inheritance & new to investing

camilleb2

Hi,

I have inherited  around £120,000, i'll use 60000 to pay off the mortgage but want to also start a private pension as I dont currently have one. Im 53 and have done some initial research, im considering a vanguard fund as it will de risk as i get older. 

Im concerned about putting a large amount into the stock market at a volitile time especilly at my age although in theory I have around 15 years to retirement. Im most concerned about making the cash retain its value.

As well as the turbulant state of the world, overvalued? stock market and tarriff fuelled recession on the cards I feel like it might be a bad time to start investing desite being keen to get the money invested somewhere. If you were in my shoes in todays world would you wait things out ?

 on the risk side, i see a lot of global index  funds but find it difficult to  end up  with a clear view on one risk level, is there any value in having one dynamic and one safer version of a similar fund?

El_Torro

The problem with waiting it out is that you can end up waiting forever, there are always many reasons not to invest if we look hard enough for those reasons. If you invest it all now the likelihood (not a certainty) is that you will be better off than drip feeding the investment in over a period of months or years. 

Having said that one option would be to keep some of the money in the pension in cash and invest chunks of it over a period of time. Like I say this will probably give a worse result, though might make you feel better.

Make sure you are clear on the limits of what you can pay into a pension every year while still getting the tax relief. You might not be able to invest the £60k (which becomes £75k after tax relief) in one go.

QrizB

camilleb2 said:

... want to also start a private pension as I dont currently have one.

Are you employed or self-employed, or neither?

camilleb2

@QrizB self emloyed

camilleb2

@El_Torro true, it just feels like a particularly volitile right now, especially in the context of my age but I take your point. what do you think about a couple of different  versions of the same fund or is that pointless?

Eyeful

You only really need to pick one fund at the level of risk you are comfortable with.

1. Anything to do with money has some form of risk, all that alters is the size and type of risk.
Example: A low risk savings account protected by the FSCS up to £85K has inflationary risk.
RPI% 1948 to 2025:  https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23

2. Welcome to the world of investing.
Investing means putting your money at risk.
If you look you will always find a reason not to invest. Only with hindsight do you find when the correct time to start is.

3. You do not have to put your money into the market all in one go. It may be less stressful for you to put equal amounts into the market each month, for a period of time, say 12 or 24 months.

4. I suggest you consider a low cost Multi Asset Fund with a share/ bond split you are happy with and will let you sleep at night and not worry about your investments. These funds will supply you with a ready made portfolio.
https://monevator.com/passive-fund-of-funds-the-rivals/
https://www.ii.co.uk/ii-accounts/sipp/sipp-investment-ideas/target-retirement-funds

5. Below are some videos which should be of interest and help to you.

(a) Risk:  https://meaningfulmoney.tv/2022/09/26/how-much-investment-risk-should-i-take/

(b) Investing: https://www.kroijer.com/

(c) Pensions
https://www.youtube.com/watch?v=PswTGd6Tzd0

(d) Multi Asset Funds
https://www.youtube.com/watch?v=lGQ9KyQq8Jw

(e) Sequence of risk at retirement
https://www.youtube.com/watch?v=oyzR7tMmj9o

QrizB

camilleb2 said:

@QrizB self emloyed

Ok, so how much you can pay into a pension will be limited to your self-employment income for the year.

So if your income from self employment for 25/26 is £10k, you can contribute £8k to a pension. You'll receive £2k in tax relief so that's £10k in total.

(The maximum for the year is £60k, even if your income is more than that. And if your income is less than £3600, you can still add £3600.)

camilleb2

@Eyeful thanks so much for taking the time to put that together - ill go through it tomorrow. Im happy with risk, im just concerned as Ive left it so late / less recovery time. I find the risk questions difficult to answer, basically id like it to grow as much as possible, at least more than inflation without big risks, guess that makes me cautious. Looking at vanguard funds and also hsbc global strategy balanced so far

Albermarle

As well as the turbulant state of the world, overvalued? stock market and tarriff fuelled recession on the cards I feel like it might be a bad time to start investing 

 it just feels like a particularly volitile right now, especially in the context of my age 

One issue here is that people get very focused on what they see in the news today, and forget what has happened in the past, or what might happen in the distant future. So what you see and hear in the news today weighs disproportionately on your view of the world. 

Second issue is that financial markets go through periods of volatility very regularly, and will do the same in future. You just have to hope that they grow in the long term, which they will based on history.

The recent volatility has actually been rather mild compared to some periods in the past, although as usual media reports tend to be sensationalist in reporting markets. In fact in the last 12 months a typical global index fund is up around 5%, as is a typical medium risk multi asset fund. Not very exciting but not exactly Armageddon.

At Age 53, you could well be invested for another 30 or 40 years.

ps Make sure you have some cash savings for emergencies, and check you are on target for a full state pension.

kempiejon

camilleb2 said:

Hi,

I have inherited  around £120,000, i'll use 60000 to pay off the mortgage but want to also start a private pension as I dont currently have one. Im 53 and have done some initial research, im considering a vanguard fund as it will de risk as i get older. 

Im concerned about putting a large amount into the stock market at a volitile time especilly at my age although in theory I have around 15 years to retirement. Im most concerned about making the cash retain its value.

As well as the turbulant state of the world, overvalued? stock market and tarriff fuelled recession on the cards I feel like it might be a bad time to start investing desite being keen to get the money invested somewhere. If you were in my shoes in todays world would you wait things out ?

 on the risk side, i see a lot of global index  funds but find it difficult to  end up  with a clear view on one risk level, is there any value in having one dynamic and one safer version of a similar fund?

With £60k to invest and a desire to start a private pensions you might be limited to your relvant UK earnings as to how much you can get in that pension this year but it'll all be in give it a few years. In the meantime there are ISAs if you dont already use them to keep some money out of the scope of tax.

The stock market is always volatile, at your age you could be invested for decades if you wait for a benign time you might not know until it has passed and you might wait forever.

I know I can't tell if markets are over or uder valued, when the next global recession is coming or where to spot the next big winner. So as to what to do in your shoes I can;t know that either. Our personal circumstance will influence our choises but in my shoes with a £60k windfall I'd fill ISA and SIPP and get it all invested in there. I have mostly equities in my retirement plan and have enough cash for now so more equities for me. If it one is tremulous then one could do half now and half in 6 months or drip feed over the next 12/18 months.

Now, when you say you want the cash to retain its value do you mean the cash value, your £60k is worth £60k today, tomorrow and forever whilst attracting some interest. Or protect do you want to protect that £60k from inflation for example using index linked gilts. What Vanguard in your example might do is give it the chance to increase it's real buying power by taking a risk on the stock market where one might be able to see average annual growth of a few percent above inflation over the next couple of decades. 

Risk is a very personal thing you need to be aware that stock and your investments into it can and will fall in value. Active/passive, dynamic or safer doesn't necessarily change that. 

Albermarle

Our personal circumstance will influence our choises but in my shoes with a £60k windfall I'd fill ISA and SIPP and get it all invested in there.

The OP does not mention having any savings. If that is the case they should keep some of the £60K in cash, for shorter term needs/emergencies.