I have no investment experience. What should I do with this lump sum of £70K? Should I employ a financial advisor to invest the money?
15 November 2021
Question by Katy
I am 48, I am in the process of selling a buy to let property which will generate a lump sum profit of £70K. I am hoping to use this fund to kick off a new project within the next 5 years, possibly a second property oversees or funds to enable me to work part time. However, I do not know exactly what I want to do with the funds and would like to keep my options open. I am a higher rate tax payer, I have a company pension, a reserve fund of £17K and an ISA with Wealthify of £5K that I am contributing £600 a month to. What should I do with this lump sum of £70K? As I have no investment experience, should I employ a financial advisor to invest the money, or identify an interim place to hold the money until I know what I want to do with it?
Answered by Oliver McDonald
Many thanks for your question. Although I cannot provide specific advice here, the information below should be helpful.
Great news that you have made a profit on your buy to let property. It's also good that you're a member of your company pensions scheme (free money!), have an emergency fund and started investing outside of your pension.
This is a tricky spot to be in, as I'm sure you want your £70k working hard whilst you decide on the next step. As I'm sure you're aware, interest rates on savings accounts are very low currently. Your money will be eroded slightly by inflation if kept in cash savings. Therefore, investing these funds is the next option. However, any adviser would recommend a minimum investment period of 5 years+. This is due to stock market fluctuations, as you may have seen with your Wealthify ISA. If you invest these funds (into a Stocks & Shares ISA or outside of this), you run the risk of the funds being less than you invested, right when you need them. Holding these funds in cash, although low returns, will mean you have the funds immediately available when required.
If you can commit to 5 years+, then employing the services of a professional would be sensible to ensure you do this correctly.
On another note, I always encourage my client to think about the purpose of money. Why are looking at another project/What is the end goal? Calculating when and how much you'll need to work part-time or fully retire would be a great exercise to complete. Your money can then be used to work towards this goal.
On a further note - do think about the net returns you receive from property and compare this to investment options. Although neither route has guaranteed returns, investments generally mean less burden on you.
Hope that helps.
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I have worked in financial services for 15 years gaining extensive experience in financial planning. I am a people person. You will rarely find me explaining complex spreadsheets or using jargon. I keep my conversations at a high level and realised early on that financial planning is all about helping my clients achieve the lifestyle they want in future. I work with individuals, business owners and entrepreneurs. I specialise in retirement planning, investments and business protection.