Want to Invest but worried about Markets

T

Thargor

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Ive been procrastinating over what to do with my savings for way too long now, basically its all cash because I got spooked and got out of everything a while back when it looked like crisis 2.0 was upon us, its 50k Prize Bonds but that might aswell be cash seeing as I only get €50 every 6 weeks or worse. I have 30k in a Post Office account earning feck all and another 15k in my current account.

Now just as I approach 100k it looks like there might actually be another crisis looming, I know the long term amateur shouldn't try to time the market but with Brexit, bad start to 2016, possible end to QE and everything else it does feel like a bit bearish.

Vanguard ETFs were where I should have gone a couple of years ago but are mostly down on the year now same as most of the market.

Im basically frozen with indecision and need advice, any help appreciated. I dont really want to get a mortgage as I dont know if Im even staying in Ireland, Im 31 if that makes any difference.
 
Hi Thargor

First off, congratulations on putting by close to €100k at the relatively youthful age of 31. Many of your peers will actually have a negative net worth at your age - I know I did.:oops:

Secondly, making negligible returns in an era of (essentially) zero inflation actually isn't too bad at all. It could be a hell of a lot worse - ask anybody that invested in Irish bank shares or BTLs in 2007/08.

You should probably give us the details requested in the "money makeover" format but from what you have told us so far it sounds as though maintaining maximum flexibility is important to you. Nothing wrong with that - keeping your powder dry makes perfect sense if you are still weighing up your life options. Nobody ever regrets having cash at hand. Are you contributing to a pension scheme of some sort?
 
No pension scheme and no debts, thanks for your reply, I try to tell myself repeatedly that Im doing well with savings but it really irritates me and I get no pleasure from it, I feel like Im missing something major and that money should be working for me but it just isnt. I only earn about 30k a year in my current role its just I have very little outgoings and cheap rent so it just piles up at a rate of about 60%+ of earnings, I dont even run a car...
 
stop worrying you are in a super position.

start a pension.

Go and splash some of that cash and enjoy yourself , before you know it you will be tied down one way or another.
 
There's always a reason not to invest. Just do it if your thinking about it , I thought about it for ages made loads of excuses not to do it then invested , prices went up , invested more and prices went down . I was about 50k or more down , I deleted the app on my phone for checking and can't exactly remember. I'm nearly as young as you though so that's the main thing. We are likely to see a few crashes before we retire. I was a bit annoyed for about a week when I was down 50k on paper. But I invest now each month last time I checked I was closer to 20k down. It's just numbers on a page really. It's the right thing to do that's the main reason I do it ( well I think history shows it's the best way to make your money work).
Just read the very helpful threads here on tax treatment of ETF's and make sure your clued up. Personally I believe in market efficiency so once your diversified accrpss sectors i would just pick stocks at random and never ask for advice on what to buy. Your guess is as good as anyone else's.
Good luck
 
You should absolutely get some professional financial planning advice.

See SFPI.ie for a certified financial planner.
 
Hi Thargor

You need to understand risk and return. If you are going to make returns greater than deposit, you have to take some investment risk and that means the value of your money going up and down over time. You have to decide how much risk exposure you are willing to take and what you are comfortable with. You do not have to go "all in" and invest all of your savings in equities, just a portion.

You also need to have a think about what you want to do with your money and when. When you know that, you can put the plan in place so it starts working for you.

Having money will not bring you pleasure. Spending it on meaningful experiences will.


Steven
www.bluewaterfp.ie
 
There are many good companies paying decent dividends. Maybe start by seeking out these and looking at the fundamentals of the company. Then make your choice.
 
If you are going to invest you need to have a minimum 5 year view, I think it should be a 10+ year view as the markets can be so volatile and if you already got spooked and cashed out then you need to consider if investing is for you.

Do you need the cash in the next 5-10 years? Buying a house for example? In that case I would not invest. You could be down 25% when you wan the cash at a point in time.

I would say start a pension and let that be your "investing" - depending on your fund choice you will be into equities and you are forced to take a 30+ year view as you cannot touch your pension until then. That makes it easier where you don't need to check the markets and worry about it and cash out with fear like you did. And you get your tax relief of course. A lot of people get spooked and cash out at a loss before buying back in when things are going back up and the cycle continues.

If you want to invest I would be looking at the bigger funds and ETFs e.g. Berkshire, S&P 500, FTSE 100, Europe and just plan to invest and add to it but assume you wont cash it out until 20 years time for example.

Based on my experience on investing over last 6 years I learned you need to look at investing like a pension works, its for 20-30 years where you do not need the cash in the meantime.
 
Aside: if you have a pension (OP doesnt, I know), is investing in equities outside the pension considered too focussed on equities, since a pension is probably 70-80% allocated to equities already? Considering people always talk about diversification, I wonder is post tax equity investment going against that?
 
Thanks for the suggestions so far all, still cant shake the feeling that its a bad time to get into equities though.
 
Thargor said:
No pension scheme and no debts, thanks for your reply, I try to tell myself repeatedly that Im doing well with savings but it really irritates me and I get no pleasure from it, I feel like Im missing something major and that money should be working for me but it just isnt. I only earn about 30k a year in my current role its just I have very little outgoings and cheap rent so it just piles up at a rate of about 60%+ of earnings, I dont even run a car...
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Hi Thargor,
just to add a little to other posts,dont just invest in things just to be doing something with your money,some years ago I did and lived to regret it!
just enjoy the fact you have quite a good financial cushion and maybe wait for a good option to come along.

Pat
 
postman pat said:
Hi Thargor,
just to add a little to other posts,dont just invest in things just to be doing something with your money,some years ago I did and lived to regret it!
just enjoy the fact you have quite a good financial cushion and maybe wait for a good option to come along.

Pat
Click to expand...
This seems like the way to go atm alright, especially with the low inflation, just wish there was something I could do with the cash instead of leaving it sitting there, I know plenty of people have it a lot worse.
 
Hi again Thargor.

Having read through the thread again, I still think you should largely stay in cash for the time being.

However, that is not because I have any idea what is going to happen in the stock market (or any other market) in the short (or medium) term but because I think you should keep your powder dry until you make some more fundamental decisions about where you want to go next with your life.

Flexibility has a value.

Having said that, I do understand that you feel you should be doing "something" with your savings.

You told us you currently have the majority of your savings in prize bonds and a post office savings account. Why not simply become an "interest rate tart" and move your money to whatever is the best instant account savings account? An post currently pays 0.25% interest whereas Nationwide UK currently pays 0.77% on an instant access account. So without increasing your risk you could triple your (admittedly modest) return (before DIRT). You could even argue that you would be lowering your risk if you think the UK deposit guarantee scheme is a better mark than the Irish State.

You also told us you have €15k in your current account. Why? Just keep whatever balance you need in your current account to meet you anticipated expenses for the upcoming month (and to avoid fees, if relevant) and move the rest into a savings account. It's not going to move the dial in a major way but even the smallest returns compound over time.

If you still feel an itch to make your savings work harder, why not dip your toe in the stock market as a live experiment? Maybe open an online brokerage account (Degiro seems to offer the best value at the moment) and buy, say, €5k worth of shares in something like Foreign & Colonial Investment Trust? It's not going to change your life but treat it as an education in terms of your own risk tolerance and the practicalities of investing.

As other posters have hinted - whatever you do, make sure you don't let life pass you by. This isn't a trial run.

Best of luck.
 
Thanks, Interest rates below 1% with DIRT make that kind of pointless though, I could literally do a few hours overtime on a Saturday which I often do and that would beat most returns on offer in Ireland and elsewhere these days, its an absolute joke. I remember a guy in Anglo Irish Bank in Galway once bumping me to an 8% return on a 15k lump sum just because I asked him if he could do any better than 7%, those were the days!

Agree about life passing me by though, Im very much wondering what the point of my job is these days.
 
Well, over the last 100 years, or so, cash has only ever produced a real (after inflation) return of around 1% per annum (before tax). Over a sufficiently long time period even that low return compounds into something meaningful.

For reference, equities have produced a real return of around 5% per annum over that timeframe (before tax and investment costs) but with some very significant ups and downs.

Let's play make believe for a moment (bear with me). Say you won the euro millions in the morning and money was no object - what then? In other words, what do want out of life? Travel? Familly? Writing a novel or some other personal project?

In other words, I suggest you try and figure out your answer to that question first and then work out a financial strategy to match it - not the other way around.

Your plans may change so build in some wriggle room.

I hope you don't find that too forward. I usually leave the "softer stuff" to other posters - they are much, much better at it than I am.

Hope that helps.
 
On a Euromillions win Id be off travelling the world but even with 100k thats not really an option, this is something I want to secure my future with not live it up for a few years and be back at square one. Id honestly be happy with a 4-5% return even but how to guarantee that? How low could ETFs like the Vanguard ones really go if I invested and then sh1t hit the fan again? You always hear that the causes of the last crisis were just kicked down the road and haven't really been dealt with yet, this is the fear that has me sitting at cash, a lot of commentators saying the whole market is way overvalued at the minute aswell...
 
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