Name: Thomas Dalton
Title: Financial adviser
How would you invest it?
The most suitable way to invest £1 million will vary widely according to who is investing and their circumstances.
Personally, being a younger adviser at the age of 30, I would pay down mortgage debts to make sure the household asset is secure at a young age, freeing up more disposable income for further investment and enjoying life with a young family.
With the mortgage cleared I would then look to invest funds in collective ISA/GIA assets, and I would use the remaining funds to consider the purchase of two rental properties, in the £100,000-£120,000 range, with no mortgage debts attached to them and with secure tenants in place.
I think with no mortgage debt, two rental properties and a large collective investment portfolio, I would end up with a diversified and low-correlated portfolio of investments with no debt or interest rate risks. Property is used to hold some form of investment not correlated to the market, and to build a secure stream of income alongside dividends from the ISA/GIA.
What would your asset allocation be?
Considering my age and timeframe for investment, I would not be shy of investing largely in equity managers with a proven track record of good performance.
While it would be important to regularly review the investments initially selected as market climates change, I think exposure to UK equity, European equity, US equity and some emerging market equity funds would stand me in good stead to capture positive returns in the long term.
Time in your investments will be more important than timing of your investments, in the long run. As I get older, a reduction to equity exposure would be sensible, but I would consider this around 15 years down the line.
Artemis' Income fund with dividends reinvested would be on the list, as would Marlborough's Special Situations fund, and it would be difficult to ignore Fundsmith Equity and the returns Terry Smith has proven to deliver.
How much would you keep in cash?
10% in cash is always a sensible level to hold: things happen in life and circumstances change. And while interests rates are poor and the money could technically go backwards against inflation, the remainder of your portfolio should offset that risk. £100,000 would be held on low-interest easy-access accounts.
Talk me through each component of what you could do until you have amounted to £1 million, e.g. 20% in bonds, 40% in equities, etc.
£100,000 in cash, setting my safety foundation first. £200,000 against mortgage repayments, clearing financial liabilities, £200,00 across two rental holdings for diversification purposes, £500,000 in collective ISA/GIA investments, initially exposed to 90% equity and 10% commercial property holdings or bond
I would put money into JISA accounts: my children are six, four and just three weeks.
While pensions are extremely friendly for tax relief, the timeframe on access is very long term. JISAs can be used in the shorter term to support housing deposits, university and early adult life. Pension planning can always be considered as the children enter their mid-20s.