# 100K make it work harder?



## rob523 (12 Jan 2007)

Hi,

My present financial situation is that I've about 60K in the Credit Union
earning approx 3.5% I've another 40k in shares in the company I work for, they're all mine (no taxes owed on sale). I had planned to have a house by this stage but it didn't happen  I'm now waiting to see how things will pan out with the housing market.. I can wait another year or two, no real pressure. Trouble is, now that inflation will be pushing 6% I hate the thoughts of my (very!) hard earned money devaluing relative to inflation.

I don't see much point in cashing in my shares and moving the lot to a higher earning on-line account. They don't offer much over my CU, especially when I don't have to pay DIRT on the dividend with my CU. I feel investing the lot in the stockmarket could be too big a chance to take 
seeing as I've home-ownership in mind.

Just curious as to what other readers would do.. 

Thanks

Rob


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## jhegarty (12 Jan 2007)

rob523 said:


> I've another 40k in shares in the company I work for, they're all mine (no taxes owed on sale).





one bit of advise... if the company goes belly up you are in double trouble.. half you saving gone and no job.....lots of enron people got really badly burned this way...


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## oldtimer (12 Jan 2007)

How are you avoiding paying DIRT on your credit union account?


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## purplealien (12 Jan 2007)

How long did it take you to save up €100,000? 
Don't think i'll ever get to that stage in this life!
Why not invest in property abroad?


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## rob523 (13 Jan 2007)

purplealien said:
			
		

> How long did it take you to save up €100,000?
> Don't think i'll ever get to that stage in this life!
> Why not invest in property abroad?


 
hi purplealien, I've been working 7years, with shift and overtime I normally double my basic wage. It's not for everyone but the more time you spend working the less time you spend blowing money. As for property abroad, I just don't know enough about it. Would probably get caught paying the 'irish price' on some unrentable dive in a country whose currency is about to go into freefall!



			
				oldtimer said:
			
		

> How are you avoiding paying DIRT on your credit union account?


 
Hi oldtimer, As far as I know my CU dividend isn't subject to DIRT. Last month they paid 3.5% on the previous years savings so it'll prob be even higher next December. As my savings weren't regular, and 20k higher at the end of year, it's hard to calculate an exact figure of what dividend to expect, and wheather or not DIRT was deducted. I don't think it was and there was certainly no mention of it by the good people at my CU.




			
				jhegarty said:
			
		

> one bit of advise... if the company goes belly up you are in double trouble.. half you saving gone and no job.....lots of enron people got really badly burned this way...


 
Jheagarty, I have confidence in the companys future and stock price, as I'm sure did those guys in Enron!!! I know you're right, that figure would be closer to 60k only I've been pulling money over the past couple of years. If the stock price and currency exchange turn a little more favourable over the comming months I'll probably cash in further shares.


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## purplealien (13 Jan 2007)

How about investing in prisons? Occupancy shouldnt be a problem! 
http://www.moneyweek.com/file/16469/invest-in-prisons---and-lock-in-defensive-growth.html


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## CCOVICH (13 Jan 2007)

I wouldn't invest in property (either abroad or in Ireland) before buying your own home and doing plenty of research-at least you are aware of the 'Paddy price'!

For an amount as large as 100k, I would seek independent professional advice.  A search of AAM will throw up some previous discussion.

Re. the Credit Union tax issue, as far as I am aware, certain CU account are 'tax free', but in other cases, if the CU is not deducting DIRT/income tax at source, the member themselves is obliged to declare and pay over the tax to Revenue.  Maybe some CU member could advise with more detail.

You are doing well to have €60-€100k to go towards a home.  While the rate of return is important, I would certainly be just as intertested in capital protection.


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## oldtimer (13 Jan 2007)

Ccovich is correct re DIRTon credit union account. Some credit unions do not deduct DIRT but it is the legal obligation of the account holder to declare it. One way or another you must pay DIRT on your credit union dividend.


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## asdfg (13 Jan 2007)

> I've another 40k in shares in the company I work for, they're all mine (no taxes owed on sale)


 
Just to let you know you may have a liability to CGT


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## liteweight (14 Jan 2007)

I agree with others that DIRT is your responsibility when it comes to some credit union savings. I don't see why you wouldn't have a CGT liability if you sell your shares. CCOVCH is correct with regard to buying property also. If you purchase abroad, you lose your FTB status at home.


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## Z100 (14 Jan 2007)

rob523 said:


> Hi,
> 
> My present financial situation is that I've about *60K* in the Credit Union
> earning approx 3.5% I've another *40k* in shares in the company I work for, they're all mine (no taxes owed on sale).


 
Rob? Will you marry me?


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## CCOVICH (14 Jan 2007)

liteweight said:


> CCOVCH is correct with regard to buying property also. If you purchase abroad, you lose your FTB status at home.


 
It's not just the FTB status issue I would 'worry' about-investing hard earned cash in property with a hope of realising gains (presumably in the short to medium-term); it seems like a high risk strategy to me. Also, liquidating a property isn't always as straightforward as we would like and could limit your flexibility to bid on a PPR when the time comes.


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## Janman07 (16 Jan 2007)

rob523,

I would take the view that if you are going to buy a home in the next few years, the sooner the better. Even the most pessimistic economists are predicting that house prices will stay flat in real terms i.e. they will keep up with inflation for the next two years and may pick up after that. As you will be borrowing at least two thirds of the value of your new home, even keeping pace with inflation will beat the pants off any messing about with high interest accounts. You can also avail of the rent-a-room scheme, interest relief, ftb grant to ease the pain. Put some time into choosing a good, well built house in a good area. If the market gets sticky, it's the cheap, badly located rubbish that will fare worst.

People have been writing off Irish property since the late 1990s. I know plenty of people who held off waiting for a crash and it cost them a large chunk of their 50k, 80k, 100k savings when they bought 18 months later.

I am not recommending Irish residential property as an investment - the short term prospects are mediocre at best. I'm just saying that if you are going to buy in the next few years anyway, the chances of you beating house price inflation with low risk investments are very slim.


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## thewatcher (16 Jan 2007)

Janman07 said:


> rob523,
> 
> I would take the view that if you are going to buy a home in the next few years, the sooner the better. Even the most pessimistic economists are predicting that house prices will stay flat in real terms i.e. they will keep up with inflation for the next two years and may pick up after that.


 
Don't you mean optimistic ? Many commentators and respected institutions are saying irish house prices are overvalued by at least 20%



Janman07 said:


> As you will be borrowing at least two thirds of the value of your new home, even keeping pace with inflation will beat the pants off any messing about with high interest accounts.


 
What happens if prices start going backwards ? Messing about with high interest accounts is purely about trying to maintaining your wealth in the shortterm till we see exactly where house prices are going.

Not sure if this breaches the "ban", just don't think Janman07 should be able to throw than post out without an alternative view.After all people are making life decisions here.


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## Janman07 (17 Jan 2007)

OK look...

I know that this is an investment forum and every dog in the street knows that Irish residential property is a nervy place to invest your money at the moment.

But consider this..

1. Rob has saved like crazy to build up 60k and earn 40k in shares in his employer's company. Rob does not want to risk that money in the stock market or other medium to high risk investments.
2. If Rob cashed in the shares (40% of his assets tied up in his employer's fortunes is too high by any standard) and put all his money into Northern Rock at 4.15% after three years he will have 110,294. Let's say he messes about with high interest accounts and gets that up to 112,000. A 12,000 profit.
3. If he buys an apartment for 350,000 and borrows the 250k. The apartment only has to rise in value by 1% per annum to give Rob a 10,605 profit after 3 years. A 1% rise in value per annum for 3 years is a pretty appalling return and a drop in value in real terms.

I know that Rob has legal fees, fit out costs and even if he rents a room will be paying more for the mortgage than he is for rent at the moment. My point is only that saving cash into a bank account to try to beat the housing market like walking up the down escalator - one step forward, two steps back..


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## phoenix_n (17 Jan 2007)

Janman07 said:


> I am not recommending Irish residential property as an investment - the short term prospects are mediocre at best. I'm just saying that if you are going to buy in the next few years anyway, the chances of you beating house price inflation with low risk investments are very slim.


 
Tend to somewhat agree. I personally would go with an investment (either fund or directly) in Germany (only particular cities) or with certain stocks but the advice above is also good if you pay particular attention to the location of the property. You may want to check out www.scs.ie (will be on tomorrow) which speaks about market segmentation ; that property rises/falls will depend on location foremost. 

There was an article (cant find it at the moment) where several Economists , Leading financial institutions were giving advice on possible good investments for 2007. Think it was the Irish Times. That might be worth checking out. With regards to Property, as far as i remember, they all mentioned Location as a very important key when choosing to purchases. (as far as protecting your investment)


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## Markjbloggs (17 Jan 2007)

How strong were you at maths in school?




Janman07 said:


> OK look...
> 
> I know that this is an investment forum and every dog in the street knows that Irish residential property is a nervy place to invest your money at the moment.
> 
> ...


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## Janman07 (17 Jan 2007)

Better than you at a guess.

You do know that you pay DIRT on savings interest, don't you?


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## Markjbloggs (17 Jan 2007)

You forgot to tax the disposal of the shares.  Without knowing how they were obtained, you cannot assume that €100k is the initial deposit.


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## Janman07 (17 Jan 2007)

Markjbloggs,

In the initial post he says that the 40k figure is all his, no taxes owed, so I presume that is a net figure. Anyway you are nitpicking (is that a word?).

I would be interested to hear any views on which option is the best one for Rob right now.

A) Put 100k on deposit in the hope that Irish residential property will fall in price over the next few years and buy at the reduced price.

B) Buy the house now in the belief that even marginal gains will outpace bank interest.

C) Let's say there is no C for the sake of the discussion.


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## murray (17 Jan 2007)

Janman07 said:


> Markjbloggs,
> 
> In the initial post he says that the 40k figure is all his, no taxes owed, so I presume that is a net figure. Anyway you are nitpicking (is that a word?).
> 
> ...


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A) would seem the best option at the moment , IMHO (& i have been an EA for 15yrs!)

remember to factor in stamp duty, removals , legal fees etc.
then if you are selling into a weak market - you have a serious liquidity problem.

house prices _*ARE *_dropping kids........!
Also, the is a huge

Also there is a huge number of properties coming onto the market at the moment - on top of the unsold summer stock & not to mention countless new developments that are reducing prices to get out.

AIB selling out , Gunnes selling out etc etc......


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## phoenix_n (17 Jan 2007)

murray;349079
house prices  said:
			
		

> *ARE  *dropping kids........!
> Also, the is a huge


 
Can't discuss. But when do you think the true market value of property stock will be seen. March or later ?


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## Carrie2006 (17 Jan 2007)

I think a more balanced view to whether you should invest in mutual funds or individual stocks should be considered.  Yes some people have access to Bloomberg, DataStream, Reuters etc... they can understand share price movements when they read them in the newspapers, they are completely comfortable with understanding a business strategy and reading their balance sheet. 

However, in reality some people do not have the financial acumen to understand why one stock is better than another, they may not know how to read a balance sheet, I could go on and on.  In that case, rather than playing ennie meanie miney mo (or however you spell that) in the hope that they pick the right companies, giving their money to a professional who understands the market, has in-built diversification and has a solid performance record may be an eminently more sensible idea. For the record, I know plenty of portfolio managers who have generated solid consistent returns through a variety of markets and I would personally trust to manage my money effectively.  

I am not saying that direct investment in stocks is a bad idea, however it may not be a suitable investment solution for everyone. This website outlines the advantages and disadvantages to both. 
http://msucares.com/pubs/publications/p2273.htm


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