What would you do with £70,000?

What would you do with £70,000? It is a hypothetical question; pub banter, or couch-talk after "Who Wants to be a Millionaire". But it is a question many of us face at least once in a lifetime because a relative does not have to be wealthy to bequeath a tidy sum. She just has to have owned a house.

When Richard Byrne’s aunt died ten years ago he inherited the council-house he had helped her buy for £8,000 years before. He briefly lived there. Then he let the house to a long-term tenant and it was when she wanted to move out in January 2004 he faced the £70,000 question. He had a buyer, a relative of his tenant, and with prices climbing fast it looked like a good time to sell.

Retirement money

Mr Byrne says: “It is my retirement money. It is making sure I have got a roof over my head. That was the whole point. I had not had capital in that form to put into any sort of investment. And then I did. Something had to be done and it was either put it in the TSB and… be grateful for 5% or try to do a bit better.”

He had let the house through his local council and needed to replace the steady but unspectacular income as well as the potential from rising prices. “My overall income is bugger all,” he says, “I do not run a car of my own. I do not push the boat out very much. But I do not particularly want to go on a slow decline.”

Beating the building society

So he tried to do a bit better. He bought a Leica, the Rolls Royce of cameras, and put the rest of the money in the stockmarket, mostly in two funds. But he also set aside £8,000 to invest in eight shares of his own choosing. He had never invested in shares before.

Richard Byrne started his adult life at the London School of Economics but his social conscience drew him into a twenty year career as a probation officer. He wrote books on the history of safecracking, prisons and crime. But the lessons he found most useful when picking stocks later on were about people and how they spend their money. “It was only after the event,” he says, “that I realised that I had been in an awful lot of homes.”

Lessons from a life in crime

In the early 1970s a colour television was a prized possession. “Quite often,” he says, “people who did not have a lot of money were keen to get one of those pretty soon.” It is the same with Sky digital TV boxes today, he says. “Amstrad are making the boxes and BSkyB are flogging them.” Mr Byrne owns shares in both companies. “And more prosperous families will have to have one in every room. Whether they are or bent or straight,” he adds, the words bubbling up through throaty chuckles.

Debt was the cause of much of the crime Mr Byrne saw as a probation officer: “How an earth,” he says, “did they get into such a hole?”

“It was not, you know, the old myth: they were obviously sitting at home doing nothing but drink and smoke. Quite often they had done a lousy credit deal.”

Preferring to invest in lenders with shop fronts to those that employ tallymen, Mr Byrne says he can differentiate between responsible and disreputable companies by advertisements in the back of the more popular newspapers: “Some are plainly more scammy than others.” He owns shares in Albemarle & Bond, the pawnbroker, and Cattles, which provides credit to consumers.

A life in crime also taught Mr Byrne how fear and greed drive popular perception. “Serious crime is far lower than when I worked in the probationary service. But you would not believe that from reading the Daily Mail.” We are experiencing a moral panic about crime, he says, “Everybody is saying the same thing at the same time for no very good rational supportive reason.”

The same thing happens with investments he says. During the dot.com bubble investors were caught up in the hype as prices rose beyond reason. They lost sight of what companies might actually be worth.

Doing it yourself

Eight years ago, Mr Byrne’s bubble burst when, age 49, he was forced into early retirement by “really lousy depression”: “I was ill,” he says, “I had a couple of hospital stints and it was just not possible to go back in [to work].”

“I was in my house, looking after my own immediate affairs. And that actually gives you very good research time.”

So last year he decided to make the most of his investments. Inspired by two Peters; Peter Temple, Interactive Investors’ twice-weekly columnist, and Peter Lynch, the legendary fund manager and investment writer, he set out to do his own research.

His one fear was self-delusion: “I had not only experienced my own bullshit, but seen other peoples’,” he says, referring to the internet discussion boards he uses. So he sent a letter to his 23 year old daughter. He called it a hostage letter, and in it he identified the eight shares he had bought, saying: “I am sure that a sum of money invested equally across these companies today will be worth at least 12% more on this date in 2005.” Then he sent Interactive Investor a copy.


Read Richard's "hostage letter"

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Richard Byrne’s favourite links on Interactive Investor
- Articles by Peter Temple in: Analyst portfolio, Community, Share Trading and Markets.
- Books by Peter Temple
- Books by Peter Lynch
- Discussions (You may find Mr Byrne in the Amstrad and Thus discussions, and others, posting as ‘leahsdad’)