Sibling with €65K in the bank looking to invest

[horusd]

Sibling has above amount on deposit with UB at .50% interest. He's no risk taker and not au fait with financial investing, so I'm looking for something simple/straightfoward to invest in with relatively easy access to at least some of the capital and no messing around with revenue. He has a dread of anything legal or complex. Suggestions anyone?

 

[rob oyle]

Check out the Deposits Best Buys section on here, I think all your bases are covered there.

 

[Sarenco]

It's not really possible to give you a meaningful answer on the basis of the limited information provided.

Does your sibling have a pension? A mortgage? A long-term investment horizon? What does he ultimately want to do with the money?

If he simply wants to keep the money on deposit, there is a "Best Buys" section that should give you the best option.

 

[horusd]

It's not really possible to give you a meaningful answer on the basis of the limited information provided.

Does your sibling have a pension? A mortgage? A long-term investment horizon? What does he ultimately want to do with the money?

If he simply wants to keep the money on deposit, there is a "Best Buys" section that should give you the best option.

Thanks for replies. He's almost 65 with limited pension (state and small private pension). he needs to be able to access at least some of it should the need arise, and hopefully get some dividend income plus share/portfolio appreciation if that's possible. Personally I'm thinking a mix of stock with good dividend income and a deposit account. Knowing him, I know he'll not be able to manage CGT or anything like that, so ideally some managed fund might be best, but which one?

 

[tallpaul]

At 65 he should leave it exactly where it is!! At the very least he should look at the Best Buys and he might eke out a few fractions of a percent better interest. But I would avoid going near shares or any type of vehicle where he could lose money.

 

[PGF2016]

Thanks for replies. He's almost 65 with limited pension (state and small private pension). he needs to be able to access at least some of it should the need arise, and hopefully get some dividend income plus share/portfolio appreciation if that's possible. Personally I'm thinking a mix of stock with good dividend income and a deposit account. Knowing him, I know he'll not be able to manage CGT or anything like that, so ideally some managed fund might be best, but which one?

Personally I don't think 65 is too old to invest in shares if your sibling is in good health and can live without a portion of the money for 10-15 years. There is obviously still risk involved. If you're going the managed fund route pick one with the lowest fees.

 

[Sarenco]

Given the circumstances presented, I would be inclined to keep things really simple - leave, maybe, €15k on deposit and use the balance of the savings to buy 4 year savings bonds from An Post.

If you think your brother could handle some additional risk and complexity, he might consider using a portion of his savings to buy shares in an income focused investment trust like The City of London Investment Trust plc. It's long established, well diversified, reasonably cheap and currently yields ~4%.

I think your brother should avoid the sort of managed funds that are currently offered by Irish life companies. For starters they are pretty expensive but the tax treatment of these funds make them really unattractive for somebody with a low marginal income tax rate (which I suspect in your brother's case is zero).

Hope that helps.

 

[horusd]

Given the circumstances presented, I would be inclined to keep things really simple - leave, maybe, €15k on deposit and use the balance of the savings to buy 4 year savings bonds from An Post.

If you think your brother could handle some additional risk and complexity, he might consider using a portion of his savings to buy shares in an income focused investment trust like The City of London Investment Trust plc. It's long established, well diversified, reasonably cheap and currently yields ~4%.

I think your brother should avoid the sort of managed funds that are currently offered by Irish life companies. For starters they are pretty expensive but the tax treatment of these funds make them really unattractive for somebody with a low marginal income tax rate (which I suspect in your brother's case is zero).

Hope that helps.

Thanks Sarenco, I'll look into these options. I'm not sure what the tax implications of the shares in the investment trust are; I'm assuming they're the same as ordinary shares? Anyhow, will look into these options. The rates of return, coupled with DIRT make deposits a very low yield. I'm hoping to do something a wee bit better but not complex. Thanks

 

[Sarenco]

I'm not sure what the tax implications of the shares in the investment trust are; I'm assuming they're the same as ordinary shares?

Yep, dividends are subject to income tax (may be below your brother's tax free allowance) and gains are subject to CGT (with annual allowances, etc.).

Don't forget that over 65s are entitled to receive interest without deduction of DIRT if their income is low enough:-

http://www.revenue.ie/en/tax/dirt/leaflets/de1.html

 

[Steven Barrett]

It is extremely difficult to advise someone with such limited information and without knowing what his needs are. But from what you have said and from advising people on their money over the years I would guess that he has never had any interest in investing his money. But with rates so low, you are now looking for a better return for him. With better returns comes risk, the risk that his money can go down in value as well as up. It also comes at a cost, the cost of managing money and trading.

Interest rates will not stay low forever and will increase eventually. Maybe it would be a good idea for him to keep his money in a hassle free deposit account, where he doesn't have to worry about the value of his money going down or what is happening in the markets. Interest rates are low but so is inflation, so his money is maintaining its real value.


Steven
www.bluewaterfp.ie

 

[horusd]

Thanks Sarenco and Sbarrett. I'll discuss options with him and let him choose. I'm still somewhat inclined to suggest a few gilt-edged high-dividend stocks as part of an investment/deposit mix. We'll see!

 

[Steven Barrett]

Thanks Sarenco and Sbarrett. I'll discuss options with him and let him choose. I'm still somewhat inclined to suggest a few gilt-edged high-dividend stocks as part of an investment/deposit mix. We'll see!

Dividends are never guaranteed, nor are any investments (Enron, Bear Sterns, Lehmans, AIB). Your brother needs to understand and be comfortable with taking an element of risk with his money. It is very important that he knows markets go up and down.


...and don't let someone in the bank sell him a tracker bond!!!!


Steven
www.bluewaterfp.ie

 

[dub_nerd]

I'll discuss options with him and let him choose. I'm still somewhat inclined to suggest a few gilt-edged high-dividend stocks as part of an investment/deposit mix. We'll see!

I empathise with your sibling's position, being similar myself. But your suggestion frankly doesn't sound compatible with the criteria in the original post -- low risk appetite and doesn't want anything complex or involving Revenue. If he buys something through a middle man he'll get stung for charges. If he trades stocks himself he will pay fees, incur risk no matter how gilt-edge the investment (and arguably there is no such thing in our current QE world), have the considerable complexity of understanding a trading platform, and have to make returns for capital gains and tax. Been there, done that, and it's been a bit of a baptism of fire.

I would say that the State Savings option is the sensible one, or else just the best yielding bank account. Yes, returns are pretty dismal, but in a low inflation environment that is not the worst thing ever. The gap between deposit returns and headline inflation is no worse than it has been historically. The niggling feeling that you ought to be making a several percent return should be resisted. There is no need, and life will be simpler.

 

[horusd]

Thanks All, in the end we opted for: 1. Family savings account with the EBS at 3%. Sibling is lodging 1000 p.m to it, limit in 1st yr is 13K. 2. He's investing a large chunk of the balance in 4 yr Post office National solidarity bond at 4%. He's happy with this arrangement, and it is simple as well. Thanks for all your help.