A chap at work has just had an inheritance summing around £150k. He's pretty happy with his current financial situation but has limited pension. He's wanting to invest for the future (>10 years ahead) with this sum.
We've just had a big debate of property (a rental house) vs financial investment. Any broad recos as to pros and cons of each? And broad ideas of the type of financial products to look at (he's had his fingers burned by an IFA before so is a bit cautious of their advice).
Ta
Lambo SV 8)
£75k on a buy to let place
£50k in stocks / cash
£25k on hookers and coke 🙂
1 - Pay off ALL your debts including mortgages
2 - Talk to a financial planner, not an IFA
3 - Ignore any comments from an internet forum
I'd split it up. Half into a rental property with a small buy to let mortgage. small or no income off it but there should be capital growth - I think ( but its a guess / gamble) that property will grow more in value than the stock market.
a quarter in premium bonds
a quarter in high risk shares / investment funds
Buy a let and producing commercial investment, not a resi one, so no problems with tenants ringing in the night for a dripping tap, also longer security on lease.
All said by a commercial surveyor!!!
First things first he should pay off any debts that he has. After that with that sort of money I'd be looking to invest in a number of different financial funds with varying risks. I'd also be looking to put a chunk into a personal pension to get a chunk of tax back but then I'm in the 40% tax bracket so this might not be so good if he isn't.
As for rental property, with £150k you are probably looking at a single property which strikes me as putting all the eggs in one basket. It might do very well, then again it might fail spectacularly.
I'm a bit curious with the IFA comment. Was he actually missold something or did the investments just to perform as expected. If the former then fair enough, if the latter well poor performance can't always be attributed to the IFA. It's advice not a guarantee and probably better informed than anything anyone here will be able to give, myself included.
easiest way to double your money .... fold it in half n stick it in yer pocket 😉
Might be a good time for a long term investment in property, what with the prices low, no?
wow - thanks all
Interesting re a financial planner vs an IFA - will mention that to him. I think he felt he was mis-sold previously hence his wariness. He's paid well methinks so guess at 40% bracket
And agree re internet advice, but it'll maybe fuel our argument this afternoon, and already, there's more info / knowledge here than we argued over!
Why advise to pay off your mortgage? In the current climate, isn't it likely that the interest on the mortgage will be less than returns on other investments?
1: Earmark £50k for short-term weekly loans to the long-term unemployed at astronomical interest rates
2: Employ two very hard men at £50k PA to collect the repayments.
House auctions.
I could buy two properties down here that would give apprx 1k month income. Alt one decent'ish holiday let that would range from 250/300 week low to 550/750 high.
[quoteI'm a bit curious with the IFA comment. Was he actually missold something or did the investments just to perform as expected. If the former then fair enough, if the latter well poor performance can't always be attributed to the IFA. It's advice not a guarantee and probably better informed than anything anyone here will be able to give, myself included.
The most sensible comment I have read yet. sadly, for my sins I am an IFA and I specialise in investments. When people come to me saying they have had their "fingers burned" by other IFAs it is often because they have either misunderstood the risk involved (and that includes how long the money needs to be tied up) or they have been far too greedy, gone for what they perceive to be the best deal, sometimes against advice, only to discover that their investment is more of a Townsends bike rather than a Santa Cruz. OK there are crooks and incompetents out there but IFAs are liable if they give you rubbish advice and the regulatory regime is very consumer biased. Poor advice is generally jumped on from a great height.
Tell him to have a look around, talk to a few IFAs and see if there is anyone he likes, feels confident in. Find a specialist. Negotiate a fee related deal, maybe with a performance clause in it. TBH £150k isn't that much if you want to screw an advisor down to that sort of deal but he can always walk away. The one thing I would advise is steer well clear of the banks.
IFA or financial planner - semantics.
[b]thepurist[/b] - Member
1 - Pay off ALL your debts including mortgages
2 - Talk to a financial planner, not an IFA
3 - Ignore any comments from an internet forum
+1
Buy a house and rent it out, as people will always want shelter. You can always sell it if everything goes wrong.
Don't bother with shares/investments as there are to many variables, with lots of other peoples interests tied into them.
Just my £0.02 worth 😀
Go and see more than one financial advisor, take notes and compare.
I know i would, if you go out to buy a car you would look at more that one even of the same model. the only difference is this is for significantly more money.
I'm disappointed at the number of sensible people on the forums 🙁
No offence slowjo, but in my experience
IFA = commission driven salesman
CFP = fee paid advisor
I agree with others on paying off any debts. Worth using up ISA allowance ASAP for this year (and next year past this month) - can get nearly £17.5k in there if half or more is in stocks/shares and even for someone risk-averse it's not too big a chunk to gamble with.
Not sure I'd be looking to buy property right now, especially not BTL (there's way too many properties for rent out there already IMO) but could be worth having the remainder available and keep an eye on the auctions over the next couple of years for repos to tidy up and sell on.
gold
Invest in China, Japan, anything but Europe..
look into futures contracts for oil/copper/nickel*
*anything we dig out of the ground, that we need increasing amounts of, and have increasing difficulty getting at/processing what's left.
Buy a wholesale batch of Grade A drugs and deal it.
Not sure I'd be looking to buy property right now, especially not BTL (there's way too many properties for rent out there already IMO)
But as he has a large chunck of capital and therefore small mortgage to cover he could charge a very competitive rent which would mean he could get tenants easily.
Most places that are to rent and sitting empty are doing so because they want stupid money for shite and not prepared to take lower offers. If he bought to let and went through a letting agency some do guaranteed rents as well which would minimise the risk.
Yes there is the issue with maintenance though for residential lettings, he should buy the house for sale two doors down from mine and rent it to me at a reduced rate on the condition I fix anything that breaks. 😉
Northern Cyprus HSBC account. 16% interest. My dad had some money with them for a while but recession meant had to spend it all to keep business going.
Semiconductors are always a good bet, there's a real leapfrog effect in some areas e.g. Nvidia/ ATI one dominates, then gets dominated then domminates again. Just bet on the underdog and reap your reward.
no offence taken thepurist
I am not alone, but a high percentage of IFAs work for fees not commission. I find it works best for my clients, but not all. As I said, do some research, find a fee based advisor and go from there.
If you belong to the IFP it doesn't mean that you hold some sort of moral high ground, simply that you have passed some specific exams.
You will know soon enough if the person you are talking to is commission driven... the basic advice will be to buy investment bonds or some insurance product.
My advice would be to earmark at least some of it for FUN! 🙂
£5K spent now on doing something good = priceless IMO. Why wait for some indeterminate point in the future to enjoy it?
Buy a full set* of Eastern European teenagers and sell their bodies to middle-aged businessmen.
*Fat, thin, blonde, ginge, trannie - the lot
Except you could get £6000pa (500pm) just sticking it in a 1 year fixed term account. No surveys or fees, no maintenance, no refurbishment costs, no agencies taking a cut, no void months. All on the hope that the property will be worth more when you come to sell (minus estate agents fees, HIPS, and all the rest, of course).
It'd have to be a very long term view - things will get much worse before they get better. Depends on how long you want to hang on to it, and to what extent you'd be willing to subsidise it relative to the easy return you could get elsewhere.
Personally I'd use it to pay for most of a house - but because of Ar$eholes with £150k to invest I'm surrounded by houses to rent and bugger all for sale at a reasonable price.
And before you ask - yeah I am bitter and have 2 parents who are seperated and neither of them owns a property so I'm unlikely to ever just 'come into' anywhere near that amount of cash.
Maybe he should just donate it all to charity, as he doesn't seem to really need it!
I would talk to Hargreaves Lansdown - they're for the long-term:
http://www.h-l.co.uk/advice/independent-financial-advice
buy 600,000 dogs (working on an avg of £200 a dog and £50 for the vets bill) and have them put down 😉
mudshark.. the problem with talking to a big firm like HL is you can't guarantee continuity of adviser... they do leave or get asked to leave if they don't hit their sales targets. Look for an established, local firm IMO, try and get to work with the owner/partner etc so there is a vested interest beyond the mere selling of a product.
Stock up on Mephedrone
Pay off any debt, including mortgage (at whatever rate he's paying).
Put the rest into a rental house, but must be mortgage free.
Monies previously spent on a mortgage, plus profits from rental - split 50/50 between shares and cash.
The 'problem' (although for some people its a positive) with a pension, is that the money is tied up until retirement - and you've no control over what the government will do in the future...
a quarter in premium bonds
=effectively gambling to try and earn interest on something.
alternatively spread it across a few banks and you are guaranteed interest,
muppet
Buy shares in commercial property REITS British Land, Land Securities. no real movement in their shares since the slump, really low PEs.
again - thanks to all - prompted much debate here, and informed us quite a bit.
buy the cheapest, shittiest house in st andrews, and then charge each tennet £400 a month to live in it. easy to earn £1600 pcm, £16000 per year.
😥
I would buy a selection of 1 bed flats or apartments. New ish builds, and definatly not conversions ( houses split into flats) . If you sink all your cash into 1 property you put all your eggs in 1 basket.You have a substantial tax liability as you really want a 75% MTG to offset the taxable income.
More property = more chance that most of it will have tenants most of the time. Invest around £30k in each one, say 1/4 of a £120k flat.
Keep some for contingency money, fridges , washing machines etc.
Alternativley look for small commercial units as these are in demand when we bump out of recession.
Or buy 15 'future classic cars' ?
Buy a night club?
Buy a pub!
Jammy111 - Member[i]a quarter in premium bonds[/i]
=effectively gambling to try and earn interest on something.
alternatively spread it across a few banks and you are guaranteed interest,
muppet
Yes it is gambling - but £35000 in premuim bonds is not really much of a gamble - the money is safe unlike shares or property, bank interest rates are low ad with that amount of premium bonds you will be continually winning something - its not like have £100 worth
A friend of mine put £40 000 into premium bonds for a year and made more than the interest he would have got in a bank.
With that level of investment you will be continually winning the smaller amounts - thats the way the odds go - and that will nearly cover the interest that you would have got - get a big prize and youa re quids in.
so don't go calling people a muppet when you don't understand
I would buy a flat near the Olympics and rent it out during 2012.
I also have money in Premium Bonds - save it for paying tax and other future bills.
With a spare £150K I'd definitely get a buy-to-let property in an area where it could be expected to rent consistently and where you'd be able to sell quickly if required.
I've had a rental property for a few years and, despite the property market issues recently, it's been rented almost 100% of the time as well as increasing in value by about 40%.
maybe your college might like to take a look at buying some shares in the Berkshire Hathaway group.or one of the company s this man owns Warren Buffett.i invested quite a large amount of money around 13yrs ago.after a friend had visited one of his seminars when he was in the states.to say its has been a good thing would be quite an understatement,im 38 this year,and all going well in five yrs. my second house will be mortgage free,this house will then be given to my son,to stop any goverment meddling in my old age.
imo the investment in property ownership has been dramatically reduced due to government/legislation.
shares in. coca cola always do well
Vedanta Resources PLC owners and investors from and for india, which is a massive market for investment,
also Kingfisher PLC the new owners of b&q/screw fix who are just about to launch in the chinese markets.(this has the potential to go bonkers as far as sales go)
as someone mentioned above large scale mining is proving to be a good investment as is some Russian energy company s as well.
if your friend has no morals then you could always invest in defence stocks,like GenCorp, the makers of bombs planes and missiles. or Sourcefire the it people who help said bombs planes and missiles work.
to be honest with £150,000 the worlds your oyster.
M B
Aus, I'd suggest a gay marriage then you initiate a messy divorce.
Pay off any debt, including mortgage (at whatever rate he's paying).Put the rest into a rental house, but must be mortgage free.
Monies previously spent on a mortgage, plus profits from rental - split 50/50 between shares and cash.
The 'problem' (although for some people its a positive) with a pension, is that the money is tied up until retirement - and you've no control over what the government will do in the future...
Nope, you want some form of mortgage on it, this will be used against any CGT it he has to sell. In an ideal world he will clear his present mortgage and then use £50k to buy a property and have a £100k mortgage that is getting paid by a tenant, so when it comes to time to sell he has remortgaged to the max and sells for £250k but has a £240k mortgage so pays tax on the £10k.
I would create a diverse investment strategy made up of:
fixed interest/term deposits
commercial property investments
shares (higher risk = higher return and need active management)
cash slush fund and/or FX
Thats what i have done, looked at property as well (commercial and resid) and decided that for ballche versus return not worth it just now in such a volatile market. I am seeing about 20% returns PA at the moment 😀
I'l invest in a small freehold business workshop
around a thousand square feet and rent it out.
wouldnt invest in houses at the moment very slow return
of cash and near zero profit.
I know one guy, who bought some small flats above a parade of shops in N London.
He then let them to mostly immigrants via the local council who needed to house the finflux of people needing a roof over their heads.
Not sure of the details as such but within 5 years he had something like 150 or so properties, all let through the council.
He bought a purlpe Diablo (Lambo) just before his wedding day – because he could.
I would go for a balanced approach with short medium and long term investments.
It's all good and well paying of the mortgage but for all we know it could be base + 0.5% which means he'd loose money by paying it off when a a two year Post Office Growth bond will pay 4.05% so I will assume we are not worrying about the mortgage.
I certainly wouldn't pile the lot into property commercial or other wise as it's one sector, with that sort of cash you need to diversify across multple sectors and multiple regions and why risk it all when you get + inflation growth elsewhere.
I would use the ISA allowance cash and stocks/shares as depending on age could cover off 20k but I would use Fidelity for the s/s element and drip the money over 6 months you can do this now and maintain this years ISA allowance and do the same after April 5th.
3600 Cash ISA 2009/2010
5100 Cash ISA 2010/2011
3600 Share ISA 2009/2010
5100 Share ISA 2010/2011
30k premium bonds - ( I would do a year see if works for you) if not sell and do something else don't get attached to them)
35k Post Office Bond - short term 2 years as it's fixed
40k To to invest in managed funds, stuff like JPM Natural Resource, something in the tiger economies, pick high risk but potential growth. Long Term this needs active management to work and make sure you have stop loss in place to protect capital, the up side is potentially rewarding.
25k Pension Over a period of time - Long Term
The investments can change you shouldn't just get straight into it and some need to get used to having the cash and not being scared of it, with the above approach the element at risk is low to begin with but protects to a degree the captial and over time you can change the view to risk once you have some clear goals. What is the right strategy now isn't necessarily the case in future years and it will need an element of management.
I would do the above more from a still working perspective and not near retirement if he were nearing retirement I'd keep out of share/stock and stick to interest bearing and guaranteed investments where the captial is not at ANY risk.
Do you own research the value of shares, property, banks and everything else can go up as well as down. The above doesn't consititute advice and is solely my opinion and what I would do in such a position.
ransom strips.