£50,000 - how to invest?

[CalIie]

Hi,

My mother, brother and myself inherited £50,000 each in 2020.

None of us have much financial acumen and are not sure what to do with it. It is currently sitting in a bank losing value as inflation gets worse….

I’m not in a position to buy a house as I live in the South East and work in London. I am 23 and can’t get a mortgage on my low graduate salary. My brother is a student and has asked me to invest his money how I see fit (he’s really just a lazy t*sser but oh well).

I was thinking £20k in a stocks and shares isa but after that I am not sure…? My understanding is premium bonds are considered a waste of time these days so that’s out.

If anyone has any ideas what my mother could do with her money that would also be very helpful. If it makes a difference she is planning on retiring in 5 years when she is 66. She currently only has a small NHS pension.

Any help would be greatly appreciated :)

There are some similar threads on the separate investment board on Mumsnet and there has been good advice on that - definitely worth taking a look at those. I agree you should be thinking about a S&S ISA.

I'd personally not be wanting to do this for my brother though - he needs to step up and sort his own money out. What if, for example, you invest it and his investments lose money? That needs to be something he owns himself.

They'll be info on the Martin Lewis money saving expert site which will be well researched and up to date

Wine makes an average 10% per annum and no capital gains tax payable. Champagne made an average 40% last year. I have heard good things about Hargreaves Lansdown in terms of investment advice. I do think it is wise to spread your investments rather than put everything into one thing. A friend has done very well with whisky over the last couple of years (more than doubled).

Leave your brother to deal with his own money

I would invest £20k in a S&S ISA and another £20k after 1st April when the new tax year starts. Then £10k in premium bonds.

Thanks everyone for your advice!

I will check out the other threads and forums.

I am thinking I will definitely put £20k into a moderate risk stocks and shares ISA, perhaps Nutmeg or Lansdown based on other MN threads.

Bit random, but does anyone have any experience with Shariah compliant investments? From a bit of quick research they seems to be making really high returns but surely there must be a catch? (I am not Muslim and have no experience in this area)

One of my pensions is in a Sharia fund, that is my only experience of it.

With regard to investments for having within a Stocks & Shares ISA I would research what fund(s) you want, then choose the platform provider. For example, you may end up wanting a Vanguard Lifestrategy fund, in which case at the value you are looking to invest over the next few years, it would be cheapest getting directly from Vanguard Investor platform. This is due to the low percentage fee charged by that platform. Once the investment is around £90k then fixed fee providers like iWeb and Interactive Investor can be lower cost.

The one thing with investing that you can control, to an extent, is the platform fees. You may like a lovely app, such as that which Hargreaves Lansdown has, but with their fees being 0.3% higher than Vanguard, you are paying for that app!

Consider putting some of the money in to pension, to give that a kick start given your age. Have some of it to spend... enjoy life. Have some for something needed in the next few years. Have some in S&S ISA for medium term investment. If you decide that you want to go down the route of buying first home, then consider using a Lifetime ISA for some of the money. Spread it about, so you keep your options open. Avoid tying it up as you are young and your needs will change over the next few decades.

@nannynick Thank you for such a helpful and detailed answer! I really appreciate it. Obviously some more research is in order, but you and the other posters have provided a great starting point

@endofthelinefinally

Wine makes an average 10% per annum and no capital gains tax payable. Champagne made an average 40% last year. I have heard good things about Hargreaves Lansdown in terms of investment advice. I do think it is wise to spread your investments rather than put everything into one thing. A friend has done very well with whisky over the last couple of years (more than doubled).

Interesting! Where do you buy whisky?!!

whatnumber

I am not an expert but I can ask my friend. There are specialist companies that will buy, store and sell wine/champagne/whisky etc for you. I have invested in wine over the last few years, but I haven't bought whisky personally.

Potentially, a private pension payment might be a good option for your mother.
As she’s 61, she wouldn’t be tying her money up - she’s actually old enough to access a pension immediately, though that should be a properly advised decision because of the implication to her NHS pension.

But if I were her, I’d look into the maximum should could invest to claim tax relief. She’s get an instant uplift of 25% from the tax relief - I’m assuming she’s a lower rate tax payer as you say her NHS payment is small.
So if she put £5K into a pension, for example, that would instantly become £6125.
A fantastic “return”. And we’re near to the end of the financial year, so she could get a payment in this year and again in April.
Once in the pension, of course the aim is further growth.

Now she does need to factor in that she’ll pay tax on it when she starts taking the pension - but with the 25% tax free lump sum, it’s still worth looking at. Depends on how small is small, for her NHS pension.

But before that, does she have the option to buy additional years in her NHS pension? And does she already have enough years of NI contributions to claim a full state pension. If not, but those is likely to be a very good investment.

Look at a LISA for you, not an ISA - but then ISA with some of the rest.

Tell your brother to stop being a lazy dick!

I have some fixed rate bonds with Sharia compliant banks : BLME, Al rayan etc. The expected profit (interest rate) has been one of the better rates on the market.

@endofthelinefinally Investing in alcohol seems an interesting idea. I looked up the Whiskey investment and it seems you have to go via an intermediary (?). Definitely looks like you can get good returns.

@Cocomarine Thanks for you advice regarding my mother :) I don’t think she has thought investing it into her pension. Will pass that on to her.

My brother is a lazy dick but I don’t want this money to go to waste - which it will if I don’t do something. I am quite tight and hate to see money wasted…. 😅

@CalIie get her to have a good look at buying additional NHS pension via a lump sum:

www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/additional-pension

Get 20k in an ISA now for 21/22 and get it another in after April for 22/23.

You then have 40k put away.

You can share deal very easily I’d put the remaining 10k in a “safe share” for a year then cash out in q1/q2 2023 and put it in an isa to use up half your 23/24 allowance

don't invest in things like wine or whiskey. that is a high risk investment where you could easily lose all your money.

Stick with a standard S&S ISA from a big mainstream provider. You want to track the stock market as a whole and not spend too much on fees. I like Nutmeg but many other options are available.

Anyone who claims they can beat the market with some quirky investment in wine or land or whatever is doing something high-risk & unusual which is not suitable for an ordinary investor with their first lump-sum.

@Cocomarine Thank you so much. I will take a look and send that to her.

Isa and premium bonds. My husband has the limit in and wins at least £25 every month.

That option may be best for your brother, very safe and easy to do. You will get a return with 50k in there

Your mum should be able to get free pension and retirement advice through her union so worth looking at that. If she doesn't have a full pension and is in good health, that might be the way to go.

Your brother can think for himself.

You need to decide if you are happy to take a risk and/or lock the money away at all. For any money you are unlikely to need in the next few years, a stocks and shares Isa is probably best. You can access the money, but the investment can go up and down and you want to avoid having to access the money when it is down.

Premium bonds aren't actually bad for any money you want to keep accessible and risk free. Above about £10k the prizes are very likely to beat the return on instant access cash savings.

This flowchart is a good guide to sorting your money. It's also worth doing some reading on the subject, outside forums where anyone can post anything which is often wrong or inappropriate for your circumstances.

ukpersonal.finance/flowchart/

If it was me(wish it was) I’d put

Mum - max she can in pension this year and next, if any left £5000 in premium bonds for easy access and rest in s&s isa.

Brother. - start a pension, you can put 2800/yr in even if not working, tax uplift plus compound interest will be his friend. Likewise. 4000 this year and next in a Lisa , 25% from government plus will lock it away until he buys a house. The rest in s& s isa, possibly moving 4000 over to a Lisa every year.

You, - Lisa this year and next, some pension contribution, maybe 5000 this year and next, 10000 in premium bonds as an emergency fund and rest in s &s isa,

Good luck!

I can’t help seeing the irony of considering investing in alcohol and Sharia compliant schemes at the same time…
Anyway personally at this stage I would find investing in wine/whisky too risky. Presumably the whisky investment incurs Capital Gains Tax when it is sold, that makes it more complex that using ISAs.
I would use a mix of LISA/ISA/pensions first, as they are all tax efficient as PPs said.
I don’t think Premium Bonds are a waste of time, they are a good way to store money safely and it is always accessible. The bonus is you might win something every month, you can think of it as a free lottery ticket…
Regarding your brother, he should do his own research, that way you can’t be blamed if something goes wrong. If he is too lazy to look into funds, most high street banks offer S&S shares ISA where all you have to do is decide your level of risk (they might have 3 or 5 different portfolios). Their fees might be higher than Vanguard index trackers but they do the thinking for you. Point him towards the MoneySaving expert site as well.
Also worth pointing that all 3 of you are at a different stage of life, so you might all want to split your money differently.

It all depends on your plans in the next 5, 10, 15 years.

S&S ISA and S&S investment account for the other £30K is the best idea if you're saving for the long-term; I'd say 10 years+. In this timeframe you could even go mostly equities.

If you think you may want to use the money for a deposit in the next 10 years, you could still invest it, but in a portfolio balanced with corporate bonds and fewer equities - something like 40/60 maybe.

If any chance of wanting to buy a house or otherwise spend the money within 5 years, premium bonds are your best bet - they will still give you, on average, a return higher than cash accounts.

• in addition to my last post, if you know nothing about investing don't choose individual stocks, invest in funds.

Personally, I would recommend Vanguard LifeStrategy funds, which offer balanced portfolios all the way from 20% equities (lower risk) to 100% equities (higher risk, better rewards for long-term). Low fees and available via their own platform + popular platforms like Hargreaves Lansdown.

Thanks @Meeko505 for your very helpful suggestions. I really appreciate all the thought you have put in.

And much thanks to everyone who has taken the time to give their insight.

@Xanorra I definitely see the irony 😂 But I am not a Muslim, I’m just seeking the best return on my investment. Should that involve a investing in both Shariah banking and alcohol so be it haha!

I’ve decided to book an appointment with a free financial advisor (through Unbiased, in case anyone is interested) and will discuss everyone’s suggestions with them.

Thanks all :)

If you bought a property with your brother you'd have a £100k deposit which would make a difference to the mortgage offers you'd get, is that something you'd consider doing?