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INDEPENDENT FINANCIAL ADVICE CENTRE
You should remember that past performance is not necessarily a guide to the future. Market and currency movements may cause the value of units, and the value derived from them, to fall as well as rise and you may get back less than you invested when you decide to sell your units. The tax treatment of investments and pensions is not guaranteed and may change in the future.
Your home is at risk if you do not keep up the payments on a mortgage
Objectives
You may want to save your lump sum for a specific purpose to spend on a set date in future, or just generally hold onto funds for your old age and have no specific time-scale in mind.
If it’s income you want read the section on Investing for Income.
But no matter what the main objective, ask yourself what is it you want your lump sum to do? We suggest the answer would be
Grow.
To do that your funds must increase by more than inflation each year, anything less and your money is simply not growing.
It’s a lot easier to achieve growth if you invest in what’s called Real Assets i.e. things that produce income as well as capital growth so your fund has twice the chance to increase.
Avoid tax
Not rocket science but what is the point of you making money only to give it to the Government. By avoiding tax you can increase your returns quite considerably.
So your lump sum has to grow by more than inflation and not pay any tax, but where can you invest?
Whilst there may be 32,000 places you can invest a lump sum, they really boil down to only a few major areas: -
Gilts, Cash, Property, Corporate Bonds and Equities.
(click to see definitions)
Now this is where it gets interesting, I put the above in that order because it’s also in order of Risk, from low to high.
Risk Risk Risk, why take any risk? The only reason to take risk is to get a higher potential return. We recently wrote an article showing the difference between investing in cash and an equity income fund over the longer term. To view this article click here
UK Government Gilts are risk free, (unless our Government goes broke!) you will always get your money back. No wonder then that lending money to the Government gives the lowest return of all.
If you deposit your money with a bank or building society you will get a higher return than from the Government, why? Because they are not risk free, your bank or Building Society could go
You may want to save your lump sum for a specific purpose to spend on a set date in future, or just generally hold onto funds for your old age and have no specific time-scale in mind.
If it’s income you want read the section on Investing for Income.
But no matter what the main objective, ask yourself what is it you want your lump sum to do? We suggest the answer would be
Grow.
To do that your funds must increase by more than inflation each year, anything less and your money is simply not growing.
It’s a lot easier to achieve growth if you invest in what’s called Real Assets i.e. things that produce income as well as capital growth so your fund has twice the chance to increase.
Avoid tax
Not rocket science but what is the point of you making money only to give it to the Government. By avoiding tax you can increase your returns quite considerably.
So your lump sum has to grow by more than inflation and not pay any tax, but where can you invest?
Whilst there may be 32,000 places you can invest a lump sum, they really boil down to only a few major areas: -
Gilts, Cash, Property, Corporate Bonds and Equities.
(click to see definitions)
Now this is where it gets interesting, I put the above in that order because it’s also in order of Risk, from low to high.
Risk Risk Risk, why take any risk? The only reason to take risk is to get a higher potential return. We recently wrote an article showing the difference between investing in cash and an equity income fund over the longer term. To view this article click here
UK Government Gilts are risk free, (unless our Government goes broke!) you will always get your money back. No wonder then that lending money to the Government gives the lowest return of all.
If you deposit your money with a bank or building society you will get a higher return than from the Government, why? Because they are not risk free, your bank or Building Society could go
INVESTING A LUMP SUM
