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How to invest 1 million pounds?  –  There are many things to consider before investing such a sum:

Before considering what investments may be appropriate for investing a million pounds, It is necessary to first consider what you are looking for – income or capital growth, (or perhaps both)?


How to invest a million pounds for income

To build a portfolio for pure income, you will be concentrating on assets that provide a steady and predictable flow of income, in the knowledge that your cash lump sum will not actually grow, it will stand still whilst providing an annual income for you to spend/live off of.

The is nothing wrong with this, of course, you just need to be aware that over time, your lump sum will erode due to the effects of inflation, so your lump sum will be worth less and less in ‘real terms’ as time goes by.

For example, let’s assume that we have a million pounds at the start of year one and we enjoy an income of say 4% per year for each of those 10 years, spending that income as we go.

Let us assume that inflation has been running at 3% per year for each of those 10 years. If our One Million had simply kept pace with inflation.  


End of year 3% effect of inflation
£1000000 1 1030000 97.09%
1030000 2 1060900 94.26%
1060900 3 1092727 91.51%
1092727 4 1125509 88.85%
1125509 5 1159274 86.26%
1159274 6 1194052 83.75%
1194052 7 1229874 81.31%
1229874 8 1266770 78.94%
1266770 9 1304773 76.64%
1304773 10 £1,343,916 74.41%


From this table, we can see that to keep up with inflation, or million would need to have grown to

£ 1,343,916 to have the same buying power as it did 10 years previously.

Or to put this another way, after 10 years with inflation running at 3% p.a. our one million pounds is now only worth 74.41% of what it was 10 years ago – Shocking!

This also means of course, that the 4% income you are enjoying from the million pounds (that is not growing) is also being eroded in ‘real terms’ at the same rate! now that really is quite sobering.

The answer, of course, is to try and achieve some capital growth at the same time as the income is being produced and spent.

We can achieve this by investing in carefully selected RISK assets. These may include certain equities (or equity funds), and portfolios of property – probably commercial property with ‘blue chip’ tenants and reliable income streams that only go up when rents are reviewed (typically every 5 years for such properties). There are some excellent fund managers that have provided superior returns in these sectors for many years now, and we specialise in selecting them from thousands of funds.

Of course, any balanced portfolio will also have exposure to bond funds, also known as ‘fixed interest’. The bonds these funds invest into only provide an income, however, the capital value of these bonds (if sold before maturity) can go up and down as they are subject to movements in interest rates, changes in credit ratings and other factors. Therefore with very careful management and a high degree of research, it is possible to buy and sell bonds and create a capital gain from doing so.


Diversify a million pounds

The number one rule when investing a large sum is DIVERSIFY.

This is simply to ensure that if any one investment has a problem for whatever reason, the rest of the portfolio is unaffected and the overall effect is minimalised.

On rule of thumb might be to invest no more than say 2% into any one collective fund, equity, bond or other financial security. This means the portfolio will contain a lot of individual which may make understanding the overall picture more challenging, however, the risk will be widely spread and that will protect your capital and its ability to generate income, well into the future.

In constructing a simple income/growth portfolio we could, for example, adopt the following asset allocation:


how to invest 1 million pounds

If we assume that the Commercial property element will contribute a steady 3.5% income, the dividend heavy equity portion will contribute 3.6% income, the bond portion will also contribute 5% in income (but zero growth), we have the following composite result:


Annualised growth (10 yrs) Cap Val after 10 yrs
400000 3.50% 14000 4.50% 621187   (Property
400000 3.60% 14400 6.25% 733414   (Equities)
200000 5.00% 10000 0.00%  200000   (Bonds)
Total yield 38400 Total value (+10 yrs) 1554601
% Yield   3.84% % increase 155.46%
Annualised Return: 4.51%


In this example, we have managed to achieve an income of 3.84% per year* whilst also managing to enjoy growth on our portfolio of an average of 4.51% per year.  Of course, this growth would not have been achieved in a linear fashion, and during the 10 year period, it would be surprising if we had not had experienced at least one negative year. However as history has shown, the years immediately after a downturn often give rise to an outperformance in upward growth, a bounce-back in equity values if you will. From an analytical perspective, however, we can only be concerned with the average trend over the period in question, in this case, 10 years.

If you are looking to invest a lump sum and want advice as to how to achieve the optimum balance between income and long-term growth, get in touch with us now to arrange a confidential and obligation free meeting at 

You have nothing to lose but may have an awful lot to gain.

* Before charges.

DISCLAIMER: Nothing in this article should be construed as investment advice of any kind. The opinions here are those of the author and do not constitute advice in any way. You should not make any investment decisions based on this article and should seek Independent advice from an authorised and regulated investment adviser such as Templar European Investment Advisers.

Templar is an Independent, fee-based firm of investment advisers and is licensed to provide investment services by the Malta Financial Services Authority in all 28 EU Countries. Templar is audited annually by Mazars (Malta) Ltd.

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