as no risk at all.  Indeed, you have created potentially higher risk by what you have done.  You may not have investment risk but you have replaced it with shortfall risk and inflation risk.

If the OP did the same as you, their £200,000 would be worth around £134,000 in 10 years time in spending power.  It would still say £200k on the statement but it would only buy around £134k.    Not only that, but the the spending power of the interest would be lower as well.   

Inevitably, there comes a point where the person is no longer getting enough interest in real terms and they start eating the capital to make up for it.  Which in turn pays less interest and more capital is needed and spiral of the balance going down, not only in real terms but in reality begins until it runs out.

Linton

Buying property means running a business and coping with awkward tenants within legal restrictions.  Do you want the hassle? 

Have you considered an annuity where you buy a fixed income for your whole life, but of course you lose your £200K

Your other options then are savings accounts or investments. Income from savings wont match inflation and in my view are only suitable for short-ish fixed periods. You can currently get about 4.5% fixed per year from savings though of course future interest rates could be much less.

Investments can give you inflation linked income that should last for a lifetime as long as you are not too greedy.  About 3-3.5% should be sustainable for your lifetime.

Which is best depends on your needs:
1) How old are you?
2) How much income do you want?
3) For how long do you want it - the whole of your life or just for some fixed period?
4) Do you want inflation matching? .

Bigwheels1111

dunstonh said:

Bigwheels1111 said:

I opted for 5 & 7 year fixed rate savings.

With annual payout.

I keep an emergency fund around, in a Chip ISA 5.1%, I use this to fund Regular savers 13 or 14 of them as of today.

I wanted NO risk at all.

No such thing as no risk at all.  Indeed, you have created potentially higher risk by what you have done.  You may not have investment risk but you have replaced it with shortfall risk and inflation risk.

If the OP did the same as you, their £200,000 would be worth around £134,000 in 10 years time in spending power.  It would still say £200k on the statement but it would only buy around £134k.    Not only that, but the the spending power of the interest would be lower as well.   

Inevitably, there comes a point where the person is no longer getting enough interest in real terms and they start eating the capital to make up for it.  Which in turn pays less interest and more capital is needed and spiral of the balance going down, not only in real terms but in reality begins until it runs out.

Works for me as don't need or spend the money.

I'm a full time carer for my friend.

I live off less than 2k a year, house, food, car etc all taken care of.

No bills at all.

I could live like a king, but nothing to spend it on.

Its more money than Ive ever had or earned in a year.

Just wish I had somthing to spend it on.

dunstonh

Works for me as don't need or spend the money.

So, your scenario is different then as the OP wants to live off the money.