National savings Bonds ?

montycat_2

Are they any good ,is it worth investing in them?
I am looking at the Income bond ,possibly investing £100,000.
Thankyou

cheerfulcat

Hi, montycat,

The NS&I interest rates are notoriously poor, and the Income Bond product has a variable rate, so if base rates go down again, so will your income. Have you looked at fixed term deposit accounts from banks and building societies?

BTW, I'm sure that you already know this, but for anything more than a very short period ( three years, say ) cash is not a good place for your money, especially if you are using the interest for income; inflation will steadily nibble away at your nest egg.

montycat_2

Thanks I am just looking at options .
Trouble is ,the more advice I get the more confused I am.lol
I am so used to debt and now i no longer am in debt I can't cope with afluence .UGH !!!!!!

cheerfulcat

Hi, montycat,

Congratulations on doing so well! Keep in mind that there is absolutely no reason to rush to action; as I said, for the short term deposit accounts are perfectly fine. There are some books and websites which you might find helpful; here's a short list -

Be Your Own Financial Adviser

http://www.amazon.co.uk/exec/obidos/ASIN/1844900126/qid=1126763266/sr=2-2/ref=sr_2_9_2/026-9549969-1547612

Financial Planning for the Individual

http://www.amazon.co.uk/exec/obidos/ASIN/1860899595/qid=1126763314/sr=1-1/ref=sr_1_0_1/026-9549969-1547612

The Independent Pensioner ( not just for pensioners! )

http://www.amazon.co.uk/exec/obidos/ASIN/071603011X/qid%3D1126763367/026-9549969-1547612

The Motley Fool UK Investment Guide

http://www.amazon.co.uk/exec/obidos/ASIN/0752265393/qid=1126763400/sr=1-1/ref=sr_1_2_1/026-9549969-1547612

Winning with Shares

http://www.amazon.co.uk/exec/obidos/ASIN/0340793384/qid=1126763437/sr=1-1/ref=sr_1_2_1/026-9549969-1547612

Motley Fool website ( ignore the ads for the Value Investor newsletter for now )

http://www.fool.co.uk/lrninvnov.htm?ref=jump_page
http://boards.fool.co.uk/messages.asp?mid=9539112&bid=50084
http://www.fool.co.uk/valuehome.htm

Incademy

http://incademy.com/pages/home.htm?ginPtrCode=10002

Some of the books are expensive, so it might be worth asking your local library to get them for you :-)

You will find things a lot less confusing if you can decide what you want the money to do, how risk tolerant you are and how much work you are prepared to do. Do you want or need an income, or are you looking for capital growth? Or do you just want to preserve the present value? Are you willing to take the chance that you might lose some capital value in attempting to get a better return? Do you have the time/inclination to handle your investments yourself or do you want to hand everything over to someone else to deal with ( bearing in mind that this costs money, one way or another )? You don't have to answer these questions here ( though if you do, it would make it easier to give pertinent answers );just have your position clear in your own mind.

As far as the actual investments are concerned, a general rule is that the more risk you take, the higher your potential return. Stock market investments normally outperform cash, and government offerings such as the National Savings one, being considered ultra-safe, usually return the least.

Your age comes into the picture as well. If you are in your eighties, I would say bung it into NS Pensioners' Bonds or spend the lot - OTOH, the closer you are to your twenties, the more I would encourage you to put it into the stock market.

Cheerfulcat

montycat_2

Hi ,
I will answer your questions so ,here goes .

I am 40 ,a widow of 3 months and have 3 children (eldest is 9).
I need the money (it is from my Dh pensions life assurances etc.)to provide an income for me and the kids .I don't have a mortgage .
Because of this I am prepared to take a few risks but not mega -risks .
I would like to preseve the present amount /have an income and make money (yes,I know a tall order)
Being a single Mum who is struggling with DH's death ,I do not have the time to manage my finances 100% (or the savvy)
I also have an 11.5 hour a week job and can't increase my hours due to an already stretched family life .
Potentially ,I have £150,000 to invest .
So all help appreciated.

cheerfulcat

Montycat, I am sorry for your loss. I will help as much as I can! Haven't got time for much of a post tonight ( will post more fully tomorrow ), but I think that you're right not to want to take big risks; having said that, if you are taking an income which is greater than the return generated, you have not just the risk but the certainty of eroding your capital.

Will have a think tonight & post more tomorrow.

Take care

Cheerfulcat

montycat_2

Hi ,I don't want a huge income ,with benefits ,my part time job ,pension (from dh ) I only need a monthly income of about £1000.As I said ,I am mortgage /rent free so my biggest cost is gone .
Does this info.help further?

cheerfulcat

Hi, montycat,

Yes, knowing what you're aiming for helps a lot. Do you really mean £1000 a month? That would require an after-tax return of 8%; I can't think of a safe investment which returns more than 4% after tax. Putting the whole £150k into fixed term deposit accounts would get you ~£300 a month after tax. Even putting the whole lot into the highest-yielding, safe-ish share I can think of [ a very bad idea ] only gets you ~£10,500 a year.

You could consider putting a portion into high interest deposit accounts, for income, and a smaller portion into several growth-oriented stock market funds ( since you don't want to run the investments yourself ) for growth of capital. You could also put up to £10,000 per issue into NS&I index-linked certificates, which return the rate of inflation + a small percentage...not good for income but it would preserve some capital.

Another option would be to put one year's worth of "income" into a deposit account...that way you don't have to worry about looking for an investment that pays out a monthly income, and could just concentrate on getting enough growth to cover what you've taken out + a bit more IYSWIM...

I'll come back with more thoughts...must run now

Cheerfulcat

montycat_2

Hi ,
My total income needs to be £1000 a month but about £800 of that is benefits and my wages so I only need about £200 from the investment .

cheerfulcat

Well, that makes things a lot easier! You could put £60k into a high interest, fixed term deposit account; at 5% that should get you 200-ish a month after tax.

That leaves £90k to invest for growth/inflation proofing. Some stock market exposure is almost essential, but only for that money which you are willing to risk losing.There is a lot to be said for having a small portion - perhaps a maxi-ISA's worth - in an index tracker. Some people don't like these, since you are literally just following the chosen index blindly, both up and down. However, most managed funds are benchmarked to an index...if you look at graphs of their performance you will see that they are in fact "closet trackers", so you might as well get a proper tracker, as they are far cheaper than managed funds.

Having said that, a managed fund where the manager is not bound by an index and where he or she is free to invest in his/her own fashion can be a good addition to a portfolio. These funds usually have words like "aggressive" and "special situations" in their names. There is a website, Trustnet, which gives information about many funds' make-up and performances.

http://www.trustnet.co.uk/

If you do go for collective funds, I suggest that you spread your money across 5 or 6, and try to make sure that they are not all invested in the same shares/sectors.

EDIT: Arghh! I can't believe I left this bit out!

My personal preference is for directly-held shares, largely for reasons of control and expense ( funds are a *very* expensive way to invest when you take into account the effect of charges on your investment). Normally direct investing requires a fair deal of effort and a certain amount of monitoring is required. However, the High Yield Portfolio concept as discussed here -

http://boards.fool.co.uk/Messages.asp?mid=9542717&bid=51166

and here -

http://www.fool.co.uk/news/foolseyeview/2000/fev001106c.htm?ref=valuehome

is a simple "long term buy and hold" strategy where you invest equal amounts in 15-20 different shares with, erm, high yields and either take the dividends as income or reinvest them for capital growth. There aren't many shares which are suitable and most of them are discussed on the HYP board.

Any money left after all this could be held in a high interest account with a view to allocating it at a later date, perhaps when you feel more comfortable with the whole idea of investing. You could even put some into a series of fixed term deposit accounts with different maturities - say a one, two and three year one -with a view to dealing with each tranch as it matures. The advantage of doing this is that you will then be able to invest in what seems right at the time. The disadvantage is of course that your money is tied up.

One thing to bear in mind is that interest rates are in a strange state right now...they should by rights be heading upwards but I have a sneaking suspicion that that won't happen anytime soon ( for political reasons ), though at some point it must. So if you *are* going for fixed term, fixed interest accounts you might like to think about opening them at different times...just an idea. OTOH, you might look back in 6 months' time and curse me for putting you off when you could have got 5% instead of a " best buy" at 3.2% :-)

HTH a little

Cheerfulcat