Newbie question - lump sum investment

Hi all,

Total newbie here so please excuse any faux pas, errors, omissions etc. :)

I have a windfall of around $500k coming to me later this year. I'm 46 and want to invest this to create a living wage for me when I reach around 50-52. I.e. I want to be able to generate about $60k per annum of passive income without affecting the value of my initial investment. I earn about $150k per year currently and can add approx. $50k per year of cash into this investment over the next 6 years. I'm also due another $150k windfall in about 4 years. I don't own a property and am looking to travel extensively once I reach 50-52 so can handle not having a property.

Any advice would be appreciated, including experts I might be able to speak within NZ. I've done a fair bit of research but the info I've found is very US biased.

Thanks in advance, please ask if you need more info.

R

The first point to appreciate is that "without affecting the value of my investment" implies making a risk-free investment for a risk-free return. There was a time when AAA rated sovereign bonds were regarded as such but these days, who knows? Assuming they still are, you would receive a return closer to 2% than the 12% sought. I think you need to revisit the risk/return question to determine the degree of risk that you are comfortable with.

Not sure whether you need advice when you have $500K to start with :) But yes, decide on what risk you can bear first for that 60K passive is very doable or even small having that much money to start with. GL.

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Originally Posted by Noyzyboy

Hi all,

Total newbie here so please excuse any faux pas, errors, omissions etc. :)

I have a windfall of around $500k coming to me later this year. I'm 46 and want to invest this to create a living wage for me when I reach around 50-52. I.e. I want to be able to generate about $60k per annum of passive income without affecting the value of my initial investment. I earn about $150k per year currently and can add approx. $50k per year of cash into this investment over the next 6 years. I'm also due another $150k windfall in about 4 years. I don't own a property and am looking to travel extensively once I reach 50-52 so can handle not having a property.

Any advice would be appreciated, including experts I might be able to speak within NZ. I've done a fair bit of research but the info I've found is very US biased.

Thanks in advance, please ask if you need more info.

R

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You are Going to have to take on some risk if you're hoping to average 12% pa ... on 500k invested .... this could be done with some debt leverage into some commercial property >>> if you could say find a long term lease 10% yield (hard to find good high NBS% good location etc)

est---- 1mill purchase price (tenant pays all outgoings >>) 500k long term loan fixed term 6% = $30,000.... (gross income 100k) = 70k gross income on 500k invested in property

Thanks all, your time and effort is appreciated, certainly not averse to risk, probably should have made that a bit clearer. In fact, happy to take some initial risk and then to tail it off after a few years.

Also should have stated I've had some property investments in the past (residential real estate) but I found it required a fair bit of time investment (even with a property manager, don't get me started on that...) and I really don't want to be "that" actively involved again. Do understand commercial could require less involvement (I currently own my own business and lease a building, astonishing how much the tenant is responsible for compared to residential!!). I do have some strong contacts in commercial real estate in the area I live so I'll give that a crack and see what turns up. Possibly a motel as I live in a holiday town.

Thanks all and still happy to hear contributions. Are there any experts in NZ that anyone can recommend talking to? I don't mind spending some money up front to get good advice.

Also, just to add to this, I don't need to draw down anything for at least another 5-6 years so in that time I'll be leaving the money invested, adding about $50k per year then the lump sum of about $150k in 4 years time. So what I'm trying to do is build this sum up within the next 5-6 years so I can invest it somewhere both passive and reasonably safe at that point.

As a committed Spark investor, I have made a good return on that for years and I still do so by day trading with a little over 12% of what you have. If you invest your lot and let divs accumulate, you will have no trouble getting the figure you want. As WB said " putting all your eggs in one basket is fine as long as it's a strong basket"

Quote:

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Originally Posted by Noyzyboy

Thanks all, your time and effort is appreciated, certainly not averse to risk, probably should have made that a bit clearer. In fact, happy to take some initial risk and then to tail it off after a few years.

Also should have stated I've had some property investments in the past (residential real estate) but I found it required a fair bit of time investment (even with a property manager, don't get me started on that...) and I really don't want to be "that" actively involved again. Do understand commercial could require less involvement (I currently own my own business and lease a building, astonishing how much the tenant is responsible for compared to residential!!). I do have some strong contacts in commercial real estate in the area I live so I'll give that a crack and see what turns up. Possibly a motel as I live in a holiday town.

Thanks all and still happy to hear contributions. Are there any experts in NZ that anyone can recommend talking to? I don't mind spending some money up front to get good advice.

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Of all classes of commercial real estate, nothing dates faster than motels. Not that that is the end of the world, but keep it in mind.

Well everybody would love to get a 12% return but I doubt whether even the smartest, most experienced investor or financial analyst will be able to do that (without excessive risk)in todays investment markets. However please do share with us how that is possible if in fact, you do achieve it. Any "expert" that says they can achieve that sort of return would certainly fail miserably in most serious investors credibility rankings. You should certainly talk with some registered financial advisors and they will reset your expectation levels as well as give you some extra insight into options available. IMHO 6% is doable in the share/bond market without too much risk. Real estate I have no knowledge of so cannot comment.

Quote:

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Originally Posted by Noyzyboy

Hi all,

Total newbie here so please excuse any faux pas, errors, omissions etc. :)

I have a windfall of around $500k coming to me later this year. I'm 46 and want to invest this to create a living wage for me when I reach around 50-52. I.e. I want to be able to generate about $60k per annum of passive income without affecting the value of my initial investment. I earn about $150k per year currently and can add approx. $50k per year of cash into this investment over the next 6 years. I'm also due another $150k windfall in about 4 years. I don't own a property and am looking to travel extensively once I reach 50-52 so can handle not having a property.

Any advice would be appreciated, including experts I might be able to speak within NZ. I've done a fair bit of research but the info I've found is very US biased.

Thanks in advance, please ask if you need more info.

R

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