Investing for income - ideas for a new investor?
Discussion
Hi all,
so, i'm very green to the world of investing but hoping for some advice.
I run a small sales company - by small I mean i'm the only employee (we have a great employee retention scheme)
Essentially, I'm an Agent, I represent one company exclusively and take commission (and retainer) for my services.
It works well, they get increased sales, and I earn far more than I would compared to working directly for a company.
Now, I get paid a regular retainer, and commission is paid when the works are complete, which is some cases is about 12/14 months. That's fine in most cases, but when some of these projects are high value, it leaves cashflow being very turbulent, fine over the course of a year, but some months there are no funds coming in, and other months have high income.
I'm keen to somewhat balance this out, and increase regular income into the business. Now my agreement is exclusivity, which means I am contract to my principle company for 100% of my working time. Which means I cannot add additional products, additionally there are limits to how much can be feasibly sold - no matter how well I do (or don't do) there is always other aspects to this line of work where some years are just better than others.
SO. The point of my ramble?
How do I invest for income?
What should I be looking at?
How much capital should I be attaching to it?
I've looked into rental properties, but it seems quite low return for potentially high risk. At the moment local rental prices are quite high but this seems to be a reaction to covid and less houses being sold, so as a long term investment it may not give a consistent return, and, would mean I'd need to pay a large deposit (circa £40,000 to give a good return and a good property)
I would like to be generating circa. £2,000 a month over the course of the next 5 years. I understand I won't be able to get to that amount overnight, it'll take growth to get there, but thought a target might be useful.
I see some "investment for income" schemes show around 7% return, so for my £2,000 I need to have about £350,000 in my investment portfolio. Now long term that's achievable, but I've got to get there first.
I expect to be able to invest circa. £20,000 per annum from the business, I'd really like to understand the best way to make this grow. Clearly if I opt for the rental route, I'd need to leave this in the business for 2 years to afford the rental property - by which point the market may well have changed entirely.
So. If you had £20,000 to invest - where would you put it?
so, i'm very green to the world of investing but hoping for some advice.
I run a small sales company - by small I mean i'm the only employee (we have a great employee retention scheme)
Essentially, I'm an Agent, I represent one company exclusively and take commission (and retainer) for my services.
It works well, they get increased sales, and I earn far more than I would compared to working directly for a company.
Now, I get paid a regular retainer, and commission is paid when the works are complete, which is some cases is about 12/14 months. That's fine in most cases, but when some of these projects are high value, it leaves cashflow being very turbulent, fine over the course of a year, but some months there are no funds coming in, and other months have high income.
I'm keen to somewhat balance this out, and increase regular income into the business. Now my agreement is exclusivity, which means I am contract to my principle company for 100% of my working time. Which means I cannot add additional products, additionally there are limits to how much can be feasibly sold - no matter how well I do (or don't do) there is always other aspects to this line of work where some years are just better than others.
SO. The point of my ramble?
How do I invest for income?
What should I be looking at?
How much capital should I be attaching to it?
I've looked into rental properties, but it seems quite low return for potentially high risk. At the moment local rental prices are quite high but this seems to be a reaction to covid and less houses being sold, so as a long term investment it may not give a consistent return, and, would mean I'd need to pay a large deposit (circa £40,000 to give a good return and a good property)
I would like to be generating circa. £2,000 a month over the course of the next 5 years. I understand I won't be able to get to that amount overnight, it'll take growth to get there, but thought a target might be useful.
I see some "investment for income" schemes show around 7% return, so for my £2,000 I need to have about £350,000 in my investment portfolio. Now long term that's achievable, but I've got to get there first.
I expect to be able to invest circa. £20,000 per annum from the business, I'd really like to understand the best way to make this grow. Clearly if I opt for the rental route, I'd need to leave this in the business for 2 years to afford the rental property - by which point the market may well have changed entirely.
So. If you had £20,000 to invest - where would you put it?
£20k is ISA territory.
Assuming I had a house, then I'd be looking at stocks and shares to balance things.
Personally, look for a mix of funds and maybe a couple of shares.
But IMHO it's a matter of looking for companies which are making money now and will make more money in the future.
I don't restrict myself to UK.
Best to go with your own beliefs, because not everything will work out.
Assuming I had a house, then I'd be looking at stocks and shares to balance things.
Personally, look for a mix of funds and maybe a couple of shares.
But IMHO it's a matter of looking for companies which are making money now and will make more money in the future.
I don't restrict myself to UK.
Best to go with your own beliefs, because not everything will work out.
OutInTheShed said:
£20k is ISA territory.
Assuming I had a house, then I'd be looking at stocks and shares to balance things.
Personally, look for a mix of funds and maybe a couple of shares.
But IMHO it's a matter of looking for companies which are making money now and will make more money in the future.
I don't restrict myself to UK.
Best to go with your own beliefs, because not everything will work out.
Yes, my main issue, is I don't want to take more out of the company as a dividend or pay, the taxation on that becomes too expensive. It appears an intercompany loan would be the best bet, and use the funds to set something else up.... I do have other ideas for businesses so perhaps that's worth exploring. Assuming I had a house, then I'd be looking at stocks and shares to balance things.
Personally, look for a mix of funds and maybe a couple of shares.
But IMHO it's a matter of looking for companies which are making money now and will make more money in the future.
I don't restrict myself to UK.
Best to go with your own beliefs, because not everything will work out.
a) if you're investing to generate an income, be prepared to think about total return rather than it must be spat out as dividends or coupon payments.
b) if you want investments that won't fall in value in the long term, taking a return of 7% is probably very optimistic.
c) diversify
d) look to minimise fees - every .5% in fee structure, is .5% less going to you.
e) saving £20,000/year for 5 years won't get you close to £350,000, and as you're unlikely to see 7%, you probably need more capital than that anyway.
f) you may well find reading some of the FI/RE blogs useful , as they have similar goals. https://monevator.com/category/investing/passive-i... may be a worthwhile starting point.
g) I'd probably go for some mixture of a S&P500 tracker and VWRP , but I'm far too lazy to consider running a BTL.
h) BTL lets you use leverage to juice your return on capital. The downside is that it increases risk, so if things go wrong, they go wrong more expensively.
i)sorry to be negative.
b) if you want investments that won't fall in value in the long term, taking a return of 7% is probably very optimistic.
c) diversify
d) look to minimise fees - every .5% in fee structure, is .5% less going to you.
e) saving £20,000/year for 5 years won't get you close to £350,000, and as you're unlikely to see 7%, you probably need more capital than that anyway.
f) you may well find reading some of the FI/RE blogs useful , as they have similar goals. https://monevator.com/category/investing/passive-i... may be a worthwhile starting point.
g) I'd probably go for some mixture of a S&P500 tracker and VWRP , but I'm far too lazy to consider running a BTL.
h) BTL lets you use leverage to juice your return on capital. The downside is that it increases risk, so if things go wrong, they go wrong more expensively.
i)sorry to be negative.
xeny said:
a) if you're investing to generate an income, be prepared to think about total return rather than it must be spat out as dividends or coupon payments.
b) if you want investments that won't fall in value in the long term, taking a return of 7% is probably very optimistic.
c) diversify
d) look to minimise fees - every .5% in fee structure, is .5% less going to you.
e) saving £20,000/year for 5 years won't get you close to £350,000, and as you're unlikely to see 7%, you probably need more capital than that anyway.
f) you may well find reading some of the FI/RE blogs useful , as they have similar goals. https://monevator.com/category/investing/passive-i... may be a worthwhile starting point.
g) I'd probably go for some mixture of a S&P500 tracker and VWRP , but I'm far too lazy to consider running a BTL.
h) BTL lets you use leverage to juice your return on capital. The downside is that it increases risk, so if things go wrong, they go wrong more expensively.
i)sorry to be negative.
oh no problem being negative at all, I'd rather work to reality over fairy tales. b) if you want investments that won't fall in value in the long term, taking a return of 7% is probably very optimistic.
c) diversify
d) look to minimise fees - every .5% in fee structure, is .5% less going to you.
e) saving £20,000/year for 5 years won't get you close to £350,000, and as you're unlikely to see 7%, you probably need more capital than that anyway.
f) you may well find reading some of the FI/RE blogs useful , as they have similar goals. https://monevator.com/category/investing/passive-i... may be a worthwhile starting point.
g) I'd probably go for some mixture of a S&P500 tracker and VWRP , but I'm far too lazy to consider running a BTL.
h) BTL lets you use leverage to juice your return on capital. The downside is that it increases risk, so if things go wrong, they go wrong more expensively.
i)sorry to be negative.
but to comment on your points:
a) Yes think this will be the case. I don't plan on taking the income generated unless it's absolutely required. If I take any more dividends I'll be paying the next level of taxation on it and i'm keen to avoid that. This is more a case of maintaining that level of income rather than increasing it. I think in all reality, I would set the investment side of things up as a 2nd ltd company, and keep all proceeds in that business unless they're required in order to maintain my regular income.
b) yes sadly I think you're right there.
c) agreed.
d) that's certainly one to think about, hadn't looked into fees as yet but I'll be a tight as possible for sure.
e) oh sorry that was my poor wittering. I don't expect to get to the £350,000 in 5 years merely that's the long term aim. And yes you're right of course, will likely need more than the £350,000 in order to achieve the income i'm hoping for.
f) i'll take a read
g) I'm likely the same! BTL has just always been seen as where the money is (in my mind) but i'm thinking those days are long gone
i) don't be.
I'm really stuck in a phase of, put the money into stocks and shares etc, or start another business all together, and staff it.
I think this is partly in line with your diversify point. I'm in a good position with business number 1. I'm very eager to add another string to the bow to minimise ongoing risks if that business should slow down
2-5% into Bitcoin and drip feed the rest into a global tracker over the next 12 months with an expectation that the markets have lower to go but that timing the bottom is going to be difficult.
https://www.fidelitydigitalassets.com/sites/defaul...
https://www.fidelitydigitalassets.com/sites/defaul...
vulture1 said:
Legal and general,
All the housebuilders
DEC (arguably a little cyclical but has been over 10% at "negative oil" and currently.
Thanks for this. Legal and General is an interesting one, as their shares seem down on the year. Anyway sorry for diversion, probably a bit specific for the original question!All the housebuilders
DEC (arguably a little cyclical but has been over 10% at "negative oil" and currently.
Still a lot of U.K. irredeemable preference shares out there. I’ve had them in my portfolio since the GFC in 2008. They’ve all taken a bit of a capital hit recently as inflation/interest rates have increased - but if you want a rock solid 7%+ return you can’t go wrong imho. Plenty of room for a capital gain too as inflation cools in the coming year or two and you’re arguably buying the bottom of the cycle now..
The usual suspects:
Nat West 9% NWBD
Aviva AV.A and AV.B
SAN
Lloyds LLPC & LLPD
BOI 13.375% ( albeit this a bond not a pref)
The usual suspects:
Nat West 9% NWBD
Aviva AV.A and AV.B
SAN
Lloyds LLPC & LLPD
BOI 13.375% ( albeit this a bond not a pref)
Edited by siheb on Sunday 9th October 21:41
Edited by siheb on Sunday 9th October 21:43
If you're interested in exposure to property, look at the REITs. Given the recent chaos, some are now trading at 50% discount to NAV. Obviously asset valuations are likely to fall as well, so its not a completely free lunch but there are good yields to be had. DYOR etc.
Also, with interest rates rising to highs compared to recent decades, there will be reasonably good (relative to recent years) fixed income yields in coming months/years, so perhaps keep in mind that next years GBP20k or whatever could be used for corporate bonds (directly or via a fund) to lock in what should be quite good income, with potentially low risk relative to equities etc. Again DYOR etc.
Both can be owned within your existing co if you want.
Also, with interest rates rising to highs compared to recent decades, there will be reasonably good (relative to recent years) fixed income yields in coming months/years, so perhaps keep in mind that next years GBP20k or whatever could be used for corporate bonds (directly or via a fund) to lock in what should be quite good income, with potentially low risk relative to equities etc. Again DYOR etc.
Both can be owned within your existing co if you want.
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