# Seeking advice on investing very large lump sum



## nissanfigaro (15 Oct 2007)

family member has sold their house with 1.7mil left after everything paid.
they are renting for at least the next 12 months. 

is putting the whole lot on deposit the most sensible option? - after 12 months they may consider buying again if there is value out there, so they dont want to tie the money up for too long

is 5% gross achievable?


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## jpd (15 Oct 2007)

Angol Irish are quoting 4.76% for 1 year term deposits. This is probably as good as it gets but shop around


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## Perplexed (16 Oct 2007)

Definitely shop around. Ask for the best rate each institution has. Don't go by the advertised rates as this is a considerable sum & rate should be negotiable.


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## ClubMan (16 Oct 2007)

Inflation is about 5% at the moment so a gross return of 5% which is 4% net of _DIRT _will mean that the lump sum is losing real value. Not sure but I seem to recall that _PRSI _may become an issue if you are earning large amounts of deposit interest income. I could be wrong though...


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## nissanfigaro (17 Oct 2007)

ClubMan said:


> Inflation is about 5% at the moment so a gross return of 5% which is 4% net of _DIRT _will mean that the lump sum is losing real value.


 

if this is this case are there any alternatives?

another thought is that since this lump will eventually be used to buy another house, inflation is irrelevant once house prices are dropping -am I correct?


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## jpd (17 Oct 2007)

If the sum is to buy another house, then yes, house price inflation is what matters. House prices are dropping now, but where will they be in 12 months, in 24 months, who knows ? Nobody, everyone may have an opinion and some may even have an informed opinion but it is still only an opinion.

Unless they want to take on some additional risk, then 4% net is as good as it gets.


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## MichaelDes (17 Oct 2007)

Flip it into sterling which is at a low to the Euro. You'll get around £1,181m (69.5p = €1) considering bank spreads. Put into an interest bearing account at 6.3% and it will earn £74,403 before tax or £59,522 after tax. If the currency moves back to its level rate of 67.5p=€1.00 which it has traded to prior to the Northern Rock Shock, you could land €1,838m. A return after tax of €138,000 compared to Anglo after tax at €64,736 (53.1% lower).


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## roland (17 Oct 2007)

Trading currencies over a short term doesn't strike me as an appropriate place for this €1.7m.  You give one scenario (€1=67p), but you don't mention other scenarios.  Sterling could easily fall in value.


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## MichaelDes (17 Oct 2007)

True Roland..but it has only gone through the barrier of 70p on one or two occasions, 67.5p is the medium. Maybe with the margin you could hedge through a 12 month future or option.


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## bungaloid (17 Oct 2007)

jpd said:


> Angol Irish are quoting 4.76% for 1 year term deposits. This is probably as good as it gets but shop around



nissanfigaro, you might want to bear the northern rock debacle in mind. there is no need to lock it up in a single financial institution. a higher yield may come with a higher institutional risk (despite what they say).


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## nissanfigaro (17 Oct 2007)

MichaelDes said:


> Flip it into sterling which is at a low to the Euro. You'll get around £1,181m (69.5p = €1) considering bank spreads. Put into an interest bearing account at 6.3% and it will earn £74,403 before tax or £59,522 after tax. If the currency moves back to its level rate of 67.5p=€1.00 which it has traded to prior to the Northern Rock Shock, you could land €1,838m. A return after tax of €138,000 compared to Anglo after tax at €64,736 (53.1% lower).


 
thanks for the tip

it was something that is being considered
where to get 6.3% - Anglos 's rate has been slowly slipping - today its down to 6.18 for 6 months fixed

what are the tax implications of profitting from flipping currency?


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## roland (18 Oct 2007)

MichaelDes said:


> True Roland..but it has only gone through the barrier of 70p on one or two occasions, 67.5p is the medium. Maybe with the margin you could hedge through a 12 month future or option.


 
Ok, maybe I'm stating the obvious there but the sense I got from the OP was that they wanted a capital secure safe-haven type investment. Currency flipping didn't strike me as that. But, I must have picked up the OP's post incorrectly as the OP was already considering it! I'm not up on whether or not current exchange rates represent an opportunity at the moment so I can't comment on that. However, I am aware there is talk about the ECB increasing interest rates. Does that not strengthen the value of the euro (all other things being equal) relative to other currencies, so that a sterling investment would lose value in euro terms?


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## piglet (18 Oct 2007)

The liklihood now is for a cut in interest rates next year, at worst it will flatten at ECB 4% so the Anglo rate looks the best. Taking fx risk with sterling is too volatile and is really gambling rather than investing. While headline inflation is 5%, the harmonised EU index is at half that rate. Since no mortgage is being paid the rate of personal price inflation being experienced is likely to be lower than the net rate on Anglo Irish.


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## MichaelDes (18 Oct 2007)

nissanfigaro said:


> thanks for the tip
> 
> it was something that is being considered
> where to get 6.3% - Anglos 's rate has been slowly slipping - today its down to 6.18 for 6 months fixed
> ...


 
Post office - can't get safer. Dont know about the flip but I'd say the withholding tax taken at source by the banks etc, wahes it anyway?


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## sapmanie (22 Oct 2007)

Use it to hire a professional and experienced tax accountant who will maximise your return.


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