Investing lump sum
Posted: March 18th, 2018, 4:30 pm
Hi
First post on Lemonfool, I was active on the old Motley Fool board quite a few years back but have been an extremely passive investor the last decade or so (for reasons which I'm about to explain) and now need to start getting involved again.
My potted investing history is that I was pretty sensible when I first started work in the late 90s. Managed to get on the property ladder early, avoided any debt other than mortgage, put what money I could afford into an ISA. Mostly ETFs, dabbled in some individual stocks with amounts I could afford to take risks with, won some, lost some. 8 years ago I managed to quit my job, start a business with 2 ex-colleagues, become a dad, and buy a doer-upper of a family house within the space of 6 weeks. Since then I've not really had the time nor money to be much of an active investor. Time has gone into building the business and being a dad. Took as little money out of the business as we could while it was getting started, and what money I did take out has largely gone on improving the house.
And now we've sold the business and I find myself with the (nice) problem of what to do with the proceeds having not really been involved in the market for close to a decade (I still have the ISA and it's done OK). It's a nice sum of money (about 7x my gross annual salary), but not into "driving a Ferrari and never having to worry about money again" territory. I literally don't need to spend a penny of it right now. Our only debt is our mortgage, which is locked in at a good rate and very affordable (about 75% equity in the house). I could pay it off when the current rate expires next year, but quite like the discipline of the monthly payments while interest rates are low. Love our house and not interested in moving up the ladder. We're happy with our lifestyle and can cover it comfortably out of our salaries, or just from my wife's salary with a few sacrifices. I'm 42, not ready to stop work and certainly can't afford to, but my work is pretty stressful at times and so this money is my chance of building the kind of financial security that means I have the option of retiring earlier, or more likely of taking a pay cut to do something less stressful. May also give us the chance to help the kids with university and/or buying their own property when the time comes (at least 10 years away!).
And my problem is that I feel like a rabbit in the headlights! When I was squirrelling away relatively small amounts of money on a regular basis I was happy to take risks and learn as I went along. I'm a bit daunted by having what is for me such a large lump sum to invest, I'm in an incredibly lucky position but there's also a lot of pressure to get it right as this sort of money isn't coming to come along again - I know myself well enough to know I'm not a serial entreprenneur. Stock markets seem high to me at the moment and I'm worried about buying at the top of the cycle - I know many people say don't worry about trying to time the market, but while that advice is sound when you're investing monthly as it averages out over time, it doesn't seem so good when you're investing all in one go. Property also doesn't seem like great value right now, and extra stamp duty and scrapping of tax relief on second homes make being a landlord less attractive. To be completely honest, I don't really know much about other classes of investments like bonds. I'm going to be reading up on here over the next few weeks.
I've met a number of financial advisers but not really been impressed with any of them. If I do end up using one I want to educate myself a bit first and have independent information sources and not just what I'm told by somebody who is going to be taking a fee or commission from me. The money is already taxed so no point using it to top up my pension, though I will be putting into my pension as much as I'm allowed from my salary over the next few years as I've been negligent on that front. So the money is just sat in cash at a pitiful interest rate right now. Any thoughts on how best to invest it? We shouldn't need to touch it for at least 15 years, but after that would want to be able to generate a nice income from it into retirement. I'll be aiming to transfer the maximum allowed into an ISA each year of course. If I stick it into an array of funds now then what are some good low fee funds with a long term horizon? There's a part of me that thinks everything is overpriced right now, there are likely to be one or more crisis events over the next couple of years that trigger a crash and that I should be keeping some or most of it in cash and looking out for buying opportunities. But even if I'm right, whether I'm in any way active enough or smart enough to spot those buying opportunities is another matter!
Anyway, sorry for the long and slightly rambling post. I've got a lot of reading up to do, this was a good way of me getting my thoughts out in writing and hopefully somebody has some useful ideas or is at least able to help me shortcut my education process by pointing me towards some helpful threads or articles. Thank you in advance!
First post on Lemonfool, I was active on the old Motley Fool board quite a few years back but have been an extremely passive investor the last decade or so (for reasons which I'm about to explain) and now need to start getting involved again.
My potted investing history is that I was pretty sensible when I first started work in the late 90s. Managed to get on the property ladder early, avoided any debt other than mortgage, put what money I could afford into an ISA. Mostly ETFs, dabbled in some individual stocks with amounts I could afford to take risks with, won some, lost some. 8 years ago I managed to quit my job, start a business with 2 ex-colleagues, become a dad, and buy a doer-upper of a family house within the space of 6 weeks. Since then I've not really had the time nor money to be much of an active investor. Time has gone into building the business and being a dad. Took as little money out of the business as we could while it was getting started, and what money I did take out has largely gone on improving the house.
And now we've sold the business and I find myself with the (nice) problem of what to do with the proceeds having not really been involved in the market for close to a decade (I still have the ISA and it's done OK). It's a nice sum of money (about 7x my gross annual salary), but not into "driving a Ferrari and never having to worry about money again" territory. I literally don't need to spend a penny of it right now. Our only debt is our mortgage, which is locked in at a good rate and very affordable (about 75% equity in the house). I could pay it off when the current rate expires next year, but quite like the discipline of the monthly payments while interest rates are low. Love our house and not interested in moving up the ladder. We're happy with our lifestyle and can cover it comfortably out of our salaries, or just from my wife's salary with a few sacrifices. I'm 42, not ready to stop work and certainly can't afford to, but my work is pretty stressful at times and so this money is my chance of building the kind of financial security that means I have the option of retiring earlier, or more likely of taking a pay cut to do something less stressful. May also give us the chance to help the kids with university and/or buying their own property when the time comes (at least 10 years away!).
And my problem is that I feel like a rabbit in the headlights! When I was squirrelling away relatively small amounts of money on a regular basis I was happy to take risks and learn as I went along. I'm a bit daunted by having what is for me such a large lump sum to invest, I'm in an incredibly lucky position but there's also a lot of pressure to get it right as this sort of money isn't coming to come along again - I know myself well enough to know I'm not a serial entreprenneur. Stock markets seem high to me at the moment and I'm worried about buying at the top of the cycle - I know many people say don't worry about trying to time the market, but while that advice is sound when you're investing monthly as it averages out over time, it doesn't seem so good when you're investing all in one go. Property also doesn't seem like great value right now, and extra stamp duty and scrapping of tax relief on second homes make being a landlord less attractive. To be completely honest, I don't really know much about other classes of investments like bonds. I'm going to be reading up on here over the next few weeks.
I've met a number of financial advisers but not really been impressed with any of them. If I do end up using one I want to educate myself a bit first and have independent information sources and not just what I'm told by somebody who is going to be taking a fee or commission from me. The money is already taxed so no point using it to top up my pension, though I will be putting into my pension as much as I'm allowed from my salary over the next few years as I've been negligent on that front. So the money is just sat in cash at a pitiful interest rate right now. Any thoughts on how best to invest it? We shouldn't need to touch it for at least 15 years, but after that would want to be able to generate a nice income from it into retirement. I'll be aiming to transfer the maximum allowed into an ISA each year of course. If I stick it into an array of funds now then what are some good low fee funds with a long term horizon? There's a part of me that thinks everything is overpriced right now, there are likely to be one or more crisis events over the next couple of years that trigger a crash and that I should be keeping some or most of it in cash and looking out for buying opportunities. But even if I'm right, whether I'm in any way active enough or smart enough to spot those buying opportunities is another matter!
Anyway, sorry for the long and slightly rambling post. I've got a lot of reading up to do, this was a good way of me getting my thoughts out in writing and hopefully somebody has some useful ideas or is at least able to help me shortcut my education process by pointing me towards some helpful threads or articles. Thank you in advance!