Short term investment ideas - £50k

[J_S_G]

I've currently got about £50k lying around that's going to be needed in a few months time to do some substantial house renovations. I.e. I'll start eating into it in 3-6 months or so once planning permission, etc. is sorted. Then it'll dwindle to nothing over the following 12 months.

Was wondering if anybody had any bright ideas on where to invest it in the meantime... I'm not willing to put it in the stock market as it's just too much of a gamble and out of my control given the money's got a purpose. I *am* willing to invest it in a business/scheme/idea that I get to do a full appraisal of in the meantime, though, if it's something that looks like a cert to me.

Current thoughts are:
- Premium bonds (up to £30k - don't hold any currently)
- Offset against the mortgage (so, ~10% PA return, given the tax breaks on that)

I hate "low return" investments, though - could do with something that'll net me a few thousand, even if it means putting a fair amount of up-front effort in. ISA allowances are all used up, by the way.

Any thoughts?

Cheers!

Edited by J_S_G on Sunday 25th March 18:50

[justinp1]

Ahh, the magical zero/low risk for high return short term investment plan!

I think they started looking for that when they wanted to convert lead into gold!

Seriously though, if there was a was such a thing everyone would be doing it. The only thing close enough to that is the property game. However, the definate returns are long term and *may not* work in the short term. There are also tax implications which mean that really its more of a longer term investment than a few months. 2-3 years though, and its pretty much a winner, or at least a worthwhile risk.

If you can get 10% with zero risk with mortgage offsetting then I would say that is a great option in itself. You would have to start thinking about a reasonable risk strategy to get anywhere close to that.

[J_S_G]

I'm not bothered about it being high risk *if* I can get a realistic measure on that risk and it's something *I* deem low whereas the market may deem it high. I.e. I'm not happy to go with the stock market on this one as I can neither control it nor predict what Bush or George W Blair will do (along with the other prevailing market concerns at the moment). However, I am quite happy to help fund somebody's business/deal/etc. if there's what looks like a decent business plan I can go over with a fine toothed comb. To be honest, I'd risk losing a substantial chunk of it if the returns were worthwhile in relation to the risk (the extra rooms could realistically wait if need be!) Stock market/lottery/gee-gees don't come into this short-termist, measurable category for me!

I guess, on reflection after a bottle of Rioja, I'm asking if anybody has any businesses that would offer a relatively quick return on investment that they'd like help with getting off the ground, given that's the only realistic option short of the usual avenues. Especially given the other things I can add to a start-up!

[GreenV8S]

justinp1 said:

If you can get 10% with zero risk with mortgage offsetting then I would say that is a great option in itself. You would have to start thinking about a reasonable risk strategy to get anywhere close to that.

10% would presumably be roughly double the mortgage interest rate. How do you get a return higher than the interest rate?

[Tiggsy]

so you dont want to invest in a huge company on the FTSE100 but you'll take a punt on some dinky start up? Sounds like you have ideas that are beyond your budget and attitude to risk.

The notion that you want to avoid the high risk and volatility of the stock market but have a stab at venture capital doesnt add up....pay of your mortgage.

[J_S_G]

GreenV8S said:

justinp1 said:

If you can get 10% with zero risk with mortgage offsetting then I would say that is a great option in itself. You would have to start thinking about a reasonable risk strategy to get anywhere close to that.

10% would presumably be roughly double the mortgage interest rate. How do you get a return higher than the interest rate?

Tax. 6% or so on a mortgage. Only I'd be "saving" it tax free (higher rate)... i.e. heading up to 10% comparatively.

Edited by J_S_G on Sunday 25th March 19:06

[J_S_G]

Tiggsy said:

so you dont want to invest in a huge company on the FTSE100 but you'll take a punt on some dinky start up? Sounds like you have ideas that are beyond your budget and attitude to risk.
The notion that you want to avoid the high risk and volatility of the stock market but have a stab at venture capital doesnt add up....pay of your mortgage.

Not at all. I already have the majority of my capital tied up in the stock market, and I'm quite, quite happy to keep it there for the long term - the stock market's a fair old hobby for me! (Not to mention fairly close to home for the day job...) However, it's not the appopriate place for this money on a 6-9 month (or so) basis. There are no further large, publicly traded companies I want any more of my money in at the moment on such a short term basis. I'm just in the process of cashing in all my short-term investments that were in Party Gaming, Barclays, etc.

I've helped enough start-ups (and been directly part of enough!) in the past to be more than happy to make an educated judgement on whether one's worth a punt. The difference this time around is that I won't have the spare hours to invest in helping such a company get off the ground over the coming year - the properties and the other jobs are going to keep me flat out. So it'll need to be something that somebody else is running but needs a little backing for. Something I can spend some time going over the figures and helping out with now, while I've got a few weeks with some down-time, and then have the confidence in it not to need my day-to-day involvement.

I'm open to any amount of technical risk on this as long as it's something I can measure and deem viable myself. There aren't any large companies on the market that would offer the level of return I'd be looking for over that period without a disproportionate risk given the likelihood of a correction and general downturn in the market over the coming months.

If nobody's got any ideas/plans they want to get off the ground, not to worry... I'll probably just stick most of it with NS&I and hope my numbers come up. If they have, I'm all ears...

Cheers.

[eyebeebe]

With the timescale and risk profile you are looking at I think you are going to struggle to get the kind of return you are after. There are only two scenarios I can think of where a business would want the kind of money you are talking about for a 10% cost of capital. A company that is experiencing cash flow/working capital issues, in which case I would say the risk profile is too high or a new start up. I can't imagine a new start up being able to start with £50k and turn over enough to repay the principal and the interest in 6-9 months. If there are any I'd expect people to be persuing it for themselves rather than letting other people in on it!

If you can make overpayments on your mortgage to that extent and take the capital back out again when you need it without incurring penalties (in either instance) I think it is your best option.

[cptsideways]

Motor trade

[J_S_G]

eyebeebe said:

With the timescale and risk profile you are looking at I think you are going to struggle to get the kind of return you are after. There are only two scenarios I can think of where a business would want the kind of money you are talking about for a 10% cost of capital. A company that is experiencing cash flow/working capital issues, in which case I would say the risk profile is too high or a new start up. I can't imagine a new start up being able to start with £50k and turn over enough to repay the principal and the interest in 6-9 months. If there are any I'd expect people to be persuing it for themselves rather than letting other people in on it!

If you can make overpayments on your mortgage to that extent and take the capital back out again when you need it without incurring penalties (in either instance) I think it is your best option.

Sound words. Have deliberately got a flexible mortgage to allow this. Would add that I'm not too worried about actually seeing the ROI in these time scales, just that getting the capital back within them would be useful. If a business came along that needed more like 18-24, I could float the money from elsewhere, too, etc.

Basically, I hate the thought of having this money and doing nothing more interesting with it that offsetting it or sticking it in premium bonds (which I'd probably pick over the offset to start with, given even *that* has some chance of a decent return, even if the odds are low). Guess that's the real thing here - I'd rather risk zero return/slight depreciation of capital with a higher rate of return than a guaranteed low rate of return.

Hmmm, wonder if there are any cars out there worth putting a deposit on with a 1 year waiting list...

[J_S_G]

cptsideways said:

Motor trade

Am quite tempted to play a game of swopsies on cars and see how far up I can trade in a few months (have a bit of a family background in that! ) Time required in doing it might not be possible, though. Am considering a couple of visits to DVLA auctions, too, to bargain hunt on plates.

[BoRED S2upid]

Premiun bonds. And if you have a sister or someone else that would hold the other £20k for you can't go wrong with this much investment you could get a fair return. Ive found them to give a better return than any non Share based investment account (Including ISAs).

[cj.ok]

BoRED S2upid said:

Premiun bonds. And if you have a sister or someone else that would hold the other £20k for you can't go wrong with this much investment you could get a fair return. Ive found them to give a better return than any non Share based investment account (Including ISAs).

If one was to put £30K into premium bonds... what sort of return could they expect in 12 months?

I know it depends but what would be an educated guess?

[dtmpower]

cj.ok said:

BoRED S2upid said:

Premiun bonds. And if you have a sister or someone else that would hold the other £20k for you can't go wrong with this much investment you could get a fair return. Ive found them to give a better return than any non Share based investment account (Including ISAs).

If one was to put £30K into premium bonds... what sort of return could they expect in 12 months?

I know it depends but what would be an educated guess?

It's a prize draw with a 1 in 24000 chance of winning per month... with a £30k stake I would say you would win at least one prize per month with prizes being £50 / £100 / £500 etc

[bogie]

Premium bonds are always worth a gamble - in 8 months with £20K in, I had quite a few £50 prizes and a couple of £100...certainly better than interest in the bank..and of course, always the chance of dropping a biggie

[IAINSMITH]

I'd do the offset on your mortgage.

You'll paying an extra £250-300 a month off with £50k and you will still be saving decent money as you will probably not need all of the £50k at once when you are renovating your property.

I've got a barclays one and i've saved a fortune, as you say it's also tax free!

Most of the accounts paying decent rates either only pay interest once or twice a year or only give you a good rate upto a certain balance.

I'm not a Financial Adviser, this is just my experience!

Iain

[madras]

what percentage return are you actually looking for?

[J_S_G]

cj.ok said:

If one was to put £30K into premium bonds... what sort of return could they expect in 12 months?

I know it depends but what would be an educated guess?

£1,080.

Premium bonds work on a standard rate of interest being applied across all the investments in them (currently at 3.6% gross PA, but tax free). So, averaged out over an infinite number of years, you'll make £1,080 per annum on £30k invested (3.6%). However, some years you'll make less (but never risk your investment), and others you may well win £1m+. Which kind of suits the nature of what I'm trying to do here - not really risk this capital unnecessarily, but open myself up to the opportunity of making some money.

[J_S_G]

madras said:

what percentage return are you actually looking for?

Interesting question. I'm looking for something that could give me a decent rate of return - say 10%+ in 6 months. I'm open to the possibility that it may give me 0% increase in capital, though... it's heavy capital depreciation (i.e. greater than 5-10%) that I'm wary of with this money.

If you could do one of those "125% of the increase in the FTSE, 0% of the drop" plans on a 3-6 months basis, that would suit perfectly. But that's not likely.

[J_S_G]

IAINSMITH said:

I'd do the offset on your mortgage.

You'll paying an extra £250-300 a month off with £50k and you will still be saving decent money as you will probably not need all of the £50k at once when you are renovating your property.

I've got a barclays one and i've saved a fortune, as you say it's also tax free!

Most of the accounts paying decent rates either only pay interest once or twice a year or only give you a good rate upto a certain balance.

I'm not a Financial Adviser, this is just my experience!

Iain

Yeah - that's my fallback position. Cheers for that. And I might just happen to be employed by a certain bank that's blue in colour.

Currently, I've not yet bought the property this money's for, though; it really is just sitting around, and there's no mortgage to offset.

I also like the idea of there being a chance (no matter how slim), of high returns, rather than guaranteed "ok" returns. Unless there are any swanky ideas/opportunities, I think it's currently looking like:

- £30k into premium bonds
- £20k offset when the mortgage is arranged
- Eat into the offset over-payment till it's used up on building work, then draw down a few £k at a time from the bonds at a time back into the offset mortgage.

That's just not very exciting!