Winning £1 million is no everyday occurrence that comes with a lot of excitement and expectations. It yields a lot of ideas on how to spend or invest the money. You have probably thought of buying a new car, clearing your mortgage, or going on a Safari in East Africa. These are, however, short-term activities that are bound to drain your income, denying you the opportunity to capitalize on the real fruits winning the British National Lottery. I am, therefore, glad that you have given investment a priority as you seek to guarantee yourself a financially secure future. As you are giving up employment, you will require a portfolio that not only guarantees you income of £100,000 per annum, but also the least susceptible to risk factors such as inflation.
The most important thing to note is that your target of £100,000 per year would be almost impossible to attain, especially if you were to invest in mainstream businesses. Depositing your money in a savings account or participating in government bonds would not bring you much income as they earn interests less than five percent; this translates to a paltry £50,000 per annum at the maximum. You also stand the risk of losing a lot of money should inflation rates rise uncontrollably, or should the pound weaken in the currency market (Tyson, 2011). To achieve your goals, a low-risk strategy that guarantees 10% returns is desirable. This can be realized by coming up with a portfolio that combines different investment strategies. This should include acquiring and holding on to assets, a low-risk strategy, and investing in intermediate-term bonds, which present medium risk, but with potential for high levels of income. In addition, you could also invest in the “Daily Paycheck” business. Combining these investments presents you with the best opportunity to meet your objectives as the assets you acquire will provide you with the security you desire while the intermediate-term bonds and daily paychecks, if properly managed, will rake in enough income to push you towards the £100,000 annual income. The subsequent sections of this article provide a breakdown of how you can make the two investments.
- Asset Allocation
Investing in assets presents you with the best opportunity to guarantee financial security in the future. This is because it is a low-risk venture that does not require you to invest a lot of your resources, apart from the initial capital, in maintaining and running. Moreover, the value of your assets is guaranteed to keep growing as the demand for such assets keeps increasing with time. This is in addition to the TAX incentives the government is offering to encourage developers to put up enough housing to accommodate the ever-growing population (Miles et al., 2000). Therefore, you should consider investing fifty percent of your money in real estate. At 10% returns, this would earn you £50,000 per year, constituting 50% of your desired annual income.
This amount will be true for the first year and is bound to increase assuming that the value of your assets appreciates by 5% every year.
On the other hand, you could opt to leverage your assets by using £50,000 of your money and borrowing £450,000 from a bank. As the asset values are bound to appreciate, and with annual income standing at 10%, you will be able to recover your money within two years and clear the loan comfortably. This option, therefore, presents you with not only the opportunity to secure your future, but also make your money grow.
- Intermediate-term bonds
Intermediate-term bonds present greater risks than investing in real estate. However, they also present provide a guarantee of earning you some income with risks less than those experienced in the stock market (Richelson & Richelson, 2011). At rates of between 5% – 6% per annum, intermediate-term bonds will earn you between £25,000 and £30,000 per annum for periods up to 5 years.
- Daily Dividends
This strategy would have you receive dividends on a daily basis from your investments. This would involve making investments in one or several companies or organizations. These could take the form of exchange-traded bonds, master limited partnerships, or closed-end funds. Depending on the deals you strive with companies and partners, you will be making an average of 7.2 percent income per annum.
This would offer you higher income compared to other traditional investments like corporate bonds, ten-year treasury bonds, or savings accounts which yield 3.3%, 1.9% and 1% respectively.
- Expected income in the First year of investment
Real Estate =
Bonds= £12,500 to £17,500
Daily Dividends= £18,000
Total Income= £105,500 to £110,500
Total Capital Growth (Ten Years) = 814447,30+500000=£1314447,30
This amount is bound to increase as the demand and values of real estate properties appreciate. The amount of income received from intermediate-term bonds could be re-invested into other ventures. The short term nature of the bonds will also give you the opportunity to direct your money to new investments after the bonds mature (Appel, 2006). Daily dividends would give you the security of having tracking the growth of your investments on a daily basis, rather than annually.
In conclusion, much as I would advise you to invest the money in these fields, you must select the right real estate, companies, and bonds to engage in business. You should conduct in-depth research on prospective companies and real estate agencies to identify those with credible histories, and those that will help you achieve your goals. This is necessary to avoid any undesirable outcomes.
List of References
Appel, G., 2006. Opportunity Investing: How to Profit When Stocks Advance, Stocks Decline, Inflation Runs Rampant, Prices Fall, Oil Prices Hit the Roof,. And Every Time in Between. Upper Saddle River: FT Press.
Miles, M.E., Berens, G. & Weiss, M.A., 2000. Real estate development: principles and process. London: Urban Land Institute.
Richelson, H. & Richelson, S., 2011. Bonds: The Unbeaten Path to Secure Investment Growth. New York: John Wiley & Sons.
Tyson, E., 2011. Investing For Dummies. New York: John Wiley & Sons.