What is a Lump Sum Investment?

Lump Sum Investments

A lump sum investment is an investment of a large portion of your cash which is reinvested to target better returns than allowing your money to lose spending power by sitting in a bank.

Often, the inflation rate, the increase in the price of goods and services in the economy, is higher than the interest you earn on a bank deposit. This means cash sitting in a bank loses spending power as time goes by. Many investors choose to allocate this money into a lump sum investment.

Many of us will be fortunate enough to come into a relatively substantial sum of money at some point during our life and it’s best to put that money to good use.

Examples of lump sum investment sources:

• inheritance money
• profit from a sale of a property or business
• a tax-free lump sum received from your pension (e.g. a UK pension transfer to a QROPS)
• a bonus

How Much Should I Put in a Lump Sum Investment?

So, how do you put this money into good use and how much should you invest?

You need to reserve enough money for emergency cash. Any amount above this amount could be used as a lump sum investment.

For example, you could invest 100,000 GBP lump sum investment into a life insurance wrapper. Once inside the life insurance wrapper, you don’t need a will to distribute cash on death. For example, you can opt for 100% of proceeds from a life insurance wrapper to go to your chosen partner on death.

If your money is left in cash in a bank instead, you will need a will to distribute the funds, otherwise, those funds will go through probate in court before funds can be distributed to your family.

How Do I Invest My Lump Sum Investment?

LUMP SUM INVESTMENT

Investing your money into an insurance wrapper gives you access to high performing funds, denominated in stable, leading currencies (USD, EUR, GBP) managed by some of the world’s leading fund management houses. You can choose investment options that fit your attitude to risk and reward. 

You need to contact a financial adviser to find out your attitude to risk and understand your investment horizon, for example, are you investing for the next five years or twenty five years?

Investing over the medium to long term in assets such as equities and bonds gives your lump sum every opportunity to grow and to achieve your financial goals. If you would like to know how your money could grow under different circumstances, you can enter a lump sum or a monthly amount into a future investment calculator to get an estimate. Contact a financial adviser for results.

You can take comfort that when you invest into an insurance wrapper in the Isle of Man, your money is safe and secure, protected by Isle of Man law.

START YOUR INVESTMENT JOURNEY

Speak to your financial adviser today to help you find the product that’s right for you.