# Help me compare two items - is it just my maths is wrong?



## Hooverfish (19 Feb 2020)

Hi there Askaboutmoney people. I'm going to use a 100,000 euros investment here for arithmetical ease.

I know equities are supposed to outperform cash and that the past can't predict the future. I understand reward is related to risk.
I don't want to outguess any markets, I've little interest in it, and we're only trying to end up holding what we have if it's possible, ie the only reason for the investment is against inflation, which I'm guessing would be 2% over the next 5 years. But I'm wondering did I misunderstand things?

I'm trying to look at Zurich's Prisma 3 versus An Post/NTMA 5 year savings. I'm interested in looking at all the costs and benefits after 5 years.
I just can't believe anyone can predict anything beyond 5 years so although I looked at 10 years, I couldn't feel confident about tying up money for a longer period.

Prisma 3 aims at 2-5% returns, and has done 2.5% for about the last 5 years according to Zurich's sales material. So based on a 2.5% return...
The entry cost seems to be 0.5% with 0.75% AMC. Exit tax @ 41% therefore 3491. Broker will probably get 0.5%/yr out of the AMC or nearly 2500.
You can take your money out. After five years and tax that's €105024. 

An Post 5 year is 0.95% return guaranteed, with no entry cost but you can't touch it for 5 years or you lose the interest. No tax. After five years €103854

So as long as there's not a horrible crash (but it still looks like there could well be), Prisma is slightly better, and we get to increase wealth disparity in Ireland by funding a broker, as well as counteracting that by paying 3491 in exit tax which you could hope the state would redistribute fairly. 

Or we can prefer to fund the State directly by lending it money, get a bit less cash ourselves, but hope that money forgone to the treasury goes to fund the "right" things. Except of course the state might still go bust given its very high debt level? We actually give slightly more to redistribution the other way, and you could even argue the broker will also be buying services with our money, which helps Ireland Inc stay upright.

Either way, we can't even beat inflation unless we want to go to a higher risk level, and interest rates look to be heading negative? 

Looking forward to understanding how you see the difference, and what choice you would make.


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## Easel (19 Feb 2020)

5 years is not a long enough time to invest in equity linked products. Stick to An post


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## Hooverfish (19 Feb 2020)

Ok then, let's do 8 years as I think that's when you have to pay the exit tax anyway, even if you have not cashed it in?
Prisma 3 €108445
An Post €106842 (if you could get the same again after 5 years)?
After 10 years An Post is beating Prisma 3...


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## Steven Barrett (19 Feb 2020)

Your Prisma fund calculations are correct. Not sure where you are getting the State savings from, it is quite clear that you get 5% after 5 years, so it is €105,000 a back.

Prisma 3 is a low risk investment with the low levels of returns to go with it. In this instance, in a market where short term bonds (42% of Prisma 3) are earning nothing, sticking the money in State Savings is the better option over 5 years.




Hooverfish said:


> So as long as there's not a horrible crash (but it still looks like there could well be), Prisma is slightly better, and we get to increase wealth disparity in Ireland by funding a broker, as well as counteracting that by paying 3491 in exit tax which you could hope the state would redistribute fairly.
> 
> Or we can prefer to fund the State directly by lending it money, get a bit less cash ourselves, but hope that money forgone to the treasury goes to fund the "right" things. Except of course the state might still go bust given its very high debt level? We actually give slightly more to redistribution the other way, and you could even argue the broker will also be buying services with our money, which helps Ireland Inc stay upright.
> 
> ...



This is all nonsense. 


Steven
www.bluewaterfp.ie


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## Hooverfish (19 Feb 2020)

Thank you very much Steven. But at least the nonsense got you to check the maths! According to the NTMA the 5 year is 0.95% a year. 

I just found the very good thread that Brendan and others coincidentally updated today, which I think is relevant too: https://askaboutmoney.com/threads/i-am-65-–-where-should-i-invest-my-life-savings.185577/


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## RedOnion (19 Feb 2020)

Hooverfish said:


> According to the NTMA the 5 year is 0.95% a year.


0.95% AER. You need to compound it.

Edit: Sorry, just realised you did compound, but only used 4 years instead of 5.


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## Hooverfish (19 Feb 2020)

RedOnion said:


> 0.95% AER. You need to compound it.
> 
> Edit: Sorry, just realised you did compound, but only used 4 years instead of 5.


Thank you Red Onion - well spotted.


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