Investing in your 40s - the divorcee with children

Published by Rob Griffin on 05 July 2011.
Last updated on 12 August 2011

Father and son

What sort of goals are you likely to be investing towards in your 40s, and which funds are well placed to help you get there?

The second in our three-part series looks at the family years: you may be in a more senior job and earning more money but the demands of your kids now, and in the future, loom large.

Our three case studies are relatively new to investing. For each scenario, we outline what their financial priorities should be and make three suitable fund recommendations.

Case study: Andrew Holmes, divorcee with custody of his two children

Andrew Holmes is a higher-rate taxpayer in his mid-40s with good job prospects, but his financial pressures still weigh heavily on his mind.

As a divorcee with custody of his two children, he wants to maximise his earnings and savings potential in order to help them through university.

He earns £50,000 a year, but his divorce settlement means he can only afford to invest a £5,000 initial lump sum, plus £200 a month going forward. He is looking for a fund solution with the potential to deliver income as well as growth.

Read: How to best invest a lump sum

Financial priorities

Andrew's priority as a higher-rate taxpayer is to use his annual £10,680 ISA allowance for tax-efficient investment.

Unfortunately, time is not really on his side as far as his investment goals are concerned. As his children are already approaching their teens, he only has a few years before the money will be needed.

He is looking for a balance of income to help fund university costs, and growth to provide capital to help the children with a house purchase in the future. But realistically, he may not be able to achieve all of his objectives.

Andrew may have to prioritise university costs over helping his children with a property purchase; or he may prefer his children to take on a low-cost student loan to fund university costs, and preserve his capital to help them buy a home.

Read our in-depth guide for first time home buyers


Henderson Multi-Manager Income and Growth

"This is a fairly cautious fund of funds with a well-diversified portfolio, which has given consistently good returns relative to its sector," says Geoff Penrice, chartered financial planner at London-based Honister Partners.

Investec Cautious Managed

Run by Alistair Mundy, this fund has "a sensible mix of UK equities, fixed interest and cash for the more cautious investor," he says.

"It is actively managed to reflect his views on the relative value within each asset class."

Invesco Perpetual Distribution

"This fund is run by Neil Woodford and aims to achieve a balance of income and capital growth through a portfolio of primarily UK equity and fixed interest securities. It has produced consistently good performances,"says Penrice.

Signs you need to review your portfolio

Getting married

What are your short-term and longer-term goals? Are you looking to buy your own home and/or start a family?

Having a baby

This changes everything. Not only will you have greater day-to-day expenses with another mouth to feed, plus reduced household income as one parent takes time out from work, but you'll also need to think about your child's long-term future.

Moving jobs

Hopefully the move will mean more money - a proportion of which can be put to good investment use.

Reaching the age of 50

Make sure that you are not embracing too much risk, as there is less chance to make up any losses. However, even at the age of 50 you may have 40 years to go, so don't be overly cautious.

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