Where to Invest Redundancy

[leem5]

Redundancy is just around the corner, though the package is generous at 12 months’ salary lump sum, with an additional 7500 retraining allowance. I'll use the allowance to my advantage so I ready for when the sector I'm in picks up again.

But what to do with some of the lump sum, invest in property for the long game (am aware of the budget changes)? Wait until before the in/ out Europe vote and purchase some shares when they drop (am assuming they will with the uncertainty) then hopefully sell shortly after when they recover after the vote?

[Jockman]

Depends on your risk profile. As this is unknown I suppose you're asking what we would do in your situation.

If you have a valuable skills set then start your own business. It will no doubt be linked to your current industry.

Pensions or ISAs or premium bonds or mortgage repayment? Dead cert at Chepstow?

[Ozzie Osmond]

IMO property would be a poor choice. Amongst other things it's expensive and illiquid.

• High transaction costs
• Big lump of cash in one place
• Can be slow to sell if you want your money back in hand
• If you already own one house it's a very high concentration of risk to buy another big asset of the same type.

What would I do?

• Maximise Stocks & Shares ISA (self, partner etc)
• Pension top-up (especially if you can get 40% tax relief on a significant contribution while you've still got earnings)
• Buy further S&S funds if there's still money left over
• Hold sufficient cash to cover several months living costs and any nasty surprises.

[leem5]

Thanks for the replies.
Firstly, my back round is in Mechanical Engineering (Offshore), and as such classed as an ex pat with no tax liability.
To answer some of the points, wouldn’t mind looking at my own business but having not considered not really sure what/ where to look.
I do have a HL SIPP and that’s where I’d be looking at the S&S/ funds in due course, there is also a separate pension account that seems to be ticking over steadily so happy with that at the moment.
So, with the above pension setup I was looking at the long term of having my money in different pots/ areas so that if any one did not perform as well as wanted, the other/s would hopefully reduce the pain. Property is not expensive in my area, so I could potentially purchase (with small mortgages) more than one.
So with that in mind is property still not a good idea?

Regards

[rotarymazda]

leem5 said:

But what to do with some of the lump sum, invest in property for the long game (am aware of the budget changes)? Wait until before the in/ out Europe vote and purchase some shares when they drop (am assuming they will with the uncertainty) then hopefully sell shortly after when they recover after the vote?

Property looks very dangerous now. There is very little net yield and little prospect for further capital gains. The recent policy changes for buy-to-let and stamp duty just add to the downward pressure.

I've recently moved 70% of my pension into equities, got in when FTSE100 was 5500-5900. That's the last place I can see that has any yield for the long-term and prospects for gains. I invest via salary sacrifice into a SIPP on a low cost platform to multiply net investments before you even start.

Do you really want to speculate with a redundancy lump sum or use it to provide income for the long-term?

The danger with speculating is that your competition know a lot more than you do.

[Jockman]

rotarymazda said:

Property looks very dangerous now. There is very little net yield and little prospect for further capital gains. The recent policy changes for buy-to-let and stamp duty just add to the downward pressure.

I've recently moved 70% of my pension into equities, got in when FTSE100 was 5500-5900. That's the last place I can see that has any yield for the long-term and prospects for gains. I invest via salary sacrifice into a SIPP on a low cost platform to multiply net investments before you even start.

Do you really want to speculate with a redundancy lump sum or use it to provide income for the long-term?

The danger with speculating is that your competition know a lot more than you do.

Commercial property or residential? U.K. Based or overseas?

All investing is speculation.

[XJ75]

rotarymazda said:

Property looks very dangerous now. There is very little net yield and little prospect for further capital gains. The recent policy changes for buy-to-let and stamp duty just add to the downward pressure.

Not sure I agree with property being "dangerous". Yes the mortgage interest tax deduction change and the stamp duty change will make it harder, but it's still far from dangerous in my opinion. You just need to keep a closer eye on the numbers when looking at deals. If you invest in somewhere with good fundamentals (transport links, schools etc.) you can still make a fairly generous monthly profit and then you also get capital growth if you're in it for the long term.

[Ozzie Osmond]

rotarymazda said:

Property looks very dangerous now. There is very little net yield and little prospect for further capital gains.

So the questions become, "where should you put your money for greater safety?" and/or "where should you put your money for better returns?".
That's the hard bit!

Personally I'm a fan of stocks & shares funds. I think stocks & shares are the best reflection of capitalism and that capitalism is the most accurate reflection of human nature. I also think people whose full time job is working in stocks & shares are likely to do a better job than me at choosing them.

[Jockman]

Ozzie Osmond said:

Personally I'm a fan of stocks & shares funds. I think stocks & shares are the best reflection of capitalism and that capitalism is the most accurate reflection of human nature. I also think people whose full time job is working in stocks & shares are likely to do a better job than me at choosing them.

You on the tobacco again, Ozzie?

I would agree with you on funds v self select. However these managers are not a homogeneous group. You have to decide which one to choose for your dosh.

[Ozzie Osmond]

Jockman said:

However these managers are not a homogeneous group. You have to decide which one to choose for your dosh.

Agreed, hence I tend to spread myself across several funds. Which would probably lead others to suggest, "in that case, why not just buy the index?". Which is a good point but doesn't fit my nature...

[Jockman]

Ozzie Osmond said:

Jockman said:

However these managers are not a homogeneous group. You have to decide which one to choose for your dosh.

Agreed, hence I tend to spread myself across several funds. Which would probably lead others to suggest, "in that case, why not just buy the index?". Which is a good point but doesn't fit my nature...

Also...which index??

The main point is to spread your risk and review on a regular basis.

[covmutley]

Ozzie Osmond said:

I also think people whose full time job is working in stocks & shares are likely to do a better job than me at choosing them.

i dont disagree, but I have been reading Warren Buffett books and he made the point that lots of traders are not investing long term, and are almost forced to take a short term view (i.e. betting) so that they are not sat doing nothing.

I think it would be interesting to have a fund portfolio and your own stocks, and see if you can get close or outperform over a long time.