£30k for ten years

[V8mate]

A friend has received £30k and then want to invest it for exactly ten years.

They are somewhat risk averse but can see further than a post office savings account!

Suggestions?

[scdan4]

premium bonds?

[nomisesor]

"Somewhat risk-averse" - are they taxpayers? I assume that, like me, they are not hugely finance-savvy and don't have a pet stockbroker but will be doing their investments online.

If so, how about £15k into the current NS&I index-linked certificates (currently returning 5.7% tax-free = 7.1% gross for a lower rate, 9.5% gross for a mid-rate taxpayer), rolled over after 5 years, the remainder into a ISA-sheltered equities / cash in the proportion they are happy with, dripped in over the current and next tax year?

ETA, direct investment into the ISA, with the equities held via low-expense tracker funds - or, depending on what you think about the risks of synthetic ETFs, even lower cost ETFs.

Edited by nomisesor on Wednesday 6th July 08:29

[Steffan]

An interesting question.

I would suggest that the biggest economic problem at the moment is the probable collapse of currencies. I think the interest rate paid on investments will pale into insignificance in relation to the losses or gains maede upon currency choice over the next three years.

If your friend can invest in an investment which is likely to rise in these circumstances as world currencies fall they should gain significantly.

My suggestion would be Canadian Dollars because (I see a stable your country with huge untapped resources.

There are alternatives such as gold etc and other PHer's may be able to suggest alternatives. But massive currency rate changes are the real danger.

[TFP]

I would strongly suggest you spend a little more time determining what attitude to risk the investor actually has, setting this against what they want to achieve.

Without knowing this exactly, and then understanding what sort of volatility and return profile different assets are likely to represent, you're starting out on a journey with no map, and no destination.

[V8mate]

I'd suggest that UK equities would be as daring as their appetite might go. And they certainly wouldn't be tempted to send 100% of the sum that way.

[RichyBoy]

I'd love to know what will happen to gold and silver in ten years.

[jeff m]

Risk aversion rules out Sterling

[cpas]

Deposit on a second house for rental?

[fido]

5yr Index-Linked Bonds .. in time for the next property boom!

[V8mate]

fido said:

5yr Index-Linked Bonds .. in time for the next property boom!

Where might one buy such an item?

[nomisesor]

V8mate said:

Where might one buy such an item?

http://www.nsandi.com/savings-index-linked-savings-certificates

[Fittster]

nomisesor said:

V8mate said:

Where might one buy such an item?

http://www.nsandi.com/savings-index-linked-savings-certificates

It's what I'd do.

Does anyone know if a similar product exists but with a shorter lock-in period? These seem rather good in principle for the eldery but 5 years is a bit to long (The person I'm thinking of what safety but is in their early 70s.)

[V8mate]

To confirm my understanding, you get a return of RPI + 0.50% per annum?

[nomisesor]

V8mate said:

To confirm my understanding, you get a return of RPI + 0.50% per annum?

As it says on the website - no interest if you cash in in the first year, RPI plus tiered rates up to 0.5% over the term, interest accrued as you go, so compound, unlike some competitor products, - but the two special bits are 1) government backed and 2) tax free - so for a higher or top rate taxpayer, exceptional value. Earlier issues, when RPI was lower and general interest rates higher, gave more premium over the RPI (I haven't checked, but I think it was up to 1.5% above RPI, but currently there is no similarly secure product which will come anywhere close to RPI tax-free, let alone a small premium on top. They usually allow reinvestment of the full (initial + interest - recent issues of £15k were worth about 17.5 at maturity) amount even if no certificates on sale (as recently) into a similar rate & term, or into the currently available issue, on top of new investments should you have a spare £15k at that time.

ETA (Sat a.m.) FT today says "Savers fail to swoop on market's best product" Savers unwilling to tie up their money are failing to take advantage of the most generous tax-free interest rate currently available on the market... contrary to expectations...investors have not inundated NS&I with deposits..."[uncertainty over whether inflation will continue to be way ahead of savings rates (though you have to factor in the tax for taxable accounts) and reluctance to tie up for 5 years (not an issue for the OP's friend, who wants to have a 10yr tie-up)]. If their aim is to beat inflation in a secure vehicle I'd still think that these fit the bill the best.

Edited by nomisesor on Saturday 9th July 12:32

[sidicks]

nomisesor said:

"Somewhat risk-averse" - are they taxpayers? I assume that, like me, they are not hugely finance-savvy and don't have a pet stockbroker but will be doing their investments online.

If so, how about £15k into the current NS&I index-linked certificates (currently returning 5.7% tax-free = 7.1% gross for a lower rate, 9.5% gross for a mid-rate taxpayer), rolled over after 5 years, the remainder into a ISA-sheltered equities / cash in the proportion they are happy with, dripped in over the current and next tax year?

ETA, direct investment into the ISA, with the equities held via low-expense tracker funds - or, depending on what you think about the risks of synthetic ETFs, even lower cost ETFs.

Edited by nomisesor on Wednesday 6th July 08:29

Based on the original thread, this seems an ideal solution!

Sidicks