Re: £200k lump sum to invest for an immediate income
Posted: March 13th, 2021, 2:38 pm
1nvest wrote:Alan7878 wrote:Excellent responses all, thank you very much. I do like the idea of a diversified basket of ITs for growth and income; particularly for the funds within an ISA. I'm also wondering about the intervening years when the majority of money will be outside of ISAs but I still want to achieve growth/income. Would you employ the same strategy and spend a bit more time on your annual tax return with various different ITs outside of an ISA OR, would you go for something simpler like a world tracker with one or two years in cash/bonds/other to feed income and ISA each year?
Thanks again
Alan
Gilt capital gains are free from CGT, with low yields on those and cash the tax implications of being outside of ISA are low. Gold legal tender coins are CGT exempt. Have a read about the Golden Butterfly (GB), which is a 80% Permanent Portfolio (Harry Browne's, that you'll also need to read about) and 20% stock asset allocation.
Basically a standard GB might be 20% in each of 20 year gilt, cash deposits, gold, FT250, S&P500. But give that a brain. Pretty much at any time one of the assets will look to be a bad choice and more often that comes to fruition. 1980 and the Dow/Gold ratio was 1.0, gold was expensive so if started then drop gold from the set. Rebalancing isn't required, just let the assets ride, but periodically reset/restart, which is in effect rebalancing to some extent, as/when valuations look extreme. 1999 and Dow/Gold was up at 40 levels, so stop/restart with a lower allocation to stocks. Recently interest rates are very low so restart without Long Dated Gilts ...etc.
For income, apply a 3.3% SWR that should be a perpetual rate (PWR) i.e. 3.3% of the initial amount, uplifting that by inflation as the amount drawn in subsequent years - so a nice consistent inflation adjusted income come what may where inflation adjusted capital value is not only likely broadly preserved, but expanded by a decent amount over time (3% real+ type rate).
Starting for instance with 25% in FT250, 25% US stock, 25% gold, 25% cash at recent valuations and the cash could near enough be stuffed under the mattress, gold might be legal tender coins, both outside of ISA. Leaving 100K of stock outside of ISA but that with a couples allowances could have 80K of that migrated into ISA using this years and next years ISA allowances if not already used ... within weeks.
Prepare to be blown away by the actual rewards generated and the low downside risk/volatility (worked long term in UK, US and even did very well in Japan since 1970's).
Thanks 1Invest. I have read briefly around those portfolios in the past but I'll have another look