Reader Q: How can I generate £1,000 a month from a £150,000 lump sum?

3 min Read Published: 02 May 2012

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Reader Question:

I want to take a year off to run a business. I have £150,000 to invest and would like a monthly income to help pay the bills as I have a shortfall each month of approximately £1,000. Do you have any suggestions for the monthly investment please?

My response:

The first thing to do is to get independent financial advice as your wider personal and financial circumstances need to be taken into consideration before you do anything.

For help in finding a reputable financial adviser click here (and read my article 10 tips on how to find a good financial adviser).

But obviously I want to give you an idea of what some of your options are. Some of the questions you need to ask yourself are:

  • how long is your investment term? If it is just 1 year then investing anything other than cash is not advisable
  • what is your attitude to invest risk?
  • are you prepared to accept higher risk in pursuit of a higher potential return/income?
  • how comfortable are you with the potential for loss of capital especially as you are already taking risk starting a business?
The answer to these questions will impact on how and where you are comfortable investing.

 

Also you state that you wish to generate £1,000 a month income from an initial investment of £150,000. That equates to a net income (after tax) of 8% a year. That is optimistic without taking excessive risk with the capital, particularly if you plan on accessing it in a year's time. As I have said, if you don't want to risk any capital loss and want to access it in a year's time then keeping your money on deposit is likely to be your best option. In which case you are unlikely to get generate more than 3-4% income a year

 

While I can't give you personal advise on what to invest in I can highlight some of the options open to an income seeking investor. I therefore suggest that you read my article Reader Question: How should I invest £150,000 to generate an income? where I cover the types of assets which can produce an income, as well as their historic yields.
I hope that helps.Damien


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