Large sum - all in one or gradual release?

[NotInventedHere]

First time poster looking for some advice on how to deal with investing a large sum.

I’m about to cash out of my business and will be receiving a few £ shy of £1m, before tax, in June. As a result I’ll be likely to be taking on some contracting work on a slightly reduced top line income over the next year or so - more than enough to cover ordinary expenses, but less than I’ve earned over the last 5 years or so. I’m 50 with no mortgage and have around £1m in pension assets and another £500k in other investments. Those other investments are split 1/3 fixed term savings earning around 5% with a 1-2 yr time horizon. 2/3 global index funds split around 80/20 shares/bonds (Vanguard funds and Fidelity Index World for the most part). I also have around 12 months easy access expenses on hand.

I’ve calculated that I want to keep around £200k in a safe space to cover total future school fee liabilities from my total non pension assets. Aside from that, my main concern is that I’m reluctant to put all of my incoming proceeds into my current 80/20 investments allocation as I’m worried about lumping everything into the market at once. I’m slightly pessimistic about the medium term economic outlook and fear I could be piling in at the top of the market. Whilst I could likely afford to wait out any market turbulence, it seems wiser to drip feed my assets into the market over a 24 month period, initially keeping them on 3 - 24 month deposit and releasing them slowly into my usual trackers.

Any thoughts on the above, or alternative strategies gratefully considered.

[dealtn]

First time poster looking for some advice on how to deal with investing a large sum....

Any thoughts on the above, or alternative strategies gratefully considered.

Do what you are comfortable with. However the sum you are about to receive was from (it appears) 100% ownership of equity in a single unquoted UK small business, and your concerns are about investing 80% of 80% of it in a well diversified global fund of large companies. That's already significantly lower risk so whilst your timing might (with hindsight) not be perfect I wouldn't worry too much about it.

Sure drip feed if that makes you more comfortable, but you are also exposed to being out of the market, as well as being in it.

[Gerry557]

Well I suppose tax might be an issue to take account of.

It's a big lump to have unsheltered. Obviously you and partner can shelter 40k but it will take time to get that remaining 800k sheltered.

It makes sense to keep the school fees available. What about x years of every day spending. Still I expect the school fees will be drawn over time anyway.

If you have available funds it won't really matter much if the market fall as you can afford to ride it out. How much will you lose by not being invested.

It might be worth discussing with a wealth manager

[mc2fool]

First time poster looking for some advice on how to deal with investing a large sum.
:
I’m worried about lumping everything into the market at once. I’m slightly pessimistic about the medium term economic outlook and fear I could be piling in at the top of the market. Whilst I could likely afford to wait out any market turbulence, it seems wiser to drip feed my assets into the market over a 24 month period, initially keeping them on 3 - 24 month deposit and releasing them slowly into my usual trackers.

Any thoughts on the above, or alternative strategies gratefully considered.

Welcome to the Lemon Fool!

I did similar after transferring a DB pension into a SIPP, over a market-wise largely uneventful couple of years, and was just at the end when the pandemic hit and markets plunged.

There is, of course, no guarantee either way so, as dealtn says, do what you are comfortable with. If you are going to drip feed one suggestion I do have is that instead of and/or in complement to 3 - 24 month deposits you look at short term low coupon gilts.

While you do pay income tax on the coupons (interest) you get from gilts, exactly as on interest from bank/b.soc. savings account deposits, gilts are free of capital gains tax. So, if you buy ones that have a low coupon and most of the return comes from the capital uplift you'll pay a lot less tax and get a greater net return than if you stuck the same amount into an equivalent period savings a/c, even though the headline rate for the latter may be a bit higher.

E.g. gilt TG25 has a coupon of 0.625% and matures on 7-Jun-25. It is currently going for around 95.54. When it matures, in a bit over a year, you'll get 100, and you'll receive a tad more than 0.625 in interest along the way. The 0.625 is taxed, the uplift of 4.46 isn't. The gross return of 4.7% looks a little dull compared with 1 year savings accounts, but the net return is equivalent to a savings account giving 7.4% if you're a 40% taxpayer.

There aren't the same wide range of options as with savings accounts but a combination of the two could let you drip feed into markets while getting a greater net return along the way.

There's a list of gilts plus vital stats at https://www.yieldgimp.com/gilt-yields and lots of discussion and useful info on the Gilts and Bonds board, here's a good starter: viewtopic.php?p=597837#p597837

[tjh290633]

You say that you are loath to put more in your "Lifestyle" type investments. Quite right. The above post indicates how gilts priced below par can be a useful route, giving phased redemptions to match your school fee demands.

Other than that, my choice would be to go for a number of diversified investment trusts. The big global ones, FCIT, ATST and WTAN have been reliable investments over the years. There are severable reliable income oriented trusts, like CTY City of London IT, on which there is a lot of background information in the B7 and B8 portfolios started by Luniversal.

Getting as much into ISAs as you can has to be a priority and you might like to think about Junior ISAs for your offsprings.

A lot to think about for you.

TJH

[Wuffle]

From the info provided, 2.5m plus the house.
Expensively educated kids probably earning a packet as well.
This money is never going to be spent, its a comfort blanket for you, your kids and potentially theirs.
On that timescale the dips won't matter but tax management might well.
Get advice.

W.

[scrumpyjack]

You could consider a wealth preserver IT, eg Personal Assets Trust for some of your cash. It has a good record of wealth preservation through market dips.

My cynical view of Wealth Management firms is that their prime interest is their own wealth and they charge very high fees to tell you what is already obvious to anyone intelligent and sensible.

[yieldhog]

Here are my portfolios to give you some more choices:


SIPP

AEI, BATS, NCYF,HFEL, HINT, IMB, IAT, JEGI, JGGI, LGEN, NAIT, PHNX, SHRS, SMIF, VOD, VSL

ISAs
1. BRIG, BRSA, BRWM, FCIT, HFEL, PHI, SMIF, WWH
2. AEI, BNKR, BERI, BRWM, NCYF, HFEL, NAIT, PHI
3. Fixed Rates ISAs

Taxable Trading Account
ASS, ATT, BRSA, CLDN, HGEN, IBT, JSGI, RCP, SMT, YCA
Taxable Bank Accounts.
Instant access and Savings accounts.



Keep in mind this is for a SIPP for a 76-year old and it has been in draw down for about 15-years
The SIPP is mainly for income with a bit of growth thrown in. It currently produces a steady 7.5% plus.
The ISAs are mainly growth with a little income to keep things steady.
The trading account is mainly growth with low dividend income.

85% of all the portfolios are in zero tax accounts i.e. SIPP and ISAs.

Hope this gives you plenty of food for thought.

Best of luck
Y

[Neutrino]

Timing The Market Vs Dollar Cost Averaging (Drip Feeding)

https://www.youtube.com/watch?v=gOVWYoGq5Jo

[DrFfybes]

There are pros and cons to drip feeding.

I invested a 6 figure inheritance a few years ago just as Putin was invading Ukraine.

I drip fed over a couple of months with weekly investments, things were moving 1% or more daily. I didn't win, but I didn't lose as much as putting it all in on day 1.

VEVE is a Global tracker, over the last month it is flat, over the last week down 2%. Markets are around record highs (again!) and the political situation around the world is volatile. My other investment was BRKB, that drifted down about 10% over my investment period, but has since had a brief 30% gain.

For me and my own sanity then regular lump sums was the way forwards.

This money is never going to be spent, its a comfort blanket for you, your kids and potentially theirs.
On that timescale the dips won't matter but tax management might well.

This sounds pretty much spot on. Tax planning is probably going to make far more of an impact than market timing.

[Adamski]

I'm with you there. I received an inheritance and invested directly before the covid crash, bit hairy at the time, when everyone was saying it was the end of the world.

If there is an AI correction it is likely the Mag 7 will drop the most as these are most overvalued. So undervalued markets like ours, Germany and China will do better than the US and technology. However the UK market has been beaten up for so long who can say.

You can get 4.5% on savings with no risk. That's quite attractive. Once interest rates are cut, I'd expect wealth preservers to do better, PNL, RICA, CGT.

So in your position I'd drip feed as well.

[1nvest]

All-in is no different to the cost-less lumping in each and every day, so a very broad/common issue, where most decide to lump in asap and select a asset allocation (typically stocks and bonds) + periodic rebalancing (trading) to do time averaging.

[monabri]

First time poster looking for some advice on how to deal with investing a large sum.
:
I’m worried about lumping everything into the market at once. I’m slightly pessimistic about the medium term economic outlook and fear I could be piling in at the top of the market. Whilst I could likely afford to wait out any market turbulence, it seems wiser to drip feed my assets into the market over a 24 month period, initially keeping them on 3 - 24 month deposit and releasing them slowly into my usual trackers.

Any thoughts on the above, or alternative strategies gratefully considered.

Welcome to the Lemon Fool!

I did similar after transferring a DB pension into a SIPP, over a market-wise largely uneventful couple of years, and was just at the end when the pandemic hit and markets plunged.

There is, of course, no guarantee either way so, as dealtn says, do what you are comfortable with. If you are going to drip feed one suggestion I do have is that instead of and/or in complement to 3 - 24 month deposits you look at short term low coupon gilts.

While you do pay income tax on the coupons (interest) you get from gilts, exactly as on interest from bank/b.soc. savings account deposits, gilts are free of capital gains tax. So, if you buy ones that have a low coupon and most of the return comes from the capital uplift you'll pay a lot less tax and get a greater net return than if you stuck the same amount into an equivalent period savings a/c, even though the headline rate for the latter may be a bit higher.

E.g. gilt TG25 has a coupon of 0.625% and matures on 7-Jun-25. It is currently going for around 95.54. When it matures, in a bit over a year, you'll get 100, and you'll receive a tad more than 0.625 in interest along the way. The 0.625 is taxed, the uplift of 4.46 isn't. The gross return of 4.7% looks a little dull compared with 1 year savings accounts, but the net return is equivalent to a savings account giving 7.4% if you're a 40% taxpayer.

There aren't the same wide range of options as with savings accounts but a combination of the two could let you drip feed into markets while getting a greater net return along the way.

There's a list of gilts plus vital stats at https://www.yieldgimp.com/gilt-yields and lots of discussion and useful info on the Gilts and Bonds board, here's a good starter: viewtopic.php?p=597837#p597837

I'd second that ( TG25) as a consideration.

[Dumbo]

I’m worried about lumping everything into the market at once. I’m slightly pessimistic about the medium term economic outlook and fear I could be piling in at the top of the market. ...

Oh for goodness sake.

"will be receiving a few £ shy of £1m",
"taking on some contracting work",
"no mortgage and have around £1m in pension assets and another £500k in other investments",
"12 months easy access expenses on hand".

Why are you asking anyone on a bulletin board for advice?

I should be asking you!

Eddie

[wanderer]

How about a five year gilt ladder to provide inflation protection and then drip feed in the investments each year as the gilt ladder matures. You can shield 40k per year per couple tax free in isas and as for the rest, you could either invest it if you feel the timing is right, or use it to extend the gilt ladder if not?

[Kantwebefriends]

You could always diversify a bit into gold and commodities. Gold sovereigns are free of CGT. You could see what they cost to buy from, and store at, the Royal Mint and then compare the cost with commercial providers.

Commodity ETFs are available: wheat, oil, silver, cocoa, ...

Combine with the low coupon gilts and you have a strategy. But as Wuffle said "This money is never going to be spent, it's a comfort blanket for you, your kids and potentially theirs."

So I suppose realistically you can do whatever you please as long as it doesn't cost you sleep. I mean that remark literally - the point of being wealthy is comfort and security for you and yours. Lost sleep would be a decent measure that you've got the balance wrong.