How to get best returns on 55K over a 12-18 month period?
Discussion
With the view of buying a property in the next 12-18month period we have 55k I would like to get the most out of in the time frame.
My initial thoughts are to open two Lifetime ISA's one in my name and one in my partners. These would allows us to deposit 4k, and get 25% put in by the state plus interest 0.75%. One in each of our names would mean a 2k return on a 8k investment in a 12month period. Assuming both of us can use this state bonus towards one property, can anyone confirm?
That leaves 47k to do something with?
1 Year fixed rate accounts seem to give a max of 1.85% from what I can see, so a return of around £870.
Easy access accounts give between 1.25 and 1.3% max, this is return of around £600.
For the sake of £270 I would be included to leave it in something easy access so I can move on a property if something nice comes up.
So at the moment I would be looking at a 2.6k return on 55k in 12months. So 4.73%.
Anyone got any feedback on this plan or some better ideas?
My initial thoughts are to open two Lifetime ISA's one in my name and one in my partners. These would allows us to deposit 4k, and get 25% put in by the state plus interest 0.75%. One in each of our names would mean a 2k return on a 8k investment in a 12month period. Assuming both of us can use this state bonus towards one property, can anyone confirm?
That leaves 47k to do something with?
1 Year fixed rate accounts seem to give a max of 1.85% from what I can see, so a return of around £870.
Easy access accounts give between 1.25 and 1.3% max, this is return of around £600.
For the sake of £270 I would be included to leave it in something easy access so I can move on a property if something nice comes up.
So at the moment I would be looking at a 2.6k return on 55k in 12months. So 4.73%.
Anyone got any feedback on this plan or some better ideas?
It depends on how much of a risk you're prepared to take with it.
I'd look at putting it in a stocks and shares ISA (one each @ £20k) and invest in a Hang Seng tracker fund. Blackrock do one with a low annual fee. Apparently it's the best performing index so far this year. Of course that's assuming you haven't already used up your allowance. To be on the safe side, you could work with a 5% stop loss, so you review it regularly and if it drops to 5% below your original value you sell, thus avoiding any further losses. As its been doing well, hopefully that won't happen and you'll just see small drops and larger increases. At least that's my theory!
That's what I'll be doing next time I need to have a reorganise.
I'd look at putting it in a stocks and shares ISA (one each @ £20k) and invest in a Hang Seng tracker fund. Blackrock do one with a low annual fee. Apparently it's the best performing index so far this year. Of course that's assuming you haven't already used up your allowance. To be on the safe side, you could work with a 5% stop loss, so you review it regularly and if it drops to 5% below your original value you sell, thus avoiding any further losses. As its been doing well, hopefully that won't happen and you'll just see small drops and larger increases. At least that's my theory!
That's what I'll be doing next time I need to have a reorganise.
The Hang Seng has done no better than anything else so far this year, in fact it’s right back to where it was at the start of the year.
With the potential for North/South Korean relations to go dramatically well or dramatically badly (who knows which way?), and a US president hell-bent on a trade war with China, I wouldn’t be investing solely in a far-east index right now.
Putting all your eggs in one stock market basket like that doesn’t sound like a good idea to me, especially as a short-term investment over 12-18 months.
The OP could consider bonds, perhaps by picking a suitable bond fund to shelter within an ISA, but to be honest I think finding the best cash savings account is probably the best bet. But don’t fool yourself into thinking that you’re earning a positive return from cash interest; with inflation where it is and interest rates so low all you can hope for is to reduce the rate of erosion of the value of your cash.
Edited to add: If using a plain cash savings account, don’t forget to consider whether you might end up paying tax on any interest you earn, including any other cash interest you might receive. Your tax-free cash interest allowance depends on your income.
With the potential for North/South Korean relations to go dramatically well or dramatically badly (who knows which way?), and a US president hell-bent on a trade war with China, I wouldn’t be investing solely in a far-east index right now.
Putting all your eggs in one stock market basket like that doesn’t sound like a good idea to me, especially as a short-term investment over 12-18 months.
The OP could consider bonds, perhaps by picking a suitable bond fund to shelter within an ISA, but to be honest I think finding the best cash savings account is probably the best bet. But don’t fool yourself into thinking that you’re earning a positive return from cash interest; with inflation where it is and interest rates so low all you can hope for is to reduce the rate of erosion of the value of your cash.
Edited to add: If using a plain cash savings account, don’t forget to consider whether you might end up paying tax on any interest you earn, including any other cash interest you might receive. Your tax-free cash interest allowance depends on your income.
Edited by Dr Mike Oxgreen on Tuesday 24th April 00:44
.. Which is why I'd work with a stop loss, minimise your losses but the potential gains could be good, especially since the alternatives offer so little. China has tremendous potential for trade globally. Wherever you look there are clouds on the horizon - Trump, Brexit, N Korea etc etc, that's why there's a risk. It's how you view the risk that makes the difference.
The rubbish returns on cash deposits and bonds aren't worth the hassle, IMO.
The rubbish returns on cash deposits and bonds aren't worth the hassle, IMO.
A cash Lifetime isa is a good idea for the first 8k.
You might consider a punt at Premium Bonds. Worst case you get back what you paid in and inflation has eaten a little. Best case you move into a mansion. Most likely you will get returns similar to an average easy access savings account (not the top paying).
I’d avoid stocks for a year timeframe unless you are prepared to risk losing a fair chunk.
You might consider a punt at Premium Bonds. Worst case you get back what you paid in and inflation has eaten a little. Best case you move into a mansion. Most likely you will get returns similar to an average easy access savings account (not the top paying).
I’d avoid stocks for a year timeframe unless you are prepared to risk losing a fair chunk.
Bluesgirl said:
It depends on how much of a risk you're prepared to take with it.
I'd look at putting it in a stocks and shares ISA (one each @ £20k) and invest in a Hang Seng tracker fund. Blackrock do one with a low annual fee. Apparently it's the best performing index so far this year. Of course that's assuming you haven't already used up your allowance. To be on the safe side, you could work with a 5% stop loss, so you review it regularly and if it drops to 5% below your original value you sell, thus avoiding any further losses. As its been doing well, hopefully that won't happen and you'll just see small drops and larger increases. At least that's my theory!
That's what I'll be doing next time I need to have a reorganise.
Investing in equities, particular overseas equities is a poor choice over such a short investment time horizon.I'd look at putting it in a stocks and shares ISA (one each @ £20k) and invest in a Hang Seng tracker fund. Blackrock do one with a low annual fee. Apparently it's the best performing index so far this year. Of course that's assuming you haven't already used up your allowance. To be on the safe side, you could work with a 5% stop loss, so you review it regularly and if it drops to 5% below your original value you sell, thus avoiding any further losses. As its been doing well, hopefully that won't happen and you'll just see small drops and larger increases. At least that's my theory!
That's what I'll be doing next time I need to have a reorganise.
I completely agree with sidicks.
Your original plan make perfect sense providing you are both first time buyers (if one or both of you are not then this makes no sense however).
Assuming you both are, then go for instant access with the rest and on the 6th April (start of the new tax year) do the same again.
Ignoring interest payments this will give you a 7.27% return (on the whole £55k) with zero risk. Even if you factor in inflation and it eats the interest payments (over such a short period of time) there is no way you could achieve this level return without taking any capital risk.
If you are not both first time buyer's then let us know and we can re-evaluate the position.
Your original plan make perfect sense providing you are both first time buyers (if one or both of you are not then this makes no sense however).
Assuming you both are, then go for instant access with the rest and on the 6th April (start of the new tax year) do the same again.
Ignoring interest payments this will give you a 7.27% return (on the whole £55k) with zero risk. Even if you factor in inflation and it eats the interest payments (over such a short period of time) there is no way you could achieve this level return without taking any capital risk.
If you are not both first time buyer's then let us know and we can re-evaluate the position.
One thing you might consider with the non-ISA portion is buying a security that is correlated to the real estate market, something like a property ETF. Then you will be insulated against swings in the property market between now and when you want to buy.
I did that when I was saving up to buy in London and it was the right choice, given that things were quickly becoming unaffordable.
I did that when I was saving up to buy in London and it was the right choice, given that things were quickly becoming unaffordable.
Thanks for everyone's feedback, its really appreciated.
I can confirm we are both first time buyers and meet the criteria to use a LISA in that way.
I can confirm we are both first time buyers and meet the criteria to use a LISA in that way.
NickCQ said:
One thing you might consider with the non-ISA portion is buying a security that is correlated to the real estate market, something like a property ETF. Then you will be insulated against swings in the property market between now and when you want to buy.
I did that when I was saving up to buy in London and it was the right choice, given that things were quickly becoming unaffordable.
Nick, this is interesting and I know nothing about it. Have you got any more information or incite into the do's and don'ts?I did that when I was saving up to buy in London and it was the right choice, given that things were quickly becoming unaffordable.
NickCQ said:
One thing you might consider with the non-ISA portion is buying a security that is correlated to the real estate market, something like a property ETF. Then you will be insulated against swings in the property market between now and when you want to buy.
I did that when I was saving up to buy in London and it was the right choice, given that things were quickly becoming unaffordable.
Good in principle, but in practice I’d imagine that there would be significant basis risk between residential property and commercial property plus changes due to leverage as well as a spread between buying and selling prices of the unit fund?I did that when I was saving up to buy in London and it was the right choice, given that things were quickly becoming unaffordable.
Bluesgirl said:
.. Which is why I'd work with a stop loss, minimise your losses but the potential gains could be good, especially since the alternatives offer so little. China has tremendous potential for trade globally. Wherever you look there are clouds on the horizon - Trump, Brexit, N Korea etc etc, that's why there's a risk. It's how you view the risk that makes the difference.
The rubbish returns on cash deposits and bonds aren't worth the hassle, IMO.
You would still run the risk of a gap down, so you lose more than 5% if something happens overnight and there is a big drop in the price.The rubbish returns on cash deposits and bonds aren't worth the hassle, IMO.
sidicks said:
NickCQ said:
One thing you might consider with the non-ISA portion is buying a security that is correlated to the real estate market, something like a property ETF. Then you will be insulated against swings in the property market between now and when you want to buy.
I did that when I was saving up to buy in London and it was the right choice, given that things were quickly becoming unaffordable.
Good in principle, but in practice I’d imagine that there would be significant basis risk between residential property and commercial property plus changes due to leverage as well as a spread between buying and selling prices of the unit fund?I did that when I was saving up to buy in London and it was the right choice, given that things were quickly becoming unaffordable.
The difference in leverage you could sort out yourself with the relative allocation to that fund versus cash.
Lurker here 
how about something like Kuflink? They do peer to peer property bridging loans. The wife and I have just put a small amount in as a tester.
It wouldn't be classified as risk free, and I'm not saying put the whole amount it, but they say that no investor has ever lost money. There are various investing options,I went for the one where they auto invest for 12 months which pays 3.99% gross.
If you sign up with quidco they are offering 5% cash back. After investing there is a refer a friend offer where both parties get £100 cash back. Between me and wifey we should in theory be getting £250 cash back off a £2k investment.
how about something like Kuflink? They do peer to peer property bridging loans. The wife and I have just put a small amount in as a tester.
It wouldn't be classified as risk free, and I'm not saying put the whole amount it, but they say that no investor has ever lost money. There are various investing options,I went for the one where they auto invest for 12 months which pays 3.99% gross.
If you sign up with quidco they are offering 5% cash back. After investing there is a refer a friend offer where both parties get £100 cash back. Between me and wifey we should in theory be getting £250 cash back off a £2k investment.
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