What to do with 50K?

(35 Posts)
ZolaBuddleia Thu 09-May-13 09:32:43

Have inherited some money and really want to use it wisely. In our area I could buy a 2 bed house for 80K and rent it out (v good rental market), would get at least 420 pcm rent but obviously don't have enough to buy the house outright.

What other types of investment should I be considering? Want to be one of those people who uses money to make money!

LaTrucha Thu 09-May-13 20:15:50

I think investment in property is always good. I didn't have enough to buy a second house in our area, but I would have.

It depends a bit where you stand and what you want. I paid off my mortgage bt kept the term long, so my mortgage went down from around £850 per month to about £80. The 'extra' money I have now I save, bt also like to think of all that interest I didn't give to the bank as saved too. However, mortgage money is among the cheapest you can brrow, so that may not be for you.

If you want to boost your pension, you can shift over £7000 in to stock and share ISAs, but I think you have to resign yourself to leaving it there for a long time (say 20 years) to make money. I am doing this with £300 a month though as I am not working ATM and worried about my pension.

Ideas, anyway.

LaTrucha Thu 09-May-13 20:16:33

I meant £7000 per year

ZolaBuddleia Fri 10-May-13 10:32:13

Thanks. Yes, I'm paying a laughably small amount into my pension (self employed) and am worried about our long term financial security. Bar a lottery win, this will be the only lump sum we're ever going to get, so I really want to do something with it that gives a tangible income.

Our mortgage has about 100K outstanding, I'll investigate what the monthly repayments would be if I put it towards that. Worry that we'd just fritter the extra per month though.

Wasn't quite sure what you mean about the 7000, do you mean every year I should put 7000 into my pension, or a mixture of ISA and pension to make up 7000?

LaTrucha Fri 10-May-13 12:19:10

You are only allowed to take out £7000 (or around that it might have changed) of ISA's each year so you wouldn't be able to put it all into ISAs straight away.

Those ISAs wouldn't have to be in a pension scheme (although I think there are benefits to that - the government puts some in) but could be. If they were in a pension scheme you couldn't get the money out again. ISAs you can cash in any time but to be sure of making money you do really have to think of it as a very long-term investment.

If you go down that route, look for a company who don't charge for a straightforward account and who allow you to keep all the money made (and take any losses- IME these even out over time). I have used Hargreaves Lansdowne for 10 years and find them excellent. Banks are totally crap for this.

As to mortgages and house, you'd have to check your terms of your current mortgage to see if it were worth your while. You would probably have an early repayment fee which you would need to include in your calculations. You would want to be careful about how long your current deal lasts: if you need to change anyway soon, you might find it just as well to wait until that time to make any early payments.

You do have to be disciplined about the cash saved. I put it straight into ISAs but Hargreaves Lansdowne can suspend it for free for a few months if there is something I want to pay for.

Frittering would also be a problem if you bought a house, though. I do think the house is a good option, and also can be used as a source of pension.So, if you got £420 for it, £100 could be for the mortgage, some for pension and some for spending.

I am not an expert, btw. I just did this two years ago and this is what I thought through.

megandraper Fri 10-May-13 12:23:55

House only a good option if you have enough spare money to cover the ongoing expenses, particularly if it has a long period of not being let. It will need regular repairs and upkeep. I find that you don't make money on rental property really, you are just keeping it going until you sell it.

ZolaBuddleia Fri 10-May-13 13:49:24

Thanks.

I didn't know that you could have an ISA as part of a pension scheme, I just have one that sits there with some money in it. I took out my pension a while ago, and chose the mid-risk route I think - should I be contacting my pension provider to see whether I should be making any changes? Is that even possible? Will look at Hargreaves Lansdowne.

megan, that worries me a bit about BTL. I know the rental market here is strong (mate who is a letting agent says he can't get enough properties) so hopefully there wouldn't be long periods without a tenant, but obviously that's a risk. The housing market here is still going down so bargains can be had.

ZolaBuddleia Fri 10-May-13 13:52:50

LaTrucha, did you do the stocks and shares ISA? How did you choose where to invest (cash ISA, IT etc)?

Reastie Fri 10-May-13 13:56:10

we inherited a similar amount recently which is all going on home improvements. we've put the money in the mean time into premium bonds (between dh and i). You can get it out whenever you like and we've won £25 - £100 a month so far so it's working out better than interest rates in ISAs we could find.

ZolaBuddleia Fri 10-May-13 14:04:04

Did you put the max 30K into premium bonds? We need home improvements too. sad

ZolaBuddleia Fri 10-May-13 14:05:00

Sorry, that sad face looks really shit given that I've come into some cash! I just mean that it's sad to spend it on things like tiles when I'd like to use it to give me a bit more financial security.

timidviper Fri 10-May-13 14:07:22

Zola We have some stocks and shares ISAs which are managed by NFU Mutual on the very flimsy basis that FIL was a farmer and had involvement with NFU and when our endowment policies matured theirs was the only fund that performed as hoped. Our ISAs are performing well. They do have financial advisors too although we have never used them

Bakingnovice Fri 10-May-13 14:16:04

We have premium bonds too. But have only won 25 quid once in the last year. However, I do think they're a good safe way to store money.

Reastie Fri 10-May-13 14:18:52

Yes we put all £50k in premuim bonds, full 30k in one and 20k in the other. We know of a number of people who have the maximum 30k in their premuim bonds and they all win little bits pretty much every month which equates to equal or better than an ISA. It's a risk as you may win nothing but you're storing your money in a safe place and can take it out when you need it for home improvements. My aunt and uncle won over 60k one month shock envy . I think you need to have loads of them to stand a possible chance of getting anything back though.

ZolaBuddleia Fri 10-May-13 14:28:53

timid, do you know what your stocks and shares ISAs were? IT, Units Trusts? It's all rather baffling!

Baking, do you mind me asking how much you put into premium bonds? A mate of mine won nothing with 5 grand.

ZolaBuddleia Fri 10-May-13 14:29:17

60K shock

<faints>

LaTrucha Fri 10-May-13 20:08:38

I only know about Hargreaves Lansdowne, but they have certain ISAs that are well established and consistently do well, such as Invesco Perpetual. I did a table of how well each of mine did over about 5 years to pick which new ones to put money into. If you're interested, I'll try and dig it out.

All the ones I invested in made money. HL have a magazine they send you and while they do try and push new funds, they are also keen to sell their long-term, established ones too. I genuiney find it quite informative.

I got into it because my Dad had it as a hobby after he retired. I don't knwo that he did very much: just read about it and kept a track of how his fnds were doing and sold the ones that were doing badly. His retirement lump sum of £48 000 turned into, I think, well over £200 000 in about 20 years. I couldn't swear that he didn't add to the lump sum at all but not sbstantially, and I know he cashed in at times too (like £20 000 for a deposit on a house for me, £11 000 for my brother etc).

ZolaBuddleia Sat 11-May-13 12:04:11

LaTrucha, you're fab. Been looking at the HL website and finding it a bit daunting. Wonder whether as I'm a novice I should be looking at their Master Portfolios or a Multi Manager fund.

LaTrucha Sat 11-May-13 14:19:51

I'm not sure of the ins and outs of those. I guess that you wouldn't be able to sell individual funds within them. I'll try and have a look at the magazine later. You could give them a ring and chat to them. They are really helpful and not condescending. I'm sure they'd send you the magazine and forms.

ZolaBuddleia Sat 11-May-13 16:55:29

Ah, so you picked all your funds individually to put within one ISA called a Stocks & Shares ISA?

LaTrucha Sat 11-May-13 19:44:17

No, I have 6 ISAs invested in different funds. I currently put £50 a month in each.

LaTrucha Sat 11-May-13 19:53:14

Haven't had time to look at magazine BTW.

I would trust their prepared packages like the Master Protfolio or Multi Manager to be good - you would just have less control.

I have just noticed that you cana now inverst over 11 000 a year in stocks and shares ISAs

LaTrucha Sun 12-May-13 08:18:53

Ok. I found my sheet! So, between 2007 and 2011 (so, the worst years for the stock market) my best funds were:

Marlborough Far East - 22.9%
Invesco Perpetual Income - 19.3%
Fidelity Special situations - 18.1%
Fidelity Europe - 15.8%
Fidelity Global - 18.1%

My worst performing one, which I dropped was HL MM Income at 6%
and Fidelity China at 13%

I have others but if you looked for a multi manager with some of thos ein I don't think you'd go far wrong You can doone off payments of min £1000, or a min of £50 a month in each, so might be worth it for some of your money, whatever else you do.

You do have to thin kof it as pension though, not something that will make money quickly.

LaTrucha Sun 12-May-13 08:23:43

i should say that my brother has recently been very upset as he had to cash in some ISAs when the market was very low and he felt he had lost a lot of money. The market then surged a few days later. I think you have to do it with money you can live without. Put it away and forget about it until you retire.

OriginalRoute Sun 12-May-13 08:41:43

Do you get any sort of tax credits, because if you have over £16000 savings when UC comes in you will not be entitled to anything. I inherited a smaller amount of money which I hoped to save for our future as I don't have a pension, but I will lose far more in TC a month than any sort of investment will earn.

OriginalRoute Sun 12-May-13 08:41:43

Do you get any sort of tax credits, because if you have over £16000 savings when UC comes in you will not be entitled to anything. I inherited a smaller amount of money which I hoped to save for our future as I don't have a pension, but I will lose far more in TC a month than any sort of investment will earn.

ZolaBuddleia Sun 12-May-13 10:34:17

Thanks so much LaTrucha. Point taken about a long term investment.

We do get a tiny amount of tax credit (both me and DP low earners at the mo), but I suppose losing it is unavoidable, given that I don't have plans to spend enough of it to get below 16K.

leaderscorp Tue 14-May-13 06:14:09

Investing your money in a property is always an option. You can also apply for a mortgage and use the money as a down payment. However, you need to make sure that you have the capabilities and the resources to pay off your loan in order to avoid problems in the future.

slhilly Tue 14-May-13 06:28:07

Zola, can I suggest you re-post your question on some financial sites eg Motley Fool or MoneySavingExpert.

My thoughts:
- paying down high cost debt is the most important thing to do. Credit cards, bank loans (except mortgages)
- you are already exposed to the housing market, so I would not immediately think you would want to increase your exposure by doing a BTL
- I would be very very cautious about taking on any kind of actively managed portfolio. It is inherently difficult for an active fund to beat the market in modern equity markets, which are pretty efficient. I would go for a low cost passive tracker. I would look at a split across UK, EU ex-UK, Japan, emerging markets and US, with most money in the UK to manage exposure to currency fluctuations.
- I'd use ISAs for stocks and shares
- I'd make a decision about whether you are focused on growth or income, and invest accordingly

lljkk Netherlands Tue 14-May-13 07:11:04

Paying down your mortgage is probably the best bet, guaranteed savings and much much larger gains than you can usually get from any other form of investment (without high risk of losing it all).

The conventional strategy with BTL is to pay a minimum deposit, get an interest-only mortgage, and then rely on house price rises to make an actual profit later; this has to do with the tax situation for BTL properties. So instead of one BTL property you could maybe get 2 or 4 of them. Look carefully at the legal situation.

If you were my friend IRL I would be telling you without reservations to take it off your mortgage (assuming no horrible early repayment fee). Suppose that takes £350 off your monthly mortgage payment; I would invest the £350 monthly into an investment vehicle like a shares ISA or into your pension. This will buffer the risk of rising or falling share prices, and give you option to pursue other investment options or even cut your working hours in future.

ZolaBuddleia Tue 14-May-13 11:30:45

Thanks everyone for the advice. I have lots of learning to do. The situation is slightly complicated by the fact that our house is teeny and we'd like to upsize a bit. I'm wondering about completing the work on our house then renting it out (negative equity) and buying another house to live in.

lljkk Netherlands Tue 14-May-13 11:33:43

Put the numbers thru a spreadsheet and I don't think you'll find that's as profitable as other options. Good luck whatever you decide smile.

BLOO3Z Tue 14-May-13 11:45:28

Premium bonds are a good option but seems to be the higher amounts which win reguarly my aunt has one £50 for the last there months, you would never get that return in the bank at present.

I wil be watching this post with interest as ive just posted on property diy with similar question re buy to let.

I dont think you can go wrong with property but you do have to have the funds to do it up and for LL insurance and maintenace. Also to get your head around that it is a 10 years plus investmenet where you will get your money back hopefully to cover the cost of the property and then stull have said property to sell too.

BLOO3Z Tue 14-May-13 11:45:59

won not one

MooncupGoddess Tue 14-May-13 13:47:47

Premium bonds are paying a very low rate at the moment, only 1.5%.

What's your mortgage rate, OP? Unless it's ridiculously low (like 0.5%) you may be best off using most of the money to pay down the mortgage. Especially given you're in negative equity which is problematic for various reasons.

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