Trying to work out interest when retired..

jamesd

ian, it sounds like an extremely poor plan to use savings accounts for this. Better income prospects are available without undue disadvantages.

ipri

Thanks again..I'd be interested in any ideas.....I'm hoping this is a very short term thing ....will get ideas (here?),...and source an advisor. ian

ipri

jamesd wrote: »

ian, it sounds like an extremely poor plan to use savings accounts for this. Better income prospects are available without undue disadvantages.

Hi ...I'm fairly risk averse...what sort of ideas are you thinking of?? Ian

jamesd

ipri, short term it's OK. Longer term you should pick an annual variation in capital value to target - say up to 20% drop - and ask the IFA to build a mixture of investments that has that as the highest likely drop in a bad year. Since you aren't planning to take out the capital most of the time these normal ups and downs just won't matter much to you, unless they worry you just because they are happening.

The two funds I mentioned earlier - BlackRock UK Absolute Alpha and Cru Investment Portfolio are reasonable if you want to keep the money in for at least a year and are willing to take a risk of some drop. The Cru one often has a high initial charge so buy it from Hargreaves Lansdown which reduces that a lot, otherwise it wouldn't be suitable for a fairly short term.

I'm assuming here that the total period of investment is much longer than a year, like most of the rest of your life, and we're talking just about the initial short term - otherwise just one year wouldn't be really suitable for investing at all.

Even so, I wouldn't suggest putting more than 25% into those two investments. It'd be too much concentration of risk to do more - concentration increases your risk and that's why you should expect an IFA to use at least ten to fifteen or more investments that invest in different areas and/or ways.

Here's a mixture that I've suggested to others to investigate this year, when worried about uncertainty in the markets:

30% BlackRock UK Absolute Alpha
20% Cru Investment Portfolio
20% Invesco Perpetual Monthly Income Plus
20% Invesco Perpetual Income
10% Neptune Global Equity

There's enough variation there that you might consider up to a couple of hundred thousand in it. Beyond that it'd really be too concentrated again. Each invests in a different way or area so they won't all move in the same way at the same time and the higher risk ones near the bottom are balanced out by larger amunts in the lower risk ones at the start. The chart shows how the volatilities differ and why so much is in the more stable ones (colors are red, blue (almost straight line), yellow, green, gray/blue (lots of ups and downs) in fund order). The ones at the start will do best if the markets go down, the ones at the bottom if they go up, the combination should do well either way.

But this is really just a taste of what an IFA would be expected to do for you, selecting a mixture of investments that complement eachother. Totally standard practice and routine business for any that do lots of investment business.