Re: Short term savings in trust.

On 30 Oct, 23:45, Philå <iclgate...@xxxxxxxxxxx> wrote:
"Daytona" <junk721...@xxxxxxxxxxx> wrote in message

news:1193680177.202555.108310@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
On 26 Oct, 23:42, Philå <iclgate...@xxxxxxxxxxx> wrote:

What do you mean Demands???

What is the money to be used for and when ? I was considering the
investment side of things.

For the kids when they grow up??? Was thinking of a buy to let property, but
I have just been speaking to a IFA and they are coming round to see me
tomorrow. I think a trust will be setup and the cash invested that way??

OK, because it was such a large sum I was wonding if was some sort of
disability settlement, where large sums are more normal there are
immediate income requirements.

Whenever you're looking to save over more than a few years, inflation
becomes the principle threat. Only assets such as property and
equities appreciate with inflation, fixed interest investments such as
cash accounts and gilts do not.

Looking at retail price inflation (RPI), the buying power of a sum of
money in a bank account in November 1996 has been reduced by 23.5% and
a sum in November 1986 has been reduced by 50.6%.

Interest rates, and therefore income, have fluctuated by +/- 36% since
Nov 1996 and by +/-62% since Nov 1986.

Combining these gives us real, spending power of -

Capital Income

1986 100,000 10,875
1996 64,575 3,834
2006 49,400 2,470

Sources -
http://www.statistics.gov.uk/statbase/product.asp?vlnk=868
http://213.225.136.206/mfsd/iadb/Repo.asp?Travel=NIxIRx

As for property, personally, and as a landlord, I think it's one of
the worse points in the house price cycle to be thinking of
purchasing. See the Long Term Real House Price Trend graph on page 3
of the Nationwide Building Societies monthly review -
http://www.nationwide.co.uk/hpi/review.htm The 30 year trend is 2.8%
real. We're ~30% above it.

As for equity linked investment, I think that it's a bad time in the
business cycle to be purchasing. We're at the peak of a boom, company
earning have been artificially inflated by interest rates (and hence
loans) that have been too low for too long. Due to the rapid increase
in money market interest rates that has occured both in the UK and
around the world since the summer (and which were the cause of the
'credit crunch') I'd expect company profits to fall as the full
effects of less available loans and higher interest payments feed
through over the next 12-18 months. Having made annualised returns of
17.3% above the market over the last 6 years I think that there is a
greater probability that I'll make significantly less than what I can
get from a savings account, so I've sold all my shares and put the
money in a savings account. I'll review things in 1 year.

If I was investing, these are the strategies/investments would be
using -

I'd use -
http://www.fool.co.uk/share-dealing/our-service.htm
and invest in one of the following, in order of personal preference -

High yield, buy and hold strategy
<URL:http://www.fool.co.uk/specials/2006/specials060208.htm>
High yield, change each year
<URL:http://boards.fool.co.uk/Message.asp?mid=10414020>
iShares FTSE UK Dividend Plus
<URL:http://www.trustnet.co.uk/etf/funds/?fund=34>
Jupiter Income
<URL:http://www.trustnet.co.uk/ut/funds/port.asp?fund=1324>
Invesco Perpetual Income
<URL:http://www.trustnet.co.uk/ut/funds/?fund=477>
Invesco Perpetual High Income
<URL:http://www.trustnet.co.uk/ut/funds/?fund=476>

If you wish to investigate the first 2 further see these examples of
long term returns from investors on The Motley Fool (TMF) forums -

TMF posters 11%pa dividend growth over 40 years -
<URL:http://boards.fool.co.uk/Message.asp?mid=10327587>

TMF posters 9.5%pa return over 20 years -
<URL:http://boards.fool.co.uk/Message.asp?mid=10327450>

TMF posters 11%pa return over 35 years -
<URL:http://boards.fool.co.uk/Message.asp?
mid=10324246&sort=whole#10325222>

The income (yield or interest) is a good comparison of the value for
money offered by different investments -

Cash 5.75% (BoE base rate)
Equities 2.98% (FTSE 100 yield)
Property 4.6% (Association of Residential Letting Agents (ARLA) Buy To
Let Index - Cash purchase - no mortgage)

Now take into account the risk of each and any extra fees which reduce
these returns, and you can maybe see why I feel the way I do.

I'd do what you were thinking of and place everything in a cash
account for 1 year and then review.

Talking to an IFA (make sure they're independent see
http://www.moneymadeclear.fsa.gov.uk/guides/getting_financial_advice.html
) is a good first step, but be aware that they do not generally advise
on cash accounts, equities or property because they make no commission
on them. Instead they recommend bonds, Unit trust funds and OEICS
which pay them, sometimes large, commission. Due to the large amount
involved I would pay fees and get all commissions refunded (get it in
writing) as this is a fairer way of paying.

Let us know what they recommend and we can double check and make sure
that the charges are fair.

These links may help -

TMF Childrens savings accounts -
http://www.fool.co.uk/savings/information/childrens-savings-accounts.aspx

TMF Getting the most out of your IFA -
http://www.fool.co.uk/news/your-money/manage-your-finances/2007/02/14/getting-most-ifa.aspx

TMF Investing for children -
http://www.fool.co.uk/personalfinance/invest4child.htm

BBC Investing for children -
http://news.bbc.co.uk/1/hi/business/3112942.stm

I hope this is not too much information :-) !

Post again when you've had a chance to think things through.

hth

Daytona

.

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