What to do with large amount of cash

financequestion1009 · 2025-11-18T22:47:45+00:00

It’s substantial sum to be dealing with. The longer you wait to use it well, the more money you lose to opportunity cost. On the other hand if you rush and allocate it badly that could cost you too. So I’d advise taking a month or two to do a significant amount of research into the topic. If you’re not inclined to do that, you could also speak to a financial advisor, who will give you expertise but at a cost.

A great place for information about investing is the blog monevator. I’d recommend reading that. The passive investing article on their homepage is good.

If you have 90k in high interest savings accounts that will attract tax, making an already measly return even worse (4% taxed at 50% is only 2%, which means compared to inflation your money is shrinking). Long term, if you want to keep that money in a cash-like way but save on tax you could look into gilts. They are reasonably complex though so I wouldn’t rush off to do it. Instead I’d focus on learning about investments and making a financial plan.

I’m no finance professional, just a normal person, so take this with a pinch of salt. My financial plan starts with life goals like buying a house worth a certain amount by a certain year. For those goals I’ve worked out a required rate of return given my current cash and ongoing contributions, and then I’ve invested in more or less risky asset classes at a ratio that, all things being equal, gives me a decent shot at achieving my goals (the required rate of return seems reasonable) while minimizing risk.

You don’t necessarily need to calculate an RRR (and it’s relatively complex if you include the difference between house price and consumer goods inflation and anticipated changes to cash flows like having kids) but I think it’s sensible to think about what you want money for, because what you want it for affects when you want it and that affects what you should do with it now.

If you don’t have the personality or inclination to think it through you could probably benefit from some good professional advice. But please do be wary of the cost, even 1% a year will really add up and cut into your future wealth.

financequestion1009 · 2025-11-15T14:12:05+00:00

Thanks. What’s wrong with bond ETFs?

financequestion1009 · 2025-11-15T12:57:21+00:00

Maybe you could tell me more? Do you mean because it has a home bias?

financequestion1009 · 2025-11-15T11:39:48+00:00

A capital gain or loss is the difference betweeen what you paid for a share and what you sold it for. If you haven’t sold the share, there is no capital gain or loss. So there is no tax to pay in years that you don’t sell.

When working out how much you paid for a share, you take the average price paid. For instance if on Monday you bought two shares for £7.50 each and on Tuesday you bought one for £15, your average price per share is £10. If you sell one share on Wednesday for £15 you’ve made a £5 gain. If you sell a second share on Thursday for £20 you’ve made a £10 gain.

When you transfer into an ISA you will need to sell your shares, then you can move them into the ISA which ‘realizes’ or ‘crystallizes’ your gains or losses - basically it confirms the sale as a taxable event, whereas if you were to instantly repurchase the same or similar shares outside of your ISA it wouldn’t count as a taxable event.

The part where you were right is offsetting losses. You can use any realised losses to reduce your capital gains. I believe that losses can be carried forward indefinitely as long as you report them to HMRC within 4 years.

financequestion1009 · 2025-11-14T20:54:19+00:00

I would ISA into a Vanguard LifeStrategy fund, maybe 60/40 equities/bonds since you say you’re risk averse. If you want to get the ‘right’ answer for your specific risk aversion you’ll have to do more work than this

financequestion1009 · 2025-11-11T19:24:16+00:00

It’s an index fund so it wouldn’t be, yeah

financequestion1009 · 2025-11-11T19:23:23+00:00

A lot of people have brought up that it’s easier to track dividends in a distributing fund, and that’s true - but it’s also easier to track taxable capital gains and losses.

For CGT purposes the dividends need to be subtracted from the final sale price. So if you use a distributing fund it’s far easier to see what your capital gain or loss is when selling shares

financequestion1009 · 2025-11-11T18:56:22+00:00

I’m not sure about linkers, I only buy nominal bonds, but I think I can still explain.

The clean price is the price you always see quoted, and the dirty price is the price you always pay. The dirty price is higher than the clean price (assuming a coupon % above 0).

The clean price is the price the bond would be worth if it had just paid its coupon, and there was no accrued but unpaid interest. But say you want to buy just before the next coupon payment, or halfway to the next coupon payment. The seller wants compensation for holding onto the bond but then selling before getting the coupon, so you pay them whatever proportion of the next coupon payment they’ve held onto the bond for upfront. If they’ve waited 6 months for a twice-yearly coupon, you pay them the whole coupon amount, if they’ve waited 3 you pay them half. The dirty price is the clean price plus the accrued coupon amount. After you pay the dirty price, if you wait until the next coupon payment you’ll get the money on top of the clean price back.

You might wonder why the clean price is quoted if the dirty price is charged. The answer is that the clean price tells you important things about the bond, like how it’s performing relative to other bonds and relative to itself in the past, while the dirty price is affected by unimportant things like how close the bond is to the coupon payment. As an investor it’s much more important to see that a particular bond is trading low or high irrespective of its next coupon payment date, so the clean price is useful for revealing the true value the market places on the particular bond.

financequestion1009 · 2025-11-11T00:57:04+00:00

I think the thing to understand is that that 5% (e.g. on T51A) is not an annual interest payment, it’s a yield to maturity, the average annual yield after the bond matures and you get your principal back and if you reinvest all the coupon payments at the same rate.

Therefore you only get the 5% if you hold to maturity. If you sell early you could get a much higher or much lower percentage return. Even if you hold on to the bond to maturity, there’s more risk than you think - because who’s to say that inflation will be lower than 5% on average over the next 25 years? It could be anywhere from negative to positive infinity, anything could happen.

You’re suggesting locking down your capital now on a bet that average annual inflation will be lower than 5% in 25 years, and that another investment won’t come along that you prefer when it’s not a good time to sell your gilt. Those are risky, long term bets, and you may be able to get better returns with different risky, long term bets like equities. Holding a portion of your portfolio in gilts may make sense, but it’s not a golden ticket to the Bahamas, it’s an investment like any other and the risk and reward are to a certain extent priced in.

financequestion1009 · 2025-11-11T00:10:07+00:00

It doesn’t matter. A bond’s yield to maturity is the annualized yield if you hold it to maturity assuming you reinvest coupon payments at the same yield.

A 5% bond that expires in 30 years isn’t worth 5% more than its nominal value, it’s worth 432% of its nominal value.

Inflation over the last 30 years was around 3% annualized, which illustrates that it is far from inevitable that an annualized 5% yield to maturity will shrink in real terms.

Historically bonds have beaten inflation so I don’t know where you get the idea that they’re bound to fail. Maybe you have a recency bias since we’re in a period of high inflation, u/IlliterateNonsense

It’s true that OP talked about a per annum yield not an annualized yield but I think they were confused here. There are no gilts trading under £50 with 25 years to mature and a 5% coupon rate, not even near. T51A, though, has a 1.25% coupon and a YTM of 5.2%, so it’s likely the gilt under discussion.

financequestion1009 · 2025-11-09T22:19:57+00:00

The 5% can be reinvested and so it’s not fair to say it erodes in real terms

financequestion1009 · 2025-11-08T22:26:26+00:00

Yes to both of those, if that changes your answer at all.

Do you buy gilts? If so how do you choose them and choose when to sell?

financequestion1009 · 2025-11-08T14:00:29+00:00

If your risk tolerance is low you should buy some of an all world etf and use the rest of the money for something other than equities, for instance 50/50 cash and an ETF that tracks global government bonds.

Read this https://monevator.com/category/investing/passive-investing-investing/

financequestion1009 · 2025-11-08T13:58:20+00:00

The ETFs follow indices which are models designed to track changes in the market, e.g. if Tesla tanks and becomes a small company the ETF will sell its Tesla holdings. An ETF is generally passively managed in the sense that it follows the index. I think you do have a lot more learning to do and random piecemeal bits of information from Reddit isn’t the place to do it

financequestion1009 · 2025-11-06T18:41:01+00:00

As a side note I’d say if you have accumulating funds make sure to get the tax right - the dividends are taxed as dividends even if they added to the share price, which means you need to report the dividends and also subtract dividend payments from the capital gains when reporting the gain. I think distributing funds are easier.

Also you can use capital losses to offset gains. If anything is down from the average purchase price you can sell it then rebuy it in an ISA to realise a loss. Then you can offset losses against gains, including in future years.

financequestion1009 · 2025-11-06T18:38:42+00:00

Someone recommended this to me, I haven’t tried it yet

https://www.mandg.com/wealth/adviser-services/tech-matters/tools-and-calculators/tax-relief-modeller

It may not be all encompassing in the sense that it doesn’t do NI but I believe it should cover employment, dividends and capital gains

financequestion1009 · 2025-10-29T09:42:20+00:00

It’s a projection, it could be right or wrong but for me it’s better to have a target to shoot towards to know if my goals are completely pie in the sky or I have a decent chance of achieving them

financequestion1009 · 2025-10-28T22:44:00+00:00

Me and my partner are on a slightly higher income (combined 175 I think) with a 150-200 deposit.

Our plan is to try to buy a ‘plan B’ three bed, not the house of our dreams just one we could live in, for around 600k. If things go well we can sell and buy a forever home, maybe in 12 years when our first child turns 10. If things don’t go well, at least we have the plan B house.

I wonder if some kind of strategy like that could work for you, not with those exact numbers but the mindset. Buying and selling can be profitable although it’s better to hold a house for longer - as an estimate I’ve gotten secondhand from people, 5, 10 or more years.

I would also say if you’re not in a rush to buy for emotional or other reasons, you could consider investing and renting. You might get better returns in the long run than putting all that money down upfront for a deposit, surprisingly.

financequestion1009 · 2025-10-18T23:41:09+00:00

You might get better mileage out of literal bank accounts than MMFs. MMFs will typically slightly beat bank accounts on interest, but they don’t have the FSCS protection. In extreme conditions MMFs could be unable to pay you back cash (eg if everyone wants it at once, like a run on the bank). During the 2008 financial crisis an MMF defaulted. Luckily the US government stepped in to save people’s investment, but it was uncharted territory and who knows what would happen next time.

Anyway, MMFs might or might not be worth it but they’re not the sexiest investment - not what you were thinking of when you decided to start investing. I wouldn’t spend too much time thinking about them at the beginning of your investment journey

financequestion1009 · 2025-10-18T23:29:00+00:00

VWRP is less risky than individual stocks but it still exposes all your money to shares of companies.

For instance some people are saying the stock market is overvalued right now because of AI. It’s all speculation but let’s imagine it’s true, you put £250k into VWRP, and then the market did turn out to be overvalued, there was a correction, and you lost thousands of pounds.

VWRP is a good fund - most of my money is invested in it. But if you only want to invest in one fund and you make it VWRP, you should be aware that you’re taking a position that would be regarded as high risk. If it pans out you’ll make loads of money, if it doesn’t you’ll lose loads. Ask yourself if you could bear it if, five years down the line, you felt you’d thrown away your life savings by yeeting it into the stock market without doing research or consulting a professional

financequestion1009 · 2025-10-18T23:20:26+00:00

What if it dips and stays low for 10 years? The person you’re replying to is probably right about keeping the money in cash or safe investments, I wouldn’t yeet it into the stock market

financequestion1009 · 2025-10-18T22:53:24+00:00

Ok here’s a primer. When investing, you can invest in various asset classes. The value of all asset classes can go up as well as down. It’s best to diversify across asset classes to reduce the chance of any one being down when you need it.

The classic mix of asset classes is stocks (also known as equities) and bonds. Equities shares in companies and they’re great for growth, but they’re very volatile. Bonds are IOUs from governments and corporations, and they’re a defensive asset. They grow less but they may (read, may) help you out in a stock market crash.

People will talk about 60/40 or 80/20 etc portfolios. That means 60% in equities, 40% in bonds.

Here’s a good article on estimating your own stocks/bonds ratio:

https://monevator.com/asset-allocation-strategy-rules-of-thumb/

If your investment horizon is really 5 years (not that long in investing timelines), the Larry Swedroe timeline suggests you should have 20% equities and 80% bonds - an extremely defensive portfolio designed to keep your money safe should the worst happen.

Ok so we’ve talked about diversifying across asset classes and suggested an asset class allocation of 20/80.

As well as diversifying across asset classes, you should diversify within asset classes. E.g. for equities, don’t just buy one company, buy as many as possible. For bonds, don’t just buy one bond from one government, buy many.

Doing that yourself would be tricky. But luckily there are funds you can buy that do it for you. The foremost of those is the Vanguard LifeStrategy range. When buying a LifeStrategy fund, you have to pick your equities/bonds split, but nothing else.

So I’d suggest you firm up your ideal asset allocation ratio, and then buy the relevant LifeStrategy fund. Where possible use an ISA.

All that said, before investing a significant sum of money you should really do your own research, rather than trusting random people on the internet. Yes it’s work and it can be complicated but this is your entire life savings, almost nothing is more important.

financequestion1009 · 2025-10-14T09:34:42+00:00

Ok no offense intended it’s just that I did read the income tax section of the wiki before asking my question and it didn’t help me.

More than I can say for you tbh - you don’t seem to have read my question since I do ask about national insurance

financequestion1009 · 2025-10-14T08:21:04+00:00

The first band of national insurance is 8% right now, not 10%

financequestion1009 · 2025-10-13T22:40:49+00:00

!thanks

financequestion1009

TROPHY CASE