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£250K in cash to invest in shares or £250k in a house ... which is the best investment as from today


Hancock
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23rdian
Posted (edited)
4 minutes ago, JoeDavola said:

Why don't you want to buy a cheap gaff?

I don't know. It's like I have a mental block about having something I can't just walk away from and being responsible for. Also I find the buying process rather convoluted and hate dealing with solicitors etc. Also the Council Tax aspect. I hate paying it. Also I am hardly ever at home. I think I will do it later this year. I'm just putting it off. It's nothing amazing. Tiny place really but like you say, they are easier.

Edited by 23rdian
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JoeDavola
2 minutes ago, Don Coglione said:

I hope, given zero interest paid on cash savings, that you have been tipping £20k each tax year out of that £200k pile into a S&S ISA, even if you choose simply to hold it in cash there. You can always take it out again if needed, but once the tax year is gone, the opportunity to build up a tax-sheltered stash goes with it.

Nope. And yes, I'm an idiot.

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JoeDavola
Posted (edited)
4 minutes ago, Don Coglione said:

I hope, given zero interest paid on cash savings, that you have been tipping £20k each tax year out of that £200k pile into a S&S ISA, even if you choose simply to hold it in cash there. You can always take it out again if needed, but once the tax year is gone, the opportunity to build up a tax-sheltered stash goes with it.

Hold on....do you mean I can put 20K as cash into an ISA to get that years allowance locked down and the 'convert' it at a later date to S&S?

Edited by JoeDavola
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23rdian
Posted (edited)
4 minutes ago, JoeDavola said:

Hold on....do you mean I can put 20K as cash into an ISA to get that years allowance locked down and the 'convert' it at a later date to S&S?

Yes indeed you can. Do it today if you haven't done it.

Also if you are under 40 stick 4k off that into a LISA and get a grand free.

Edited by 23rdian
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Bobthebuilder
5 minutes ago, JoeDavola said:

Hold on....do you mean I can put 20K as cash into an ISA to get that years allowance locked down and the 'convert' it at a later date to S&S?

I often have a lot of cash in my stocks and shares ISA. Do not get any interest on it but a smallish amount in some good divi shares at about 8% make up for it.

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JoeDavola
Posted (edited)
9 minutes ago, 23rdian said:

Also if you are under 40 stick 4k off that into a LISA and get a grand free.

Yes I took out two LISA's in recent years. I kind of see it as a way of claiming back the tax paid on the money sitting in my account!

EDIT: Actually I think it just counts as one LISA, but I made two 4K payments in different years to get the 1K bump each time. I could continue doing every year until I'm 50 it seems.

Edited by JoeDavola
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Don Coglione
8 minutes ago, 23rdian said:

Yes indeed you can. Do it today if you haven't done it.

Also if you are under 40 stick 4k off that into a LISA and get a grand free.

You don't need to do it today, but certainly do it before the end of the tax year in April. Having said that, it might be a good idea to do it today, if only to give yourself a kick up the arse. As a bonus, you are then primed and ready to clean up when the much-fabled Big Kahuna arrives! Caveat that I believe the FSCS compensation limit of £85k will apply to cash holdings in an ISA too, but that problem is at least 5 years away for you.

I can't see the ISA limits being increased for a goodly while; in fact they might be reduced, as the government is going to need every penny of tax that it can grab. Currently, we are incredibly lucky in this country to be able to avail of a number of generous and legal tax avoidance vehicles. @Frank Hovis has expounded on this many a time.

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23rdian
1 hour ago, JoeDavola said:

Yes I took out two LISA's in recent years. I kind of see it as a way of claiming back the tax paid on the money sitting in my account!

EDIT: Actually I think it just counts as one LISA, but I made two 4K payments in different years to get the 1K bump each time. I could continue doing every year until I'm 50 it seems.

Well in that case you have 16k free rather than the 20k if you are maxing out the LISA again this year.

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JoeDavola
4 minutes ago, 23rdian said:

Well in that case you have 16k free rather than the 20k if you are maxing out the LISA again this year.

Oh right didn't know the LISA ate into the other ISA allowance.

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Hancock
2 hours ago, 23rdian said:

 Also the Council Tax aspect. I hate paying it

Past time this ended and changed to property tax to paid by the owner.

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Hancock
2 hours ago, JoeDavola said:

Hold on....do you mean I can put 20K as cash into an ISA to get that years allowance locked down and the 'convert' it at a later date to S&S?

Yes you can transfer your cash ISA to a shares ISA, just done it myself last week.

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UmBongo

I guess I should move part of my recent windfall into my S&S ISA. 

I was reluctant to do so as I might sink it into a deposit for a property. However, as mentioned above, I can always withdraw it. :)

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Frank Hovis

@JoeDavola IMHO the big mistake that you, and most people, are making is as @Don Coglione says in accumulating and holding cash in order to buy your house.

This is continually leaving you at the mercy of inflation which, in a normal year, will erode the value of your cash whilst increasing the cost of the house you want to buy.

And the more cash you have the more you lose.  If you were say there with a million in cash you're probably losing £20k a year to inflation less interest whilst the million pound house you wanted to buy just went up £30k.

Result: you have just gone backwards £50k.

And do you see this process ending any time soon? Because I don't: inflation is stoking up nicely.

What you should be doing is putting your money into something that stands a good chance of outstripping house price inflation so that every year instead of losing money to inflation you are matching and then exceeding inflation.

Nothing looks a screaming buy at the moment but I have done well out of equities (these days low fee trackers of big companies in developed economies) and at times of higher inflation government index-linked bonds which used to pay RPI + 1% and are issued sufficiently regularly that it was easy to rapidly get up to a six figure holding; though I doubt that they pay RPI + 1% these days.

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Castlevania
15 hours ago, JoeDavola said:

Well....you've basically described me.

I fucked up by not buying a house 8 years ago after the last crash. I never guessed prices would inflate again so quickly. Two housing booms inside of a decade in NI - it's ridiculous.

Now, having said that even though I've done the worst things possible when it came to investing and missed out on several chances to get rich....I'm still sitting on about 200K cash; plus about 10K in index trackers for the long term.

I rent a 1 bed flat which I love living in and I'm grateful to have had for the last decade, but which has never come up for sale. Rent is 600 a month and means no council tax, no commuting costs, no maintenance costs, no heating bill (seriously I never have to use the heating). Cheap living and all the space I need.

Until the landlord chucks me out. Which they may do some day.

As a single bloke I'm not terribly enamored with the idea of exchanging my 600 a month low stress life for a 200K house that I then have to upkeep with several rooms I don't need. But there really isn't decent affordable 'single person' housing available - i.e. one good sized living room and one good sized bedroom. So you're then competing with couples with two wages when you're looking somewhere to buy. And a big percentage of the houses on sale need 5 figure sums spent on them right away to make them any way presentable. Buying the wrong house as a single person on a not terribly high wage is a very easy way to cripple yourself financially.

However - I don't want to rent forever, and I've completely lost faith in any drop in £ in house prices.

So, with that in mind - I guess the best thing would be:

- reduce your exposure to the bloated market by not buying more house than you need - not saying buy a hovel; but there's sometimes houses that are 70-100K apart and the quality of life isn't terribly different between them

- get a 10 year cheap fix with whatever the sweet spot deposit-wise is - I think it's 40%?

- start moving the rest into S&S ISA for the tax breaks and inflation protection - if I could find a low-stress way to bump my earnings up to 50K i.e. the 40% limit and start maxxing out my S&S ISA every year that would be a nice situation to be in

 

 

If your single you don’t need a big bedroom. What you want is more living space. I’m renting a one bed flat at the moment. The flat is somewhere between 75 and 80 square meters of which the bedroom takes up ~6. It’s big enough for a double bed and a wardrobe, which is all you need really. 

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JoeDavola
5 minutes ago, Castlevania said:

If your single you don’t need a big bedroom. What you want is more living space. I’m renting a one bed flat at the moment. The flat is somewhere between 75 and 80 square meters of which the bedroom takes up ~6. It’s big enough for a double bed and a wardrobe, which is all you need really. 

That’s bigger than most 2 bbed flats here. That’s as big as some semi detached houses. My one bed is bigger than most here at 55 square meters.

The reason I say a big bedroom is so that it can also be used as a home office without having to pay for a 2 bed flat. Current bedroom is big enough for double bed wardrobe and full size desk; most are not.

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Castlevania
On 21/05/2021 at 19:02, Hancock said:

Looking at the above scenario from a purely investment point.

If you had £250K in cash as of this moment, to put in the stock market at a time of your choosing whether there is a BK or not .... 

 ... would this offer greater returns than having buying a £250k in a house and not having to pay any rent.

Obviously in the first scenario the investor would have to pay rent of about 600PCM.

My thinking is if inflation stays high, sooner or later interest rates will rise and it could bring the price of the property down, but you'd be saving £7k per annum on rent; however if inflation is high and wage growth matches it, its inevitable that house prices will continue to rise.

If there is a BK clearly putting £250k into the markets would be a very good investment, but a BK is not a certainty, and at the current prices the stock market looks well over valued, so putting such a sum in now could well mean its halved in the event of a correction.

Thus it could takes years to get that money returned and by then inflation would mean it'd have to get to £500k just to buy that £250k house ... however if interest rates go high enough (say 5%) then that house would stay at a similar price in nominal terms for a long time.

A dilemma. 

 

Depends on your personal circumstances. Age and having kids definitely plays a part in making buying a house a more appealing choice.

However, I don’t have kids and am in my 30’s so I’m happy to have most of my house buying fund in stocks (I’m something like 75% stocks; 15% PM’s and 10% cash) and continuing to rent. However, it’s not enough to buy a house (or a flat that I’d be happy living in for that matter) outright for cash. I’d still need a mortgage and I’m not sure I’d want to be beholden to the bank. If I got to the point where I could buy in cash, I’d consider it, but at current house prices I doubt I’d buy.

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Castlevania
13 minutes ago, JoeDavola said:

That’s bigger than most 2 bbed flats here. That’s as big as some semi detached houses. My one bed is bigger than most here at 55 square meters.

The reason I say a big bedroom is so that it can also be used as a home office without having to pay for a 2 bed flat. Current bedroom is big enough for double bed wardrobe and full size desk; most are not.

Yeah. In the U.K. people tend to focus on the number of bedrooms and then the number of en-suite bathrooms (I really don’t get the British love of en-suite bathrooms, quite why you’d want to sleep a few feet from where you or your partner has just taken a dump makes no sense to me). When what you really want is space I.e. square footage. I’ve been in tiny two up two down houses that are 650sq foot, and just couldn’t live in something so cramped.

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JoeDavola
1 hour ago, Castlevania said:

have most of my house buying fund in stocks (I’m something like 75% stocks; 15% PM’s and 10% cash) 

Yep that’s exactly what I should have done for the last decade.

And agree with the en-suite obsession iI’ve actually seen a one bedroom flat with an en-suite ie in addition to the ‘main’ bathroom. It seems a waste of space in most flats.

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One percent

Rather than start a new thread, i thought I would jump in here. Feel free to tell me to bugger off and start my own thread :)

i have a house mortgage free. Looking to spend money on the final refurb which should mean I’m not looking at substantial maintenance for a good few years. 
 

i have 250k in cash and have not a clue what to do with it. A couple of acquaintances have financial advisers but I honestly don’t trust them and would rather take advice from a random forum. 

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AlfredTheLittle
3 minutes ago, One percent said:

 

 

i have 250k in cash and have not a clue what to do with it. A couple of acquaintances have financial advisers but I honestly don’t trust them and would rather take advice from a random forum. 

Have a year off, blow all the money on a year long holiday with big dick Jamaicans

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Hancock
1 hour ago, Castlevania said:

Depends on your personal circumstances. Age and having kids definitely plays a part in making buying a house a more appealing choice.

However, I don’t have kids and am in my 30’s so I’m happy to have most of my house buying fund in stocks (I’m something like 75% stocks; 15% PM’s and 10% cash) and continuing to rent. However, it’s not enough to buy a house (or a flat that I’d be happy living in for that matter) outright for cash. I’d still need a mortgage and I’m not sure I’d want to be beholden to the bank. If I got to the point where I could buy in cash, I’d consider it, but at current house prices I doubt I’d buy.

Yes agreed on the age kids etc... but i was just thinking from a purely investment perspective. i.e the offsetting of having to pay rent and potential HPC against potential gains in the stock market

Close to 6 and 2x3s.

 

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Hancock
2 hours ago, Frank Hovis said:

 

And do you see this process ending any time soon? Because I don't: inflation is stoking up nicely.

What you should be doing is putting your money into something that stands a good chance of outstripping house price inflation so that every year instead of losing money to inflation you are matching and then exceeding inflation.

 

But that inflation stoking up vastly will probably lead to the FED raising interest rates.

And again its crazy to put money in the stock market for 1/2 years when you're looking to take it out in such a short time frame. That is not investing that is gambling.

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Frank Hovis
1 hour ago, Hancock said:

But that inflation stoking up vastly will probably lead to the FED raising interest rates.

And again its crazy to put money in the stock market for 1/2 years when you're looking to take it out in such a short time frame. That is not investing that is gambling.

You're assuming a short time frame and if that is the case then I entirely agree with you.

I always say that you cannot lose on the stock market over ten years.

You can however certainly lose over two.

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Frank Hovis
1 hour ago, One percent said:

Rather than start a new thread, i thought I would jump in here. Feel free to tell me to bugger off and start my own thread :)

i have a house mortgage free. Looking to spend money on the final refurb which should mean I’m not looking at substantial maintenance for a good few years. 
 

i have 250k in cash and have not a clue what to do with it. A couple of acquaintances have financial advisers but I honestly don’t trust them and would rather take advice from a random forum. 

Bigger off and... oh sorry.

These days I follow the Warren Buffet advice to his wife after he dies; though being in the UK I have tweaked it as he said just put it in the S&P 500 index.

Historically the best consistent returns on the stock market are from big companies in developed economies and to benefit from those you want a weighted index of the type that Vanguard provides.

Also as it is an index fees are on the floor because there is no active management or research you pay less than 0.1% rather than 1.5% to 1.9% for a managed fund.  That compounds up to a great deal saved over the years.

I'm in global developed economies excluding the UK which I do separately with a FTSE index tracker primarily because it avoids currency fluctuations.

I also select income units rather than accumulation so that I have cash on the account without needing to sell anything to get it. Usually I simply roll it back into the trackers but sometimes I buy other stuff like BP and Shell last year.

Ideally you want it all in an ISA and tax free but you can only go in at £20k per tax year so what you can do is have the rest in the same trackers in another (taxable) account and each year sell £20k, transfer the cash into the ISA, and then rebuy the same indexes.  That way you don't need to worry about timing.

That's about 90% (excluding house) with the rest mostly in cash equivalents.

Big caveat as per my other post: these are long term (ten year) investments; not six months. My international tracker was from memory down 11% over the year two years ago but then up 40% last year. 

 

WB's advice summarised:

 Put your money in index funds and move on, he told them. Seriously, you'll do better. In fact, he said, that's what I plan to do with my own money once I am gone.

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One percent
10 minutes ago, Frank Hovis said:

Bigger off and... oh sorry.

These days I follow the Warren Buffet advice to his wife after he dies; though being in the UK I have tweaked it as he said just put it in the S&P 500 index.

Historically the best consistent returns on the stock market are from big companies in developed economies and to benefit from those you want a weighted index of the type that Vanguard provides.

Also as it is an index fees are on the floor because there is no active management or research you pay less than 0.1% rather than 1.5% to 1.9% for a managed fund.  That compounds up to a great deal saved over the years.

I'm in global developed economies excluding the UK which I do separately with a FTSE index tracker primarily because it avoids currency fluctuations.

I also select income units rather than accumulation so that I have cash on the account without needing to sell anything to get it. Usually I simply roll it back into the trackers but sometimes I buy other stuff like BP and Shell last year.

Ideally you want it all in an ISA and tax free but you can only go in at £20k per tax year so what you can do is have the rest in the same trackers in another (taxable) account and each year sell £20k, transfer the cash into the ISA, and then rebuy the same indexes.  That way you don't need to worry about timing.

That's about 90% (excluding house) with the rest mostly in cash equivalents.

Big caveat as per my other post: these are long term (ten year) investments; not six months. My international tracker was from memory down 11% over the year two years ago but then up 40% last year. 

 

WB's advice summarised:

 Put your money in index funds and move on, he told them. Seriously, you'll do better. In fact, he said, that's what I plan to do with my own money once I am gone.

Thanks Frank, extremely helpful. A few questions if I may:

who do you use as a platform for both trackers and buying shares?

im not looking for growth but to first have a hedge against inflation and, ideally, an income. 

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