Sensible low risk investment

jake_jones99 · 16 January at 2:26PM

Hi everyone, I have around £120k available to invest. Around £50k are already in a stocks and shares ISA, as before I invested in a passive fund tracking FTSE100 and made around £10k in the past year. However, I feel that ship has sailed and sold all shares. Ideally I would want to move and invest in property. Would you have other sensible low risk alternatives?

bd10 · 16 January at 3:35PM

You could consider REITS. Less idiosyncratic risks as you buy a hopefully diversified portfolio or various underlying properties. It does come with factors to consider: Are rents inflation-linked/proofed? What are the tenants? What's the rent collection situation? What's the fund's exposure to interest rate rises? What sector? We're coming out of the pandemic and work/life balance and culture is likely to change. Permanently or temporary? What sectors within real estate are likely to benefit going forward? What's the valuation: discount/premium to net asset value.

As for low risk, one thing 2020 taught us, when markets got sold en masse, REITS suffered as well. So while the upside correlation to the equity market may be low, the downside correlation is likely to be higher. The flipside to this is: REITS were to be had at healthy discounts to NAV.

bostonerimus · 16 January at 3:49PM

You have made the classic error of trying to time the market and not thinking long term. Don't worry lots of people do that. If you want to avoid the very high risk of inflation making you poorer you should be invested in a diverse selection of investments that can grow over a number of decades. Property is not low risk.

dunstonh · 16 January at 9:34PM

as before I invested in a passive fund tracking FTSE100

That is very poor quality investing if that is your only risk based investment. Very little diversification and a very active decision to only invest in UK large caps.

Ideally I would want to move and invest in property.

....at a time when the Government is expected to continue hitting landlords.

What other funds do you have as £100k isn't much to get low-risk property portfolio. Low risk tends for property tends to occur when you have around 5-6 properties or more.

Would you have other sensible low risk alternatives?

Investing in the FTSE100 as you did was high risk. So, what has changed in your circumstances that high risk previously but only low risk now?

london21 · 16 January at 9:39PM

You are not currently diversified.
Just Uk FTSE 100?

Proprrty is not low risk, what happens when your tenant defaults and does not make rent payments.?

jake_jones99 · 16 January at 9:57PM

dunstonh said:

as before I invested in a passive fund tracking FTSE100
That is very poor quality investing if that is your only risk based investment. Very little diversification and a very active decision to only invest in UK large caps.

Ideally I would want to move and invest in property.
....at a time when the Government is expected to continue hitting landlords.

What other funds do you have as £100k isn't much to get low-risk property portfolio. Low risk tends for property tends to occur when you have around 5-6 properties or more.

Would you have other sensible low risk alternatives?
Investing in the FTSE100 as you did was high risk. So, what has changed in your circumstances that high risk previously but only low risk now?

Can you explain how it's not diversified and high risk? It distributes the investment in 100 different companies, and it changes slower than most other investments. I cannot handle sharp changes psychologically. It offered also a regular dividend payment.
Maybe you can give an example of low risk that would clarify it.

jake_jones99 · 16 January at 10:00PM

dunstonh said:

as before I invested in a passive fund tracking FTSE100
That is very poor quality investing if that is your only risk based investment. Very little diversification and a very active decision to only invest in UK large caps.

Ideally I would want to move and invest in property.
....at a time when the Government is expected to continue hitting landlords.

What other funds do you have as £100k isn't much to get low-risk property portfolio. Low risk tends for property tends to occur when you have around 5-6 properties or more.

Would you have other sensible low risk alternatives?
Investing in the FTSE100 as you did was high risk. So, what has changed in your circumstances that high risk previously but only low risk now?

In addition to what I said, around £50,000 comes from selling another property, coming from family. So they would expect it going in another property, as they have no experience investing.

jimjames · 16 January at 10:52PM

jake_jones99 said:

dunstonh said:

as before I invested in a passive fund tracking FTSE100
That is very poor quality investing if that is your only risk based investment. Very little diversification and a very active decision to only invest in UK large caps.

Ideally I would want to move and invest in property.
....at a time when the Government is expected to continue hitting landlords.

What other funds do you have as £100k isn't much to get low-risk property portfolio. Low risk tends for property tends to occur when you have around 5-6 properties or more.

Would you have other sensible low risk alternatives?
Investing in the FTSE100 as you did was high risk. So, what has changed in your circumstances that high risk previously but only low risk now?

Can you explain how it's not diversified and high risk? It distributes the investment in 100 different companies, and it changes slower than most other investments. I cannot handle sharp changes psychologically. It offered also a regular dividend payment.
Maybe you can give an example of low risk that would clarify it.

A bond fund would be low risk. A mix of shares and bonds lower risk than just shares. I don't understand your comment about changes. It can and has dropped 50% over a short period of time. That's a much higher drop than many people would tolerate.

The FTSE100 is also quite unbalanced in terms of the sectors that are covered, it might be 100 companies but if they're mainly banks or oil companies then it doesn't give you much diversification. It also only features companies listed in the UK which excludes 96% of the companies worldwide.

https://www.statista.com/statistics/710680/global-stock-markets-by-country/

I would also be very wary about investing money for other people especially when risk might not be fully appreciated.

dunstonh · 17 January at 12:48AM

Can you explain how it's not diversified and high risk?

The UK makes up around 4% of the global economy (that figure moves around depending on how you measure it - so its a ballpark figure).
The UK stock market is made up of small, medium and large companies. The large cap companies are low growth companies. Many near the end of their life unless they diversify out. However, UK large cap suffers from a desire to provide high dividends at the expense of investment to grow further. The best growth has come from the small and mid caps.

However, you chose to ignore the rest of the world and the UK small and mid caps to focus just on the large caps. The FTSE100 is considered a weak index made up of yesteryear industries. It is too heavily weighted to just a handful of companies.

The FTSE100 is capable of falling 50% in 12 months. That is high risk.

It distributes the investment in 100 different companies, and it changes slower than most other investments.

It does not invest evenly and a 40-50% inside 12 months is not a slow change. In the last 25 years you have seen 2 drops in excess of 40% and one at 35%. One was a slower decline over 3 years, one happened over a year and the other happened over a month.

In addition to what I said, around £50,000 comes from selling another property, coming from family. So they would expect it going in another property, as they have no experience investing.

At the moment, you do not seem to appreciate the level of investment risk you have taken and maybe looking to take in the future. So, it would not be a good idea to accept money from family members to invest. They have no experience and you are lacking understanding and knowledge. It is a recipe for losing money and the family all falling out.

bostonerimus · 17 January at 1:10AM

jake_jones99 said:

dunstonh said:

as before I invested in a passive fund tracking FTSE100
That is very poor quality investing if that is your only risk based investment. Very little diversification and a very active decision to only invest in UK large caps.

Ideally I would want to move and invest in property.
....at a time when the Government is expected to continue hitting landlords.

What other funds do you have as £100k isn't much to get low-risk property portfolio. Low risk tends for property tends to occur when you have around 5-6 properties or more.

Would you have other sensible low risk alternatives?
Investing in the FTSE100 as you did was high risk. So, what has changed in your circumstances that high risk previously but only low risk now?

Can you explain how it's not diversified and high risk? It distributes the investment in 100 different companies, and it changes slower than most other investments. I cannot handle sharp changes psychologically. It offered also a regular dividend payment.
Maybe you can give an example of low risk that would clarify it.

You want to have a range of risk that allows you to benefit in good times and also preserves some capital in the bad times. Your pension and an ISA are the most tax efficient ways to do that. Putting money into FTSE100 is a small section of the world economy. You should be invested in the global equity and bond markets with 6 months to a year of cash in the bank for emergencies. If you want to invest in property I would start with your own mortgage and maybe REITs while you evaluate all the intricacies of owning rental properties.

jake_jones99 · 17 January at 1:37AM

Billycock said:

jake_jones99 said:

Hi everyone, I have around £120k available to invest. Around £50k are already in a stocks and shares ISA, as before I invested in a passive fund tracking FTSE100 and made around £10k in the past year. However, I feel that ship has sailed and sold all shares. Ideally I would want to move and invest in property. Would you have other sensible low risk alternatives?

Are you saying you made a 20% gain on your 50K S&S ISA in one year?

To be fully precise, it was 1.5 years. But I started with 20k in my Stocks and Shares ISA in April 2020, put in 20k more in April 2021, and the extra £10k are profit. There were around 4-5 buy/sale actions, all in profit. Yes, I "timed the market", I am an irresponsible trader. Before anyone says anything, no, I wouldn't do it with someone else's money.

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Sensible low risk investment

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