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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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Frank Hovis
55 minutes ago, One percent said:

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. 

I use HL and the fund managers are Vanguard.

Big caveat: whilst I'm happy that Vanguard are some of the best / cheapest trackers it is a very long time since I market tested HL (and can't now be bothered to move these days) so you might want to some research or ask on here.  I think there has been a thread somewhere and HL weren't the cheapest.

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3 hours ago, Frank Hovis said:

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.

Are  you including inflation in that? The ten year bit.

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On 21/05/2021 at 20:38, Froggy2000 said:

My strategy would be to get a 10 year fix mortgage to lock in the low rates.  You would need a 25% deposit to get one at a reasonable rate (roughly 2.5% if you have steady employment, good credit etc).

So that would be 62.5k deposit.  The rest I would invest in reflation stocks.  Yes they have rallied off their lows, but remember this cycle is due to run for at least 10 years, so there is still some reasonable value.

A 4% yield from the portfolio would be 7k a year.  Tax free if in an ISA.  So that will manage more than half of the repayments on the mortgage and can be expected to rise over time.  The main struggle would be the first 5 years.

Obviously your payments will spike when the fix ends, but you will have hopefully received some pay rises by then, or you can sell some of your reflation portfolio depending on how the sums work out at that time.

High house prices piss me off like the rest of us on here but this way at least you can hope that a lot of the principal is paid off by inflation / those poor suckers in long term bonds, bringing the real price paid over time down considerably.

One question for me would be what happens if yields increase by for example 1% across the curve?  Will that make things better value - i.e higher interest rate on the mortgage but lower initial purchase price - or worse?  On that I have no idea.

That's what I would do anyway.  Not ideal but I think the best way we can hope to play it.  Not financial advice!!!

Excellent plan.

The part of buying a house to live in that almost always gets ignored on here and HPC is that you have fixed the cost of your accomodation for a long time. That makes this plan even better if there is general inflation.

Whilst I believe that's what we are going to see and REAL HPs will drop, nominal HPs may very well keep rising but not as much as cost of energy and food and and. And hopefully for you working guys salaries. Following the plan above not only means your investment income/gain will rise but your living cost will be completely fixed for a while and in the second decade at least the house price part of that equation is fixed when the market price could have done anything.

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Frank Hovis
Posted (edited)
54 minutes ago, BWW said:

Are  you including inflation in that? The ten year bit.

Yes, very much so.

This is with dividends reinvested rather than a simple headline index figure.

Edited by Frank Hovis
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23rdian
5 hours 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.

Past performance is no guarantee of future performance though. As unlikely as it might seem. It's just my luck that as soon as I put money into this it starts doing a Nikkei

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Frank Hovis
3 minutes ago, 23rdian said:

Past performance is no guarantee of future performance though. As unlikely as it might seem. It's just my luck that as soon as I put money into this it starts doing a Nikkei

Absolutely.

There are two positive forces at work that will always boost share prices or rather top slice indices:

Inflation - this is effectively seen through by companies because they are the ones whose goods are rising in price.

Innovation - by holding indices rather than companies you are always in the biggest, most profitable companies.  You are always holding shares in successful companies and receiving dividends therefrom. 

 

What they are all subject to, to a greater or lesser extent as measured by their "beta", is general economic conditions.  If we head into a massive recession then they all gone down; albeit not at the same rate.  However they continue to be boosted by the above two factors.

 

My time horizon has always been about 65 to cash in most and buy a big villa with a boathouse; but if the markets are on the floor then I will simply wait until they recover.

Shares, or rather indices, do always recover and more so and within reasonable timeframes; it's not like waiting for a housing market crash.

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Hancock
On 22/05/2021 at 10:58, Lightscribe said:

House prices went up due to unicorns, rainbows, work from home and stamp duty savings.

The whole house of cards lies solely on zero rates and the banks willingness to lend. That is what will be changing going forward. Things move slowly until they don’t, it’s when the weights are added on to the other side of the scale that things can unravel very fast.

 

I'm just back from a trip down south to look at a few houses in Winchester and Romsey.

It is all absolutely mental and like the 2007 but on steroids.

Looking at new builds that are modelled on wendy houses, but up for £375K, they are appalling the only people who'd buy them to live in are rich Chinese students whose parents have recently had a nice bribe that needs laundering https://www.rightmove.co.uk/properties/105386012#/

Until the insanity ends the economy can never recover.

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Long time lurking
On 21/05/2021 at 18:02, 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. 

 

As someone much wiser than me has recently said if the government backs  95% 25 year fixed rate mortgages which has apparently been rumoured (DYOR on that one ) 

Sell your grandmother and borrow as much as you can and spend it on a house 

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sancho panza
13 hours 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.

I'm 50,have 3 kids under 5 and a 14 year old and have the vast bulk of our assets in oil,gold,potash,telcoms.

I had a chance to buy a cheap hosue in the 90's but went travelling instead of getting a mrotgage.Renting in the UK isn't great but I've explained the thesis to the wife and she gets it.Thesis is basically to use hosue moeny invested in shares to bring an income greater than or equivalent to cost of rent.

Currently,the project is running nicely but it's beena long hard road and it's hard when everyone else you know is loading up with debt to buy a hosue.

Your last bit in bold speaks for me.The prices are insane relative to wages and in all honesty,if the crash that I think is coming comes,then I wouldn't want to be in somewhere like Leicester,we'll jsut give notice and move..If we did ever buy,then I've said to Mrs P it's one we'll own for at least 10-15 years but in all hoensty,the way the figures are stacking up,we could rent for a long time yet.

Seems weird to say that in a country obsessed with owning hosues

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Hancock
Posted (edited)
42 minutes ago, sancho panza said:

I'm 50,have 3 kids under 5 and a 14 year old and have the vast bulk of our assets in oil,gold,potash,telcoms.

I had a chance to buy a cheap hosue in the 90's but went travelling instead of getting a mrotgage.Renting in the UK isn't great but I've explained the thesis to the wife and she gets it.Thesis is basically to use hosue moeny invested in shares to bring an income greater than or equivalent to cost of rent.

Currently,the project is running nicely but it's beena long hard road and it's hard when everyone else you know is loading up with debt to buy a hosue.

Your last bit in bold speaks for me.The prices are insane relative to wages and in all honesty,if the crash that I think is coming comes,then I wouldn't want to be in somewhere like Leicester,we'll jsut give notice and move..If we did ever buy,then I've said to Mrs P it's one we'll own for at least 10-15 years but in all hoensty,the way the figures are stacking up,we could rent for a long time yet.

Seems weird to say that in a country obsessed with owning hosues

Yes im thinking if the BK occurs i'll throw £250k into the stock market and do as you are, timing that one right could be the game changer that more than makes up for watching the bubble get bigger and bigger.

I will have £150/160k in my SIPP be the end of August, and 40/50K of it being in cash, more if i decide to cash some shares in prior to a BK.

But it has to be taken that the BK may not happen.

Anyway after my scouting mission this weekend, i'm thinking my next goal, is just to get the fuck out of England by the end of this year, it truly is the pits. We're a full on totalitarian regime, ran by the extreme woke left i.e. as Boris and co., who even Orwell couldn't make up, its fucken freezing almost all the time .... and the only fun people seem to have is by getting morbidly obese and/or necking 10 pints of Stella and knocking 10 colours of shit out of each other.

 

42 minutes ago, sancho panza said:

Thesis is basically to use hosue moeny invested in shares to bring an income greater than or equivalent to cost of rent.

I take it all your shares are in an ISA or similar?

Edited by Hancock
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sancho panza
Posted (edited)
1 hour ago, Hancock said:

Yes im thinking if the BK occurs i'll throw £250k into the stock market and do as you are, timing that one right could be the game changer that more than makes up for watching the bubble get bigger and bigger.

I will have £150/160k in my SIPP be the end of August, and 40/50K of it being in cash, more if i decide to cash some shares in prior to a BK.

But it has to be taken that the BK may not happen.

Anyway after my scouting mission this weekend, i'm thinking my next goal, is just to get the fuck out of England by the end of this year, it truly is the pits. We're a full on totalitarian regime, ran by the extreme woke left i.e. as Boris and co., who even Orwell couldn't make up, its fucken freezing almost all the time .... and the only fun people seem to have is by getting morbidly obese and/or necking 10 pints of Stella and knocking 10 colours of shit out of each other.

 

I take it all your shares are in an ISA or similar?

I posit the following situation.

Average niceish 3 bed semi in Leicester rents for circa £800pcm.One we live in worth £300k possibly more.Gross yield 3.2%

Nice 4 bed detached goes for circa £1000 pcm Worth £400k,Gross yield 3%

The upkeep, the buildings insurance etc are the LL's.Hard to source mortgage money cheaper than that let alone the repayment.Rents might go up but given they're paid out of salaries that's unlikely.

£300k in a selection of oilies bought recently you might get a 5% yield bringing in £15k gross.

If yields go back to what they were before covid(unlikely but WTI was $54 pre covid) then BP pays nearly 32p =10% gross yield brings £30k income on £300k holding(obviously spread your risk etc).If oil goes to $200,then we're good teh equation moves even further in your favour.

My point is that like you,I'm prepping for my kids to have the ability to get out of the UK if they so wish.The UK faces a huge array of problems politically/socially/economically and I have no desire to tie myself financially to something as flawed(and let's be honest-overleveraged)as the UK banking sector.

I'll take my chances with oil and gold thank you.

Using that comparison,by reinvesting the remaining money post divi's then your retirement plans open right up.

Edited by sancho panza
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Hancock
3 minutes ago, sancho panza said:

I posit the following situation.

Average niceish 3 bed semi in Leicester rents for circa £800pcm.One we live in worth £300k possibly more.Gross yield 3.2%

Nice 4 bed detached goes for circa £1000 pcm Worth £400k,Gross yield 3%

The upkeep, the buildings insurance etc are the LL's.Hard to source mortgage money cheaper than that let alone the repayment.Rents might go up but given they're paid out of salaries that's unlikely.

£300k in a selection of oilies bought recently you might get a 5% yield bringing in £15k gross.

If yields go back to what they were before covid(unlikely but WTI was $54 pre covid) then BP pays nearly 32p =10% gross yield brings £30k income on £300k holding(obviously spread your risk etc).If oil goes to $200,then we're good teh equation moves even further in your favour.

My point is that like you,I'm prepping for my kids to have the ability to get out of the UK if they so wish.The UK faces a huge array of problems politically/socially/economically and I have no desire to tie myself financially to something as flawed(and let's be honest-overleveraged)as the UK banking sector.

I'll take my chances with oil and gold thank you.

 

Your way seems to be the best solution, if i manage to get out of here by the end of the year.

 

 

 

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MrXxxx
18 hours ago, Frank Hovis said:

I use HL and the fund managers are Vanguard.

Big caveat: whilst I'm happy that Vanguard are some of the best / cheapest trackers it is a very long time since I market tested HL (and can't now be bothered to move these days) so you might want to some research or ask on here.  I think there has been a thread somewhere and HL weren't the cheapest.

If this is the case, wouldn't it be better to buy the funds directly from Vanguard who charge 0.15% pa account fee whereas HL charge 0.35%?

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sleepwello'nights
8 hours ago, Hancock said:

Yes im thinking if the BK occurs i'll throw £250k into the stock market and do as you are, timing that one right could be the game changer that more than makes up for watching the bubble get bigger and bigger.

I will have £150/160k in my SIPP be the end of August, and 40/50K of it being in cash, more if i decide to cash some shares in prior to a BK.

But it has to be taken that the BK may not happen.

Anyway after my scouting mission this weekend, i'm thinking my next goal, is just to get the fuck out of England by the end of this year, it truly is the pits. We're a full on totalitarian regime, ran by the extreme woke left i.e. as Boris and co., who even Orwell couldn't make up, its fucken freezing almost all the time .... and the only fun people seem to have is by getting morbidly obese and/or necking 10 pints of Stella and knocking 10 colours of shit out of each other.

 

I take it all your shares are in an ISA or similar?

If you do that get your timing right. I topped up my stock market investments a week too early! Overall I ended about 10% up. Really though my biggest mistake was not selling IAG when I realised travel would be curtailed.

Is there anywhere that much better than the UK? I look at what's reported in Europe. Italy, Spain, France and Germany seem more restrictive, New Zealand seems terminally fucked with wokeness, likewise Canada, some/most US states. Are you sure you're not looking at the greener grass and not considering it looks greener because its built on a swamp? 

 

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gibbon
On 21/05/2021 at 20:10, 23rdian said:

If you asked 100 people what a central bank does let alone how the money system worked, how many do you think would be able to answer? 

I don't even mean in-depth answers. Just a basic understanding. I think it might be about 5 people if you are lucky. Literally no-one I know, even pretty intelligent people I know just shrug it off. Ignorance is bliss.

All they see is a price of a house going up and up since just before the Millennium.

About the same time globalisation really kicked off IMO.

But where do we go from here? It's not looking brilliant to me. Like rats in a sack.

Years ago I had an argument with an accountant who refused to believe that money was simply printed out of thin air, that there was such a thing as fractional reserve accounting and that banks didn't in fact have the money they loaned out and simply created the money via loans by typing it into a computer. In their defence this accountant was previously a teacher.

But if professionals don't even understand the system, politicians certainly won't and really shows how fucked we are.

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Frank Hovis
2 hours ago, MrXxxx said:

If this is the case, wouldn't it be better to buy the funds directly from Vanguard who charge 0.15% pa account fee whereas HL charge 0.35%?

For ISA and SIPP?

Cheers, I'll have a look at that then.

As I noted HL was the best when I researched it but that was (literally) decades ago and there weren't many people offering the service at that time.

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Castlevania
2 minutes ago, Frank Hovis said:

For ISA and SIPP?

Cheers, I'll have a look at that then.

As I noted HL was the best when I researched it but that was (literally) decades ago and there weren't many people offering the service at that time.

I think Vanguard only offer SIPP’s. 

The pricing is all over the place with investment platforms, and the cheapest is dependent on how much money you have invested.

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gibbon
3 minutes ago, Frank Hovis said:

For ISA and SIPP?

Cheers, I'll have a look at that then.

As I noted HL was the best when I researched it but that was (literally) decades ago and there weren't many people offering the service at that time.

Just started up my HL account after not doing any investing for over a decade. Their rates for monthly investing where you set up a DD and stick it in a index tracker are very low. Any type of active investing though they clobber you and there's much cheaper alternatives (from what I can see).

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Frank Hovis
Posted (edited)
5 minutes ago, Castlevania said:

I think Vanguard only offer SIPP’s. 

The pricing is all over the place with investment platforms, and the cheapest is dependent on how much money you have invested.

I had a quick look and it's ISAs as well.

It's a rainy day so I will have a morning searching around but a decent sized provider will do well to beat the 0.15% of Vanguard; HL was actually 0.45%.

The downside of Vanguard looks to be the choice of funds being restricted to their own but as I'm mostly in them anyway that's not a problem.

Also I don't particularly mind being out of the market for a few days whilst the transfer takes place at present.

Edited by Frank Hovis
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23rdian
Posted (edited)
1 hour ago, Frank Hovis said:

For ISA and SIPP?

Cheers, I'll have a look at that then.

As I noted HL was the best when I researched it but that was (literally) decades ago and there weren't many people offering the service at that time.

For ISA at least:

The 0.15pc is just the platform fee. For every £ you hold with them this is what you pay (including cash!) there are charges for the particular fund on top of this. Ranging from about 0.07pc to 0.29pc ish depending on what you pick. 

So if you only want to ever buy Vanguard funds direct is is a good bet. But if you are paying a flat fee for a broker anyway or just want to avoid the 0.15pc and not have access to the website you might be better buying them elsewhere.

I think it's important to think how you will invest regularly. As Vanguard don't charge for this. Other platforms may do.

I think the cheapest way is FreeTrade etc but I guess it depends how much you trust them.

As ever, plenty of vids on YouTube.

Edited by 23rdian
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Frank Hovis
2 minutes ago, 23rdian said:

The 0.15pc is just the platform fee. For every £ you hold with them this is what you pay (including tax) there are charges for the particular find on top of this. Ranging from about 0.07pc to 0.29pc ish depending on what you pick. 

So if you only want to ever buy Vanguard funds the website is a good bet. But if you are paying a flat fee for a broke anyway or want to avoid the 0.15pc and not have access to the website you might be better buying them elsewhere.

I think it's important to think how you will invest regularly. As Vanguard don't charge for this. Other platforms may do.

I think the cheapest way is FreeTrade etc but I guess it depends how much you trust them.

Cheers for the extra info; I'll do a full search and cost them all.

As I'm not working regular savings aren't of interest; I put £20k into my ISA last year and will do the same this.

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3 hours ago, sleepwello'nights said:

If you do that get your timing right. I topped up my stock market investments a week too early! Overall I ended about 10% up. Really though my biggest mistake was not selling IAG when I realised travel would be curtailed.

Is there anywhere that much better than the UK? I look at what's reported in Europe. Italy, Spain, France and Germany seem more restrictive, New Zealand seems terminally fucked with wokeness, likewise Canada, some/most US states. Are you sure you're not looking at the greener grass and not considering it looks greener because its built on a swamp? 

 

The same here- could buy a really nice place with cash in France, Italy, Spain, Portugal, Greece, and I know I’d enjoy the lifestyle- but when I see the Italian government making it covid vaccine mandatory for healthcare workers, a real push to rid the system of cash in Spain and Italy (currently if you pay with a card the government will reimburse up to 10% of that back every month and put you into a lottery to win €300 million), UBI being trialled in Spain, Greece being the whipping boys of Europe in general- where do you go- the only place I can see staying fairly normal is Florida or Texas, and the UK seems like the better place to be in Europe- happy to be enlightened though as still hate what’s going on here.

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sleepwello'nights
Posted (edited)
2 hours ago, Frank Hovis said:

For ISA and SIPP?

Cheers, I'll have a look at that then.

As I noted HL was the best when I researched it but that was (literally) decades ago and there weren't many people offering the service at that time.

Also Vanguard cap their fees at £375 a year over all investments held with them. That's the account fee, their are fund fees when you purchase but that is a one off at the time of purchase. 

https://www.vanguardinvestor.co.uk/what-we-offer/fees-explained

Edited by sleepwello'nights
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Frank Hovis
1 hour ago, sleepwello'nights said:

Also Vanguard cap their fees at £375 a year over all investments held with them. That's the account fee, their are fund fees when you purchase but that is a one off at the time of purchase. 

https://www.vanguardinvestor.co.uk/what-we-offer/fees-explained

Yes, I will be moving to Vanguard and will probably start it off today.

I've done a quick review and the only thing that would have previously stopped me from using them is their restriction of funds to their own in-house as I used to hold a lot of specialist funds; these days I'm primarily in Vanguard trackers anyway and am happy to put the rest in.

@One percent as you were looking at this, plus links and information above.

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