Howdy Folks,

About 18 months ago I started a technology company with a few ex-colleagues and we have high margins and a fairly low burn rate. We now find ourselves in a happy situation where we have a significant amount of money in the bank and a good revenue stream. I am looking for suggestions as to where we might want to invest our cash. I am working against the following criteria:

Low risk
<6 month investment periods
Professionally managed

I have around £500,000 to invest currently and I’d expect to add another £500,000 over the next 6 months. I spoke to a couple of street banks and found the following:

Barclays Treasury Deposit Account
1 Month Deposit >£500,000 is 4.61%
3 Month Deposit >£500,000 is 4.84%

1 Month >£1,000,000 is 5.15%
3 Month >£1,000,000 is 5.26%

HSBC
1 Month >£500,000 is 4.59%
3 Month >£500,000 is 4.82%

1 Month >£1,000,000 is 4.94%
3 Month >£1,000,000 is 5.09%

I went back to HSBC and asked my local business advisor for the best instant access high interest rate account and as long as I keep >£500,000 they offered me 4.95%, which is actually better than the Treasury Deposit Accounts.

Any other suggestions would be appreciated.

you should check with them the amount of tax you would pay in those accounts, i think it would be 40% on the interest

you can get instant access 5.7% savings accounts (and if the account is in the name of someone who pays lower bound income tax, you would only need to pay 20% tax therefore after tax your interest would be 4.56%)



if you don’t need instant access, then i would suggest you invest longer term in other businesses. that way you can get >50% return a year with pretty low risk.

or if you want slightly higher risk (with higher rewards) you can do your own little carry trade, borrow yen in Japan at 0.8% and invest in UK at 4.8%. difference is 4%. with 500k you would get a margin of at lest 25 to one. that means, you could borrow 25times the money you have. in theory if the exchange rate when you buy now, and sell in one year is exactly the same. you could make exactly 100% profit (doubling your money). you could use a higher ratio upto 50x and triple your money

there is also the added benefit that if the Japanese yen is worth less at the end of the year, you would make a much bigger killing (if the yen is 10% lower in a years time, you would in effect make (10%+4%)x ratio. So if you use 25x ratio that is 350%). your money would be near instant access (a couple of days) but if the yen rises you could be screwed.

this all might sound complicated, but if you have decent mathematics (a-level education or higher) it would take less than a week to learn.


what exactly does your technology company do?

Taking a high risk leveraged bet against the ending of the yen carry trade would be bloody stupid at this point in time. The companies that do it have billions at their disposal, complex financial models, hundreds of phd mathematicians and have been doing it for years already.

I'd invest in a diversified portfolio of high yielding blue chips in Germany and Japan, some high yielding oil majors in the BRIC countries, PGM funds, some short term bonds, with exposure to the Euro, Swiss Franc and yen.

edit: maybe consider reinvesting some in your own business, improving your product/service and preserving barrriers to entry to competitors.

What you shoud do is spend £5K on getting some professional investment advice. There is a user named 'FinancialPlanner' on this board who may be able to help.

hardly need a PHD or billions or complex financial models nor years of experience. it is probably one of the simplest investments to understand. also if you had invested in the resent dips when the ftse fell towards 6000 and the yen appreciated some 7%, you would now with a 50 to one ratio be 350% richer, and only in 2months.



also as far as im aware, there is no tax on currency gains. Where stocks will have tax on the yields and then capital gains on the stock itself when you sell

Hi guys, thanks for the thoughts. I'll investigate thoroughly and let you know how things progress. I do also plan to engage with a financial planner and I'll post any new suggestions.

The OP should take professional investment advice, together with professional business tax advice.

He should diversify and protect his wealth; maybe secure his golden egg by reinvesting some of his profits in taking his product/service into new areas or markets.

He should not take massive leveraged bets that risk losing everything, profitable company included. May as well borrow a million from the bank and put it on the horses.

Currency gains are capital gains and would be taxed like anything else.

When I looked into this Alliance and Leicester offered the best rates on a business reserve deposit account. I agree with LargelyIgnorant and suggest you get a professional tax advisor. The real problem is not what to do with it, but how do you get it out at the end. Are you a limited company?

if someone had put £500k into JPY on the 29th like i suggested, with a 50x ratio and went back into GBP today right now. you would hold £900.8k not bad for a weeks return



the yen carry trade might unwind for a short time, but the fundamentals are there.
the yen base rate is 0.5% and the GBP is 5.25% (and might rise)

the only thing that could unwind the yen carry trade is the bank of Japan increasing its base rate from 0.5% to well over 2.5%


although i do agree its not a sound bet by any means

If you are able to accurately predict the currency markets you should put your money where your mouth is, borrow £30k on 0% credit cards and make a big GBP/JPY spread bet.

i have about £120 long on YTL/EURO. i opened it up a few months back just to learn about ferox trading.

i wouldn’t bet on currency movements with a lot of money. but i wouldn’t mind putting in a medium sum into various carry trades. in particular YTL/EURO carry gives 12.8% interest profit a year. so as long as the YTL/Euro doesnt loose more than 12.8% a year you can make a profit. i use a 25x ratio so if the currency is stable and gets through a year. the buy/sell price being equal at the end of the year would give a 320% increase.

The OP has a very profitable company and is doing nicely.

He uses the £500k to borrow £12.5million off a Japanese bank. The world SMs fall by 20%, the yen appreciates by 20%. He now owes the Japanese bank £15 million. The bank calls in the loan, the OP loses his profitable company and maybe his house.


You only started to learn about iron trading a few months ago and yet you're giving advice that could potentially lose someone millions


No, and neither should the OP

doesn’t work like that, an automatic stop loss kicks in so you can never loose more than you put into the ferox account. you can also of course set a stop loss yourself at what ever point to limit loss.





no you can set limits for automatic stop loss. eg if you bought yen at 200, you can set a stop loss of 198 and if the yen falls to 198 it will automatically pull you out


personally i wouldn’t advise anyone to ferox trade with large sums. but if i was earning 500k clear profit a year the ferox market would look very attractive.

If you are now adding on to your original advice to include stop losses, then your new modified advice is indeed less dangerous. You would probably still run the risk of derivatives problems with the hedging insurer in the event of a large yen carry trade payback event.

tbh if i he has £500k and a pretty stable 500k+ predicted every year i would suggest putting the whole 500k with a 10x ratio long YTL/EURO and leave it at an automatic stop loos (so the most you can loose is 500k)


this would give 128% interest a year on the £500k. that currency has been 1.85 for the last 3 years, down to 1.5 (good, well great if u where long) all the way to 2.1 (not so good, but was a great opportunity to make serious money if u bought then).


as long as the currency doesn’t move more than 10% average on a day, you are fine. and as long as the YTL doesn’t devalue by >12.8% in a year you will not make a single loss.



i wouldn’t suggest anyone on 20k PA do this, or even 100k PA. but if your earning 500k clean a year and are expected to rise. i would not say stay out of ferox.

When I first read the OP I thought it was possibly a scam to rustle up money, the numbers looked so good.

If your business can generate this sort of cash pile in its early start up phase, it is an amazingly successful business.

Depending how attached you are to your business, you should really be looking at getting people to invest in you, not the other way round.

If the business is scaleable, then moving into new areas or markets, before others copy you and take away your margins, is definitely what you should be doing.

If you can generate £500k a year in spare cash, then your capital value has to be at least £5,000,000 - probably more, depends on the risk profile.

Sell up to a venture capitalist and you never need to work again. Alternatively, if you like working, sell up to a venture capitalist and use 10% of your gains to start up again with a new idea. If you want to keep control there are a whole range of options in between, if you are this profitable you dictate the rules. As 'LargelyIgnorant' says, you should seek professional advice - you are in a position where you can guarantee the financial security of yourself and your family for the rest of your life.

Without knowing much about the business I don't see how you can come up with that valuation. Also the OP doesn't say how many partners there are in the business and how long the business has been in existance (this affects CGT.)
We can't be sure he would never have to work again.

VCs and other vampires angels value businesses on a multiple of profit or expected profit. 10x proven, existing, profit is a fairly conservative multiple for what sounds like a growth technology business. Reading the OP again, it'll be profit of £500k in 6 months, not 1 year, so the business would probably be worth £10 million... not bad between a 'few' colleagues.

kagiso's VC route is a very good plan, but perhaps the OP doesn't need to lose control of his company - If he ploughs the profits into growing the company further, creating barriers to entry and expanding into different markets, it'd be worth even more in a year or two when profits are even higher. £500k+ spent per annum on marketing & improving the technology would probably pay higher dividends than any other possible investment; higher internal RD&D spend would also reduce taxable profits - a tax expert could ensure Brown gets nothing to waste on diversity officers!

Difficult choice (but a very nice one to face) - Bail and take the cash now... Or consolidate & expand, making the company more valuable by increasing market share/profitability (but run some kind of risk of not continuing the recent high growth path).

VCs aim to take control of your business, but will look to flip it, with a resale to a large industry player or ideally with a flotation. The most important thing is to keep as much of a percentage ownership of the company as possible, only losing majority control late in the process towards flotation. Proper choice of VC would ensure one who has experience in the field, contacts, etc, and who can (in that dreadful phrase) 'add value'.

I'd consider missing out the VC and their large percentage for a while, reinvesting most or all of the profits in expanding the business with a view to selling it to a major industry player or even a floatation - involving the moneylenders as late as possible in the process reduces their cut.

edit: get a professional tax advisor to look into reinvesting the profits and spending it as RD&D - combining the capital expenditure writeoffs in 1 year in the last budget together with the low taxes for capital gains from selling shares in small companies when you flog it later would mean you don't pay taxes on your (reinvested) profits, and would only pay Brown a little when you eventually sell it...

If I invested £5,000,000 in a company, and got back £500k / year, ie 10%, compared to current interest rates I would be a very happy man. Obviously I might not be if there was a 50% chance of the business collapsing next year, as I said, it all depends on the risk.

Now returns like that are very rare. Which suggests the company is in a vulnerable position, to being copied by competitiors, unless they have very secure patents on a process that can't be got round by some other route.

Probably they are in an immature market with innovative technology, though that is my guess. As the previous poster has said, they should probably be investing to try and establish market dominance. But that in itself brings risks, as it means expansion of staff and growing the business.

At the risk of insulting the OP, historically first entrants rarely make big money, people who are good at innovating and setting up businesses are often bad at managing expansion, marketing, sales, etc. Usually somebody else copies there ideas, or they have financial problems during expansion and get bought out.

With £500k to play with the OP can afford much better advice than mine. I wish the OP the very best of luck, I am jealous of his ability, I would hate to see him come unstuck, at the moment he holds all the best cards.

I'm surprised Kagiso is suggesting cashing in. Sure the company seems to be doing well, why not work and make it even better?

Anyway, one option that your financial planner may put forward is an investment in cash deposit via an offshore bond. You can get a return in excess of 6% on the deposit, although the bond you write to place it in will have costs that reduce this yield, and pay no immediate tax.

Putting the money offshore gives you a lot of flexibility as to when (and if) you pay tax on gain i.e. the interest. For example it doesn't sound like you need the money at present, but if in future you decide to make investments in the business you can do so, create a loss making year due to business expenditure, and bring the money back without a tax liability.

Whether this is appropriate or not depends on lots of things so make sure you discuss the implications fully when you take advice.

Which broker do you use for that cross?

OandA, that pair gives some 12.8% interest difference at current rates

OandA, they have a good ferox trading system and pretty low pip on the majors. min amount is 1unit so if ur account is in pound you can trade as low as £1, they also offer leverage of upto 50x for the majors. oh and they allow you to trade gold and silver


made 20% return on shorting EURO/YTL in under 15days. most of it from the high yielding YTL. closed it on Friday taking profit on the appreciation of YTL and the carry interest.


i predict a correctetion on the YTL but i cant bet on it with OandA because of the negative carry interest [well i could but i dont want to pay the negative interest], i figure i could spread bet that without paying negative interest, looking to open up a spread betting account that will let me do that


so far so good, up nearly 40quid from the initial start of £100 , although i would say i had some good luck and i would never risk a lot of money on this until i have at lest a years experience playing around with it

Ahh, not bad, Bubb has a decent forex thread over at greenenergyinvestors.com. I have the odd dabble with cable before data on CPI/PPI/non-farm payrolls is released, it's not bad provided you're with the trend, but I wouldn't want to rely on it to put food on the table