Investing grandparents money

Aloreth

Aloreth

Aloreth

Associate
Joined
16 Aug 2005
Posts
1,372
Hi folks - a quick question,

I have been managing my own investments for a bout 4 years expanded to manage my mum, dad's and girlfriends. I like to think I have a reasonable ability at picking good defensive stocks for them and aggressive AIM listed stocks for myself.

My question relates to investing my grandparents money. They are getting criminal amounts in their ISA and want to know if I can do better safely. I was thinking that either preference shares or bonds would be a reasonable way to go. Take for example this:

B3KSBG7 - Lloyds Banking Group 6.3673% Non-Cum Fxd/Fltg Rt Pref Shares

I'm assuming I wouldn't just get a 6.3% return on my money, ignoring capital value fluctuations how would I work out what my return is?

Alternatively if I went for a corporate bond say this: (not watching todays lloyds results honest :D )

0521341 Lloyds TSB Bank 9.125% 2011

How would I know what value I am byuying in relation to the face value. i.e. LLOY will redeem their bond in 2011 at a rate of (I for example) £1 per bond. How do I know what they are trading at in relation to this bond face value?

If there are decent forums that can answer these questions point me in the right direction :)

Mike
 
Aloreth said:
How would I know what value I am byuying in relation to the face value. i.e. LLOY will redeem their bond in 2011 at a rate of (I for example) £1 per bond. How do I know what they are trading at in relation to this bond face value?
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There's seriously so much wrong with the ideas that I'll just highlight this one. If you even have to ask questions like this, do you seriously believe you're in the best position to move your grandparents' money from a tax-free, risk free environment into something like this? Have you even asked them what their priorities are, or are these your own priorities?
 
Your post contributes very little......I know exactly what I am doing at the moment. I openly admit that I know little about pref shares and corporate bonds hence the question.
 
Aloreth said:
Your post contributes very little......I know exactly what I am doing at the moment. I openly admit that I know little about pref shares and corporate bonds hence the question.
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Without sounding rude, I think the person that replied to you did indeed contribute something very relevant. It is certainly a valid point to raise and I would put careful thought as to whether you fully understand what you are doing before risking hard earned cash.

I don't doubt your knowledge but to be in a position where it is necessary to be asking on a (non-related) forum I'd at least consider the question raised by the previous poster to be relevant.
 
You could always give it to a firm like www.europac.net they will invest it for you, probably in commodities, depending on how much you have etc.

But the more return, generally the more risk. Due to the uncertainty in the market these days with the potential for the entire thing to come crashing down when some monkey draws £50. Buying gold coins and keeping them in a safety deposit box is not such a stupid idea anymore. If you keep it in paper, in an ISA. The first you notice any problems with currency, take it out and invest it in commodities like precious metals or even agriculture.

do not put it in residential property...
 
0521341 Lloyds TSB Bank 9.125% 2011

How would I know what value I am byuying in relation to the face value. i.e. LLOY will redeem their bond in 2011 at a rate of (I for example) £1 per bond. How do I know what they are trading at in relation to this bond face value?
Click to expand...

Your post contributes very little......I know exactly what I am doing at the moment. I openly admit that I know little about pref shares and corporate bonds hence the question.
Click to expand...

If you can't calculate the yields / internal rate of return on a corporate bond you shouldn't be investing on behalf of other people. I also dread to think what methodology you're using to value shares.
 
Saetia said:
If you can't calculate the yields / internal rate of return on a corporate bond you shouldn't be investing on behalf of other people. I also dread to think what methodology you're using to value shares.
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+1

There's also a tax element you have to consider.
 
Saetia said:
If you can't calculate the yields / internal rate of return on a corporate bond you shouldn't be investing on behalf of other people. I also dread to think what methodology you're using to value shares.
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Warren Buffet says similar. If you have to use a calculator to work out potential returns rather than pencil and paper then it is not worth investing in.

Tesco have a great Cash ISA online at the moment or last time I checked. Was about 3.25% for the first year, then drops to 1.75% at which point you just leave and go somewhere else.
 
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Barclays have similiar ISA on atm 3.65% IIRC drops to 1.75 or so after a year... (might be a current customer offer as the front page is 3.1% or something and I cba to login to check).
 
How much is the money? You can put some money into fixed rate bonds which come under the government insurance scheme upto a limit per institution. Obviously you'd permanently lose the tax free element.

Have your grandparents retired? If so, all their money should probably go on a guaranteed annuity anyway. Unless they plan on giving inheritances.
 
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I'm not sure if people just enjoy blowing their own trumpet and pointing out my ignorance or are genuinly concerned. Let me give a little more background in the hope that people will offer genuine advice. I qualified as a financial advisor whilst working as a stockbroker, I currently work for PricewaterhouseCoopers due to get my ACA shortly.

I am far from a novice to the financial world and have done very well for everyone I have invested money for. I simply have a very basic understanding of bonds / pref shares etc. My grandparents have already taken their retirement benefits and both receive final salary pension schemes, they want me to invest on their behalf more for a bit of fun but are still very risk averse.

If someone has some information in general terms on in investing in bonds / pref shares it would be appreciated.
 
Must have colleagues who can better help then? I'm sure they'd be people you can better trust than randoms on the internet who have no provable background.

edit:

Also, I could be wrong, investing in fixed income products I would have thought would require research beyond what an accountant might be able to do? My impression has been that in FI you need thorough macroeconomic research.
 
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mangobreeder said:
correct in additin to UK tax you will generally suffer witholding tax, depending on which country pays the dividend, for example witholding tax in switzerland is 35%
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So you pay a 35% witholding tax in Switzerland and then the relevant income/dividend tax in your country of residence. Who on earth (other than a Swiss) would want to invest in Switzerland then?
 
ghost101 said:
So you pay a 35% witholding tax in Switzerland and then the relevant income/dividend tax in your country of residence. Who on earth (other than a Swiss) would want to invest in Switzerland then?
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Because withholding tax is usually creditable against UK tax (so you pay the higher of the two only - which for HR taxpayers is likely to be UK).

We also have double tax agreements with many countries that limit the WHT rate.
 
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