How to invest £10,000 for income

If you are lucky enough to have a lump sum to invest into the stock market then there are a number of options to choose from.

But perhaps the first question you need to ask yourself is “why am I investing in the stock market”?

You could be investing for long-term capital growth, you could be investing to generate income or you could be doing a little of both.

Investing for growing dividend income

In this article we will concentrate on investing for income.

With interest rates at all-time lows, putting your £10,000 in the bank is likely to yield less than 0.5% in interest, unless you are willing to lock up your capital for a year or more – but even then you will have to search hard to find any institution paying much over 1%.

So, putting your money in the bank could generate less that £50 in interest over the year.
Inflation dropped to 0.5% in August, down from 1.1% in July, so your interest income would be wiped out by inflation meaning the spending power of your £10,000 after one year is…. £10,000!

So where else can we look for a higher level of return?

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A couple of small share sells

OK, OK. Before anyone says it, the share trading activities of the Amateur Investor have been pretty non-existent in recent months.

Since liquidizing most of my holdings when deciding not to renew the unlimited trading option on my Share Centre account, all trading activity has consisted of buying funds within a Fidelity ISA.

But the need for a little ready cash to pay off a credit card which has the expiry of a 0% interest offer looming on the horizon meant that I dipped an early toe into the 2013 markets.

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Another flurry of share sales

Following hot on the heels of the sale of Greene King, another 10 share sales.

Sell Marston’s @ 105.8 – 10.67% profit
Sell Old Mutual @ 1152.5 – 10.91% profit
Sell Jardine Lloyd Thompson Group @ 709.5 – 0.07% profit
Sell BAT @ 3,355 – 18.13% profit
Sell Pendragon @ 14.33 – 63.34% profit
Sell HSBC @ 568.67 – 5.35% profit
Sell Close Brothers @ 776 – 6.3% profit
Sell AstraZeneca @ 2,919 – 6.92% profit
Sell SSE @ 1,426 – 9.46% profit
Sell Murray International @ 992 – 13.5% profit

Considering all of these shares have been held for less that a year, and some dividend payments have been received too, the capital gains aren’t bad at all!

Sale of Greene King (GNK) Shares

Bought at 469p, a profit of over 22% meant it was time to sell my Greene King shares today.

The selling price was 573p for a 104p profit.

They are due to go ex-dividend next month, but as the Premium Dealing option runs out at the end of this month I decided to forego the dividend and sell now.

Sale of Umeco (UMC)

Just one sale today. Umeco (UMC), the specialist engineering firm, at 547p

I bought Umeco on 3rd August 2011 for 373p
The share price shot up on 12th April 2012 on the news that the company had received an offer from Cytec Industries’ subsidiary Cytec UK Holdings, for the entire company.

Cytec and Umeco agreed that Umeco’s shareholders will be paid 550p in cash per share.

I’m not sure when this deal is due to be completed and shareholders paid, but as I’m selling off smaller holdings I decided to cash in today, despite the share price being 3p below the price shareholders will receive if and when the takeover goes ahead.

The sale price of 547p represents a near 47% profit.

More share sales

Sold more shares today, including Dixons Retail, Howden Joinery Group, National Grid, Telford Homes, Rightmove, Dot digital Group, Hammerson, Lloyds Banking Group and Magnolia Petroleum.

Most were quite small holdings, but I hesitated before selling National Grid (NG.). While these should have been in the High Yield Portfolio (HYP) they were in the general shares portfolio. Once the sale proceeds have come through I may re-invest in NG. in the HYP.

Portfolio reorganisation continues

As I wrote last week in “Cleaning up the Amateur Investor Portfolio“, I’ve decided to tidy up the Amateur Investor portfolio.

While I said that this was because the A.I. portfolio of over 200 holdings was proving to be too difficult to keep a close eye on, another consideration is that the 12 month anniversary of subscribing to The Share Centre’s unlimited share dealing option is approaching (The deed is done. I’m now a “Premium Trader”!)

This trading option costs £3000 per annum (£2500 + VAT) and allows frequent traders to trade as often as they like without additional trading fees. So anyone trading at least once a day will probably be better off on the Premium Trading option.

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Cleaning up the Amateur Investor Portfolio

Since staring my journey as the Amateur Investor last year I have managed to accumulate around 200 different holdings!

Far too many to be able to keep an eye on all of the shares, so I’ve decided to weed out some of the smaller holdings in my general portfolio (leaving the High Yield Portfolio to quietly carry on earning income).

To this effect I have sold 2 holdings today, Intertek Group (ITRK) and Xchanging (XCH).

Intertek was purchased on 2nd August 2011 at 2,022p each (including fees). Today’s selling price was 2,682p for a nice profit of 660p per share, or just over 32%.

I bought two lots of Xchanging, one at the beginning of August 2011 at 97p per share and another just before Christmas 2011 at 64p per share – an average of 80.5p per share. Today’s selling price was 101p per share, a profit of 20.5p per share – or just over 25%.

More selling is planned for the coming days and weeks…