I am post-divorce with a good settlement which I

03 March 2021

Question by Ellie

I am post-divorce with a good settlement which I have only partially invested.

I completely empathise with the masculine nature of the investment market. I am very new to it and am working hard to understand the jargon and concepts. I am concerned to make sure that I invest the balance with an emphasis on income generation.

Are there any courses you can recommend? I have sat in a number of meetings with accountants and financial advisers feeling somewhat patronised! I am sure that there are plenty of women in a similar position to me (aged 55!).

Answered by Boring Money

Hi Ellie,

Nice to hear from you.

Sorry to hear about your situation – divorce is always twice as hard and twice as expensive as anyone thinks.

Your question is really interesting to me as you are so right – you are not alone. Many women do tell u s they feel patronised or talked down to. And they want to learn and get their heads around this. Actually, it’s also women in their 60s too who are coming to us for help about divorce in particular, a fairly recent development.

I do think a financial adviser would help – you can just pay for a block of time and see someone to talk through this stuff. You don’t have to sign up for life! Have a look at our Directory at some of the first advisers to help us on this site (you can look for female advisers too) ; you may also be interested in paying a one-off fixed fee for a specific and focussed piece of advice.

Financial coaching could be another really interesting path forward. Look at coaching firm Hatch or alternatively check out adviser Catherine Morgan who also runs a financial coaching service. These services can really empower you and teach you the right questions to ask.

Finally both Standard Life and Hub offer digital advice aimed at those coming up to retirement – this is lower-cost than full-fat advice and could be a good halfway house? Check out our Digital Advice tables for details.

In terms of investing for income, you need to set realistic income targets – 3% is probably a decent ballpark - and be willing to take a bit of investment risk. You can use the ‘Best Buys’ lists on a number of DIY investment platforms and look for well-rated Equity Income funds – a mixed bag of between 10-15 is sensible to spread risks. This is particularly important for income investors if they are relying on the income to maintain their standard of living in retirement.

The yield is the number to look for – this will tell you how much income each fund will pay out every year.

A key pillar is an equity income fund, which gives you access to good quality companies that are making regular profits and paying consistent dividends. That said, given that in the UK around 80% of all dividend income has historically been produced by 15 companies and 50% by just 5 companies, it makes sense to also consider equity income funds that invest in some smaller companies. Have a look at some global and international equity income funds, too.

Fixed income (bonds) would be a second pillar. This includes government and corporate bonds and should have a place in most investment portfolios. Check out some strategic bond funds.

The final pillar would traditionally be commercial property, although clearly lockdown has somewhat hammered this sector. It typically moves differently to stock markets, so can provide some protection during volatile times. That said, it is important to understand where a property fund invests. Some invest mainly in the shares of property related companies and don’t buy many, if any, actual buildings where as others will invest predominantly in real ‘bricks and mortar’ properties.

Leading investment platforms such as Hargreaves Lansdown or AJ Bell Youinvest will have Best Buys lists which suggest a few funds of this type.

2020 was a very hard year for income investors as many dividends from firms dried up a bit. So do be realistic about how much income you are likely to get from your investments.

You also need to think about how to protect the income your investments earn. Firstly, if you hold funds in an ISA, the income will be tax-free. Consider using your £20,000 allowance each year to shelter as much as you can.

Also, at 55, do read up on a pension as money you contribute here will be eligible for tax relief which means you will end up with more in your pocket. Although of course there will be restrictions about when you can actually draw any money out so it won’t be an immediate source of income for you.

Thanks and I hope it all works out.

Answered by

Boring Money