£120k to invest for 3yrs+

coupleuk

Hello All

Please can anyone give me some advice ?

My husband and I are about to sell our house for £190,000 and have no mortgage.

We are going to live in a friends spanish villa for 2-3 years and want to know what to do with our money whilst we are away.

We plan to put £70,000 into a Nationwide savings account which is 4.75%.

But, we cannot decide on the remaining £120,000.

We did think of buying a property and renting it out, which would give us around £5,000 after expenses.....but it doesnt seem worth it, unless we think house prices will rise during the 3 years (we cannot even decide whether they will fall either).

Would you suggest putting the whole amount into Nationwide as this would give us £5,700 on our £120,000 (plus the interest on the other money).

Are there any better savings accounts for us ? (we do not want to open another current account).

Are there any good isa or tessa accounts that we can join for just 3 years ?

By the way, if it makes any difference, we are both in our 30's and wont be working for the 3 years.

Do you think it is worth putting money into shares?

What we really want to do is to go away and return in 3 years with a decent increase on the money we invested.

Sorry to be so dithery but we can't decide what to do for the best.

Thank you everyone.

Liz

cgnao

Don't put all of your cash in one bank. The FSA deposit insurance scheme only covers up to £35,000 per account.

Use three banks:

1) Nationwide (4.75%)
2) ING Direct (4.75%)
3) Cahoot (4.85%)

Open two accounts per bank, one in your name the other in your O/H's. Put £27,000 in each. This is a total of 162,000, accounting for 90% of your cash, and will provide £7,749/year interest gross of tax.

With the remaining 10% buy gold as a hedge against inflation which is starting to rear its ugly head.

You can either buy gold coins/bars from one of the many gold dealers in london (http://www.atsbullion.com or http://www.goldline.co.uk) or invest in an allocated gold account like http://www.goldmoney.com. Coins/bars are nicer but a pain to store, buy and sell.

http://www.gold-eagle.com/editorials_04/evans061304.html
http://www.economist.com/finance/displaystory.cfm?story_id=4425575
http://observer.guardian.co.uk/business/story/0,6903,1577521,00.html

Good luck.

cgnao

Ah and I forgot. When you do not work, every one of you does not have to pay tax on the first £4,895 interest. Do not forget to fill in form R85 which you can find at http://www.hmrc.gov.uk/forms/r85lp.pdf

If you live abroad, you don't have to pay tax in the UK but might be liable to foreign tax. In this case, you will have to fill in form R105 which you can find at http://www.hmrc.gov.uk/pdfs/r105.pdf

Also useful http://www.hmrc.gov.uk/pdfs/ir138.htm

Hope this helps.

blacksta

Hi

Give all 2 to me and i will make you an extra 30,000 in 3 yrs

hope to hear from you soon

Tee-Bhoy

blacksta, I`ll give you 2 quid!!!!!!!!!!if you gie me 30,000

YorkshireBoy

cgnao wrote:

The FSA deposit insurance scheme only covers up to £35,000 per account.

It's actually a little bit less at £31,700 per person. Further details here...

http://www.fscs.org.uk/consumer/key_facts/limitations_of_the_scheme/compensation_limits/

ag359

cgnao wrote:

Don't put all of your cash in one bank. The FSA deposit insurance scheme only covers up to £35,000 per account.

Use three banks:

1) Nationwide (4.75%)
2) ING Direct (4.75%)
3) Cahoot (4.85%)

Open two accounts per bank, one in your name the other in your O/H's. Put £27,000 in each. This is a total of 162,000, accounting for 90% of your cash, and will provide £7,749/year interest gross of tax.

With the remaining 10% buy gold as a hedge against inflation which is starting to rear its ugly head.

You can either buy gold coins/bars from one of the many gold dealers in london (http://www.atsbullion.com or http://www.goldline.co.uk) or invest in an allocated gold account like http://www.goldmoney.com. Coins/bars are nicer but a pain to store, buy and sell.

http://www.gold-eagle.com/editorials_04/evans061304.html
http://www.economist.com/finance/displaystory.cfm?story_id=4425575
http://observer.guardian.co.uk/business/story/0,6903,1577521,00.html

Good luck.

Why is gold a hedge against inflation? (Genuine, if ignorant, question)

coupleuk

Thanks for the replies.

I dont understand the "gold thing" either.

Looking at one of the websites you quoted, they only give an indication (graph etc) of a good return for 2002.

Since the 50s, gold has increased in value (higher or lower than shares??) but for the past decade or two the price has been VERY volatile, with huge gains and losses.

I guess for a 10% gamble it may pay off for us.

What are peoples thoughts on buying shares - probably a portfolio of low (£50,000), medium (£50,000) and risky (£20,000) and keeping the remaining £70,000 in nationwide at 4.75%.

Im not too sure about putting all of it into basic savings accounts as it is widely believed interest rates will fall again (??).

I even took a look at buying property thru auction - Ive seen 2 beds within 20 miles of me at £60,000 with tenants paying £4,800pa (a return of 8% before agents fees etc), plus any increase in property price (or that dreaded decrease).

Thanks

Liz

PS could anyone recommend a good starting place for shares - ideally a firm who arent going to charge me for a chat.

dunstonh

You have three years. Investing in shares over 3 years should be considered high risk. High risk/high potential.

JasonG_2

Why three years? What are you going to do when you come back? Will you want to buy a house, will you be able to afford one by then, if you dont own one during that 3 years?

I agree with gold and shares for three years is pretty high risk profile. If you want a home when you return, maybe its best to get one now, and rent it? Yes there are pitfalls with this to, how do you feel about the management of it, a sitting tenant etc etc. You may have views on the housing market, but no crystal balls around here.

If you are comfortable with a deposit return then play safe and speard it around a little if you wish. however consider that by spreading around you are also gambling with the strength of the organisation, ie a large bank vs a small (relative) mutual etc. Also, dont beat yourself up over any potential missed gains in the stockmarket for example. Make your decision and move on.

Most advisors wont look at anything bar deposit based for less than 5 years, but I suspect the story is much more complex as ever and i'd take some advice. Considerations such as retirement planning/ property in a Sipp/ offshore etc etc.

Also if your going to put it in a deposit based environment, interest rates (and inflation) will of course affect it, so consider a portion in a fixed rate maybe, to fix the return if they fall, obviously runing the risk if they rise. A individual corporate bond, or fixed account would do this.

Sorry if that seems a little bitty, thinking as I type. Good luck, nice problem to have.

(Just an opinion, not to be viewed as advice etc etc blah blah).

Good luck.