How to invest £850k??

[Firefly7]

Hi,

I don't post much so please bear with me.

The proceeds from the sale of our business will give us around £850k, which we will need to invest to provide some sort of income stream. Interest rates at present mean quite a poor return, so I was wondering about property developing (which we've done very small scale a long time ago) or buy-to let maybe or are they both too risky now? Any suggestions? We are mid 40's and our own house is owned outright, so no mortgage to pay off, if that helps.

Thanks

I have nothing to add except extreme and unadulterated jealousy

Split it out so you don't do eggs in one basket.
Stocks and shares
Property
Off shore
Business
Pension
Bonds
Holiday!

Invest in your financial education to start with. Go to richdad.com and play the cash flow game. Look up Graham Rowan (the renegade investor) and watch his videos on YouTube. If you fancy property read Property Magic by Simon Zutchi and attend a PIN (Property Investors Network) meeting. Meet with IFAs but only with the understanding that they are like waiters who can only recommend dishes from their restaurants' menu. I liked the book "Own the world" as it is based on the model that made Harvard University so rich yet is based on a pretty simple idea that anyone with a few quid can use.

Do due diligence and make decisions slowly based on your own objectives. I am low to medium risk by my definition (but my inlaws think I'm high risk) and won't consider investments that don't give a steady 10% annual ROI.

Knowing what YOU want based upon your own research is key before you go shopping for investments.

Thanks all for your replies - I appreciate we are in a good position but still finding it very scary, Tickle!

Good idea I think Just, to spread it out a bit.

I know we'll need to see an IFA, but worried about being railroaded into something, so wanted to get some things straight in my head before we do.

Some invaluable advice Waiting, thank you. I've just signed up to richdad.com and looking at the other things you mentioned.

Our plan at the moment is to take a few months out, to work out which way to go.

Thanks again.

Firefly
Your view and waiting for me's view of IFA's is at least 14 months out of date. An IFA will only charge a fee for advice and would not try to shoehorn you into one of their schemes. I think what would be of benefit to you is to meet with someone who will listen to what you want to achieve for the rest of your lives. Your dreams and ambitions and risks you are prepared to take with your finances.
You can do this by yourself or interview 3 IFA's and they should give you a free hour consultation. This should give you a good overall feeling of what is right for you to do in the future.
The main thing I would think is to enjoy the rewards of your business.

buy to let does work if you don't have a mortgage (unless you are in London where you will have tenants queuing up to rent a dirty broom cupboard); but get educated first, get all the insurances, research your local market and don't expect a return over about 5% at most.

investment is obviously risky but is the only long term strategy.

if you are 'parking' the money for any time in the current pitiful savings accounts, split it between institutions to ensure it is protected.

and well done on generating that by hard work. I agree, use some of it for fun!

ps remember offshore is still taxable unless you are non-residents, and has no financial services guarantee protection.

some offshore banks are covered by a depositors compensation scheme, many banks in the Isle of Man for example are covered by an Isle of Man Government scheme, details here: www.gov.im/fsc/investor/dep_comp.xml although as special has mentioned no real benefit unless you are not UK tax payers except if they are offering better rates that make it worthwhile opening accounts

I agree on taking some free advice, to diversify and look up 'pound cost averaging' as you may want to drip into investment vehicles in chunks rather than dropping the whole lot in in one go

If you want to invest in properties in London i would suggest that you look at the crossrail projects and select areas where existing stations will be covered. These areas will very probably increase in value. You could get three rental flats.

oops, sorry - thanks to lex for the correction. I do now recall that protection coming in, just as I returned to the UK so my need for offshore banking went away.

that was the days before Northern Rock when we didn't think banks could go bust...

Stick as much as possible (£30k per person, incl children) into premium bonds.

You get a higher return depending on the number you own, so £30k per head you'll get decent returns
From. It's easy to get your money out of, and currently tends to return more tha. Interest rates with the poasiblilty of the big prize.

I know many people who do really well from this

You could also, if you wanted, buy a property in Portugal in my name if you so wished may not quite be as serious as premium bonds suggestion

Premium bonds max is now £40k, I'm absolutely sure of this as we have recently availed ourselves of the increased allowace. Poor return but at least your money is safe. I'd go btl for at least half of the rest, as you won't need a mortgage.

You cannot say you'll get 'decent returns' on premium bonds. They are drawn at random and there is no guarantee at all on the return. Admittedly I only have £500 worth but they have won ZERO in 20 years.

it is safe but think of any return at all as a bonus.

i have no idea, but have fun.

www.moneysavingexpert.com/savings/premium-bonds-calculator/#result

I can help. You can invest it in my bank account

I have premium bonds my parents bought me over40 years ago. So far they have paid out 0% and the face value has gone down considerably.

Buy to let in a stable area, e.g. Commuter belt is pretty safe and likely to give 4 to 5% return through rent, plus anything that the property increases by.

Shares in large companies can give a reasonable return and you can sell them in time for retirement.

850k is unlikely to give you an income for life even without a mortgage. You'll be doing well if you get an income of 40k before tax, which is OK for now, but won't be worth much in 10 years. You need to reinvest around 50% of after tax income if you want the money to keep growing at an amount that keeps up with inflation.

Any of these websites or books trying to give you ideas on how to invest and get rich etc. are also trying to manipulate you/the market so that they can be the ones really getting rich. Just remember that everyone is wanting to make some money out of your money, and that every time you move your money it will cost you a % of the capital.

Def interview 3 IFA's but be very careful when they start talking about BPR & EIS schemes as they really are to be treated with caution, regardless of the excellent tax breaks. Also be wary of anyone that talks all about the funds. I would think about what you want to achieve with the money, and work out what your objectives are, the IFA that tunes into that and is suitably qualified (Chartered without a doubt) would be the best long term bet IMHO.

BTW investing for income is a very different proposition than investing for growth. Someone used to dealing with income generating investments (think pensions, even if that's not the tax wrapper your money is in). Anyone that hands you on to a DFM automatically is not a great idea either, it might be right in full or in part, but not by default.

Watch out for 'Wealth Managers' they are the emperors new clothes.
DO NOT go with a tied or multi tied company. Ask them to put in writing we are fully independent whole of market.

Fees:
1 - 2% + 0.5% is a good deal
3% + 1% isn't
2+ 1% isn't either!

You may have to fight to get 1% initial but 850k it's worth it.

Hmmm I read this back and it is filled with tales of caution. Get a personal recommendation if you can, that's a good place to start. If you know an accountant personally perhaps ask them. They will often have someone they use, make sure they really know them though and their work. Then question the fees.

Good luck, there are some excellent Chartered IFA's out there and they can add value.

If you are going to have other jobs then you might want to sell your house and buy a bigger one which costs £850k more.

If you wont'; have other jobs and want to live no the income from £850k 4% is probably what you might get from that sum if you invest wisely including shares with high dividends. However that £34k of income is taxed at 20% so even though it seems a vast sum if I were your sort of ages I'd consider something more exciting - a new business or various different ventures. I absolutely agree about spreading risk as advised above however. A friend bought an old set of hospital buildings and has teamed up with a local builder and they are building houses - that is the sort of plan which in some regions can lead to a reasonably good profit.

Make sure however you take tax and legal advice go into anything complex and if you are promised returns over about 4% then you will probably lose the lot and the plan will be dodgy. No friend of a friend advice. No Bernie madoffs.

What's your long-term plan in terms of jobs, retirement, etc? Do you have children? I'd be very wary of living off the income long term, it won't be enough to fund a decent quality of life (unless you are very frugal) and spending the income will restrict the ability of the invested money to grow.

£850k is a decent sum to put with a stockbroker who will invest in around 40 stocks and funds. Go for a national or regional firm who have a good back office and a team of investment managers who can bounce strategic thinking off each other.

SteveBrucesNose seems to be on the right track, stick £30,000 (again max you can do per person) and put it into premium bonds. might get doubley lucky with a big win :)

I would avoid premium bonds. No guaranteed return & in 10 yrs time money will be worth the same amount although in real terms it will actually be a lot less because inflation will have eroded it.

That may be true Ughh but you have to think of the tax benefits as well you are getting when placing the money in premium bonds, yes its a lottery on winning the money though.