How would you invest a cash lump sum?

Question

Although I'm not lucky enough to have won the lottery myself I can't help wondering "What if...?"

So I'm just going to throw the scenario out to see what others think.

You're a UK citizen who's just discovered you've won the lottery!

It's been a good week for winning tickets so you've had to share the jackpot with several others but you're still £1,000,000 richer!

You put the money into a high interest bank account and retire, planning to live off the interest. With the best rates being somewhere in the region of 3.5% - 5.0% you realistically expect to receive £35,000 - £50,000 pa. However, after income tax that figure falls to roughly £30,000 - £40,000 pa: Ouch!

In order to improve your returns a different strategy is needed.

You need a tax advantage. You've heard that low rates exist but where in the world would you find them and how would you qualify?

You need to invest but in what? Hedge funds, wealth management, trusts, portfolios? Now you're confused!! Are these options suitable or should you be looking at something else?

I know there are many knowledgeable people out there so this should make for an interesting discussion. Please feel free to provide suggestions, testimonials, comments, solutions or just about anything you think might be useful.

Look forward to hearing what you all have to say.

Abby Rhodes

PeterL · Accepted Answer

Obviously not enough info.  Age?  Family situation?  Debt?  etc.  Foryounger person the choice would be to invest for growth.  For older,invest for safety.

Ron Peterson · Answer

The UK exempts the first £10,000 of capital gains from taxation, so I would put £200,000 into stocks to take advantage of that rule.

Paying off a mortgage is a risk free investment.

Irish bonds are paying a high interest rate now which may compensate for your higher taxes.

-- Ron

dapperdobbs · Answer

1. Usually one pays taxes based on the country one resides in - thatincludes income from foreign sources.2. Those are basic investment questions very often pondered. A basictenet of capitalist theory is to invest in *producing assets* such as:a) your own business startup, b) someone else's business (pooledcapital). People ten to miss this: do you like the products yourcapital is used for? Whom are these products useful to?

Bill Woessner · Answer

I live in the US, so my answer is obviously biased towards our laws.

If I suddenly came in to $1.59M, I'd put it in to a broad base index fund - either an S&P 500 index fund or a total stock market index fund. They have a bit of a tax advantage because of low turnover. Then I would max out contributions to my tax advantaged accounts, in effect transferring that money to my tax advantaged accounts.

--Bill

Ron Peterson · Answer

I lost the UK currency symbol on my posting although I can see it OKon the OP posting.Anybody know why that happened? I am using Google Groups and wouldlike to blame them.--   Ron

bo peep · Answer

I can see that symbol in both your 11/17 post and the OP's post. I'musing Google Groups too. I'll try it here - "£"

How would you invest a cash lump sum?

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