We don't have much of a pension but we do have £180k to invest: should we buy shares or funds to get the best retirement income?

My husband and I are coming up to retirement and though we don’t have much of a pension, we do have £180,000, which we would like to invest to give us an income. Is it better to buy shares or funds?

I. H

Shares or funds? Generally speaking, it is less risky to invest through funds rather than in individual shares

Shares or funds? Generally speaking, it is less risky to invest through funds rather than in individual shares

Generally speaking, it is less risky to invest through funds rather than directly in individual shares.

The simple reason for this is that even by buying one fund you will get exposure to around 80 companies, rather than trusting your savings to the fortunes of just one or two.

You are also paying an expert to pick these companies for you rather than having to do your own research and make those decisions yourself.

If you are a newcomer to investment this can be incredibly daunting. Of course, the downside is that you will have to pay an annual fee to a fund manager, rather than a one-off charge to buy or sell a share.

But the average fund charge is around 0.75 per cent a year, and a good manager should make more than that to justify their fee.

Juliet Schooling Latter, research director at Chelsea Financial Services, likes the Premier Multi Asset Income and F&C Multi- Manager Navigator Distribution funds, which yield 4.5 per cent and 4.6 per cent respectively. She says: ‘Managers of the F&C fund are some of the most experienced and established teams in the City and this fund has consistently delivered a high income as well as growing your money.’

These so-called Multi Manager funds don’t invest directly in companies themselves, but instead pick the best of other funds to create a ready-made mixture of investments for you.

The benefit of this is that it’s a one-stop shop solution, but the downside is that they are slightly more expensive — the F&C fund, for example, has total ongoing charges of 2.23 per cent a year.

If you prefer a traditional fund, Ms Schooling Latter likes Woodford Equity Income, which invests in a mixture of big FTSE 100 companies such as GlaxoSmithKline and Imperial Tobacco, and smaller biotech firm. It yields 4 per cent and has returned 19 per cent over the past year.

She also likes the Jupiter Strategic bond, which invests in a mixture of government and company bonds across the globe. Some of its biggest investments include Australian and UK government bonds. It yields 4.9 per cent and has returned 14 per cent over the past 12 months.

‘The manager is quite cautious in his approaches and tries to limit how much you lose when markets are tough, but has still managed to produce a high income,’ she says.

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If you have an investment question get in touch at Investment Clinic, Money Mail, Northcliffe House, Derry Street, London W8 5TT or email h.black@dailymail.co.uk.


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