Draw on investments or not?
Discussion
As mentioned on another thread, it isn't out of the question that in due course I will pay for schooling for my kid(s). By that point I hope to have a decent amount in savings, which today are mostly spread across Vanguard lifestrategy and Fundsmith using mine and partners ISA allowances.
Obviously predicting annual returns is impossible and they may return a loss too. However, with some diversity hopefully there is a return of sorts, and my idea was to build enough of a pot that it pays the fee(s) each year and it doesn't particularly change our month to month living and eventually it covers fee's and continues to grow as there's a surplus (wishful thinking of course, but with enough in there its possible on paper). But then it got me thinking that selling units in a fund is potentially quite damaging to growth and actually is it better to pay fees in cash each month vs interfering with investments?
I suppose there are income funds, would that make more sense for something like this?
Obviously predicting annual returns is impossible and they may return a loss too. However, with some diversity hopefully there is a return of sorts, and my idea was to build enough of a pot that it pays the fee(s) each year and it doesn't particularly change our month to month living and eventually it covers fee's and continues to grow as there's a surplus (wishful thinking of course, but with enough in there its possible on paper). But then it got me thinking that selling units in a fund is potentially quite damaging to growth and actually is it better to pay fees in cash each month vs interfering with investments?
I suppose there are income funds, would that make more sense for something like this?
It's taken me 30 years of adult life to realise it, but protecting long-term investments is key to future prosperity. By which I mean, so long as you keep yourself solvent and you aren't maxing out credit cards or something daft like that, then don't touch your investments unless there is literally no other option.
I have recently found myself unexpectedly having to fork out a significant 5-figure sum to pay school fees. Whilst I am in the fortunate position being able to cover this from investments, I have instead chosen to dip into my offset mortgage to fund this - effectively, to borrow the money and put a few more years on the mortgage. Even at a sub-optimal borrowing rate of 4%, the expected returns from keeping my investments where they are made this a no-brainer in my book.
I have recently found myself unexpectedly having to fork out a significant 5-figure sum to pay school fees. Whilst I am in the fortunate position being able to cover this from investments, I have instead chosen to dip into my offset mortgage to fund this - effectively, to borrow the money and put a few more years on the mortgage. Even at a sub-optimal borrowing rate of 4%, the expected returns from keeping my investments where they are made this a no-brainer in my book.
okgo said:
As mentioned on another thread, it isn't out of the question that in due course I will pay for schooling for my kid(s). By that point I hope to have a decent amount in savings, which today are mostly spread across Vanguard lifestrategy and Fundsmith using mine and partners ISA allowances.
Obviously predicting annual returns is impossible and they may return a loss too. However, with some diversity hopefully there is a return of sorts, and my idea was to build enough of a pot that it pays the fee(s) each year and it doesn't particularly change our month to month living and eventually it covers fee's and continues to grow as there's a surplus (wishful thinking of course, but with enough in there its possible on paper). But then it got me thinking that selling units in a fund is potentially quite damaging to growth and actually is it better to pay fees in cash each month vs interfering with investments?
I suppose there are income funds, would that make more sense for something like this?
Do you think you will be able to afford the fees from spare cash? Worth bearing in mind that fees increase by ~2% over inflation - not sure how old your children are but this is worth bearing in mind. That would take away the worry of worrying about investment returns.Obviously predicting annual returns is impossible and they may return a loss too. However, with some diversity hopefully there is a return of sorts, and my idea was to build enough of a pot that it pays the fee(s) each year and it doesn't particularly change our month to month living and eventually it covers fee's and continues to grow as there's a surplus (wishful thinking of course, but with enough in there its possible on paper). But then it got me thinking that selling units in a fund is potentially quite damaging to growth and actually is it better to pay fees in cash each month vs interfering with investments?
I suppose there are income funds, would that make more sense for something like this?
I don't think income funds would give you anything over a total return approach (selling units as required).
Simpo Two said:
If you have an income (ie cash coming in) and can pay the fees from that, then I'd do so, and leave the investments alone until you retire or want to dip into them for some other reason.
This all day long. My wife mentioned the other day, oh the kids JISA's can be cashed in to pay their University and living expenses-NO! It's their until they are a hell of a lot older than that. Ideally 50. By which time it may well be 8 figs and they'll thank the old b
d every day of their privileged life.Interesting, thanks for the responses.
I suppose I only started out with this saving thing as that was a reasonable thing to aim it at and give us a bit of impotus. If I'm just going to pay cash each month/term then what the hell am I saving for
We're in our mid 30's, so the thought of it being untouched for 20 years until retirement is a little depressing, but then what do I actually need it for in the meantime I suppose...
I suppose I only started out with this saving thing as that was a reasonable thing to aim it at and give us a bit of impotus. If I'm just going to pay cash each month/term then what the hell am I saving for
We're in our mid 30's, so the thought of it being untouched for 20 years until retirement is a little depressing, but then what do I actually need it for in the meantime I suppose...
okgo said:
Interesting, thanks for the responses.
I suppose I only started out with this saving thing as that was a reasonable thing to aim it at and give us a bit of impotus. If I'm just going to pay cash each month/term then what the hell am I saving for
We're in our mid 30's, so the thought of it being untouched for 20 years until retirement is a little depressing, but then what do I actually need it for in the meantime I suppose...
The other perspective is that if you spend your investments now, your retirement probably won't be in your middle fifties...I suppose I only started out with this saving thing as that was a reasonable thing to aim it at and give us a bit of impotus. If I'm just going to pay cash each month/term then what the hell am I saving for
We're in our mid 30's, so the thought of it being untouched for 20 years until retirement is a little depressing, but then what do I actually need it for in the meantime I suppose...
okgo said:
Interesting, thanks for the responses.
I suppose I only started out with this saving thing as that was a reasonable thing to aim it at and give us a bit of impotus. If I'm just going to pay cash each month/term then what the hell am I saving for
We're in our mid 30's, so the thought of it being untouched for 20 years until retirement is a little depressing, but then what do I actually need it for in the meantime I suppose...
When you're 50-and you will get there, you'll think back and laugh your ass off, assuming you left it alone. I suppose I only started out with this saving thing as that was a reasonable thing to aim it at and give us a bit of impotus. If I'm just going to pay cash each month/term then what the hell am I saving for
We're in our mid 30's, so the thought of it being untouched for 20 years until retirement is a little depressing, but then what do I actually need it for in the meantime I suppose...
deckster said:
The other perspective is that if you spend your investments now, your retirement probably won't be in your middle fifties...
Quite. Many of my friends spent everything they earned, and are now stuck working until 67. I see the younger ones doing the same.One thought - a cousin of mine got a discount on school fees by paying for several years in advance. (It was a great idea until his son fluffed the entrance exam but he got the money back)
For the reasons others have alluded to, liquidating ISA holdings is precisely the last thing I would be inclined to do to raise cash, and only if I really needed the cash and had exhausted all other avenues (in descending order of preference: remortgage > margin loan > other appropriately priced loan > liquidating non-ISA holdings > liquidating SIPP if applicable).
Edited by NowWatchThisDrive on Monday 1st November 18:16
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