Money Transformation: ‘I have £150,000 from house sale – what should I do?’

Ben Yearsley, Investment Director at Shore Financial Planning

The first thing I would do is put £50,000 into NS&I Premium Bonds. NS&I recently increased the prize pool rate to 2.2 per cent, meaning the odds of winning each month are now 1 in 24,000. That leaves £100,000. As this money will be used for a house deposit, I do not recommend tying up too much in longer-term investments.

Markets are volatile and if Ms. Palmer had invested the entire amount, it could have easily gone up or down 10 percent in a short period of time.

So I’d leave £50,000 of that money in cash – you can get some decent instant access rates now. For example, Shawbrook Bank’s Easy Access Account pays 2.3 per cent and this could increase in the coming weeks as the bank has so far been good at weathering rate rises. That leaves £50,000.

This is the hardest part as the timeframe for buying a house in Cornwall is so uncertain. Since Mrs. Palmer does not know when she wants to buy, I think it is fair to assume some investment risk, with the caveat that the shorter the investment period, the greater the chance of losing money.

The first step is to set a stocks and shares Isa. Next, I would look at funds known as capital preservation mutual funds. By buying shares in these, you pay an expert to invest your money on your behalf with the goal of preserving its value. This is very attractive when markets are falling and inflation is high.

Popular picks include Ruffer Investment Company and the Personal Assets and Capital Gearing funds. It’s important to include some bond investments as well, as they help diversify the way your money is distributed and look like decent value these days.

Monthly income funds Axa Global Strategic Bond and Premier Miton Corporate Bond are good options.

Daniel Hough, financial planner at RBC Brewin Dolphin

Mrs Palmer is in a great position – by selling her two properties she could be mortgage free in her 30s. However, I would encourage her to reevaluate some of her plans, as she may be putting too many eggs in one basket. With £37,500 in salary from her job and another £12,000 in annual rental income, Ms Palmer is about to become a higher rate taxpayer.

Any significant allowances or increases in her salary would push her over the £50,271 threshold. If it is likely that she will large capital gain on own property in Nottingham, which he expects to sell for £250,000, the sales process will need to be carefully considered. Instead, it might be worth selling your flat in Nottingham next year, otherwise there could be a huge tax liability on top of the capital gains tax he has to pay on his share of the other shared property.

Another point is how much of the potential £400,000 cash he has to put into buying the townhouse. If he needs the full amount, that leaves no room for potential renovation costs. If Mrs Palmer only needs £300,000 for the property out of £400,000 of cash, I suggest investing the rest in a diversified portfolio of assets.

Alternatively, if she was thinking of spending the full amount, it might be worth cutting back and buying a smaller property for herself instead, so that some of the money could be used for non-property investments such as pension contributions or Isa contributions.

Saving for retirement would also reduce her taxable income.

In terms of investment, the absolute minimum timeframe we suggest is three years – or ideally between five and ten. If it’s less, you’re very limited in what you can realistically invest in. I would still be wrong at three years old. be careful and opt for a low risk portfolio. This could mean splitting 20 percent stocks and 45 percent bonds with at least 10 different funds in different regions and sectors. The rest should be in cash.

The Jupiter Strategic Bond and Allianz Strategic Bond funds are good options, while “tracker” funds that mirror the S&P 500 and FTSE 350 would be good starting points for equity exposure.

However, if Ms Palmer wants to beat the market, active funds such as BNY Mellon US Equity Income and Ninety One UK Equity Income could be good options.

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