# 1 Million Euro to invest - managed fund?



## venividivici (17 Jan 2008)

Sold farm - have cash to invest. Getting mixed suggestions from bank and accountant. Balanced managed fund appears to us to be best. Good time to buy. Prices low. Everything cyclical and we are in for the long haul - at least a 10 year plan. Can anyone give us some educated opinion on what you would do in our position? We're not big risk takers or seasoned investors, but we don't want to leave it all on deposit at below the rate of inflation or in a guaranteed 'safe' non-money-making fund. Any suggestions would be very helpful


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## ClubMan (17 Jan 2008)

venividivici said:


> Sold farm - have cash to invest. Getting mixed suggestions from bank and accountant.


You should not expect independent, professional advice from the tied agents in the bank. I would expect better from a good accountant but perhaps you need to talk to a truly independent advisor such as a good multi-agency intermediary or an authorised advisor. Somebody who will do a thorough fact find/financial review, understand your short, medium and long term goals/needs and then identify a range of savings/investment options that might match. For €1M you really should be thinking of getting such all encompassing assistance.


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## z109 (17 Jan 2008)

On what basis do you say that prices are low? On the basis that they are lower than they were last week? Have a bit of patience. Stick it on deposit and do a lot of research.


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## venividivici (17 Jan 2008)

Thanks a million for your speedy replies.  The funny thing is, on the way driving to the accountant this morning, we were heading towards the Deposit/sit-and-wait strategy - God knows how much worse it's going to get.  But then we got talked out of it.  Amateurs that we are. Gut instinct shouldn't be ignored. Thanks again


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## ClubMan (17 Jan 2008)

Timing the market is a mugs game. Don't do it. You should stick the money on deposit at the highest rate possible (see the _Financial Best Buys _forum lists of best deposit rates on offer and see if you can negotiate an even better rate for your large lump sum) until you get independent, professional advice along the lines that I mentioned and the work off that.


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## venividivici (17 Jan 2008)

Once again, thank you so much. I know what you are saying makes perfect sense.  We'll sleep much better tonight! Will ring accountant first thing and cancel investment plans and check out best deposit rate. As they say 'When in doubt, do nothing'. Thanks and good night.


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## ClubMan (17 Jan 2008)

Plans? What specific plans were tentatively agreed to  and who recommended them and why exactly?


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## venividivici (18 Jan 2008)

Our accountant (for last 8 years and my father's before that, with whom we have a great working relationship and who we do trust) gave us a lot of information about various investment funds etc - Irish life, Hibernian, Eagle Star, Canada Life/Great West among others - and when it came down to it, the Balanced Managed Fund from Hibernian looked like it suited our needs - we don't need to have a regular income from the money; we're both 40, so 10-15 years' investment is possible; we don't want high risk, but would like to beat inflation at least. To be honest though, we are very much relying on the expertise/opinion of others which is quite frightening when you are dealing with this kind of money.


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## LDFerguson (18 Jan 2008)

Here's a few random bits of advice: - 


If you eventually decide to go down the road of Managed Funds, make sure that you are fully aware of charges.  €1M is a sizeable amount of money and you should cut a deal.  Whoever you go through, find out how much commission they're earning if you go with their recommendations.  Find out also how much the company (e.g. Hibernian) are deducting in charges.  Haggle on this.
Don't be bamboozled by jargon - if you don't understand every last detail, get the advisor to explain it to you in terms you do understand.  That's what they're there for.
Given the large sum of money and your 10-year+ timeframe I'd say it's very important to diversify - look for exposure to different asset classes, fund managers and regions.  This will protect you from underperformance by one fund manager, asset class or region.
Liam D. Ferguson
www.ferga.com


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## Duke of Marmalade (18 Jan 2008)

A few Harchibald tips.

There are no silver bullets. So whilst 1M is a significant sum don't think there are double digit returns for the picking.

There is no such think as this being a good time to invest. Better than a year ago to be sure, but only time will tell if it is good.

No way of picking between fund managers. Charges should be the only deciding factor in chosing your investment house.

Decide how much you want to "punt" i.e. run a chance of double the deposit returns but also run a chance of losing at least in the short to medium term. Put the rest on best deposit.

Put the punt in a pure equity fund, not a managed fund where effectively 30% is on deposit but paying fund charges.

The one advantage you have with big money is negotiating power. The standard commissions if you invested the whole 1M would be 35K upfront plus 5K per annum, hard to believe for a couple of hours work. No way should you pay the trailer fee, and you should get the upfront commission knocked down to what you think is fair for the advice - which is not rocket science after all.


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## ClubMan (18 Jan 2008)

Another tip - the €1M does not (and probably should not) go into a single product/investment option. Your goal should probably be to build a portfolio that is well diversified by asset class, risk/reward profile, geographic region, timeframe (with a view towards funding your short, medium and long term goals) etc. This is why I suggested getting a comprehensive fact find/financial review done with a truly independent, professional advisor above. At the very least have a read of the www.itsyourmoney.ie site and their summary guide to savings and investments, the _AAM _equivalent guide, the key posts here and browse around the site to see in existing threads what others have asked and been suggested in similar situations.


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## Raskolnikov (18 Jan 2008)

venividivici said:


> Getting mixed suggestions from bank and accountant.


Ignore the bank. The only interest they have is flogging you their own products, which in all likelihood will not be the most competitive way for you to invest your money.


venividivici said:


> Balanced managed fund appears to us to be best.


Possibly, but it's best not to put all your eggs into the one basket. Make sure you read the fine print on any managed fund. A 1.5% entrance and exit charge would leave you nearly €30k down on your lump sum assuming that there was no growth at all.


venividivici said:


> Can anyone give us some educated opinion on what you would do in our position? We're not big risk takers or seasoned investors, but we don't want to leave it all on deposit at below the rate of inflation or in a guaranteed 'safe' non-money-making fund.


The most important things are to spread your risk and to know exactly what sort of financial product you're signing up to. Too often there are people who post on these forums who lost money on investments because they were recommended products that weren't suited to them or because they never read the terms and conditions properly.


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## z109 (18 Jan 2008)

ClubMan said:


> Timing the market is a mugs game. Don't do it. You should stick the money on deposit at the highest rate possible (see the _Financial Best Buys _forum lists of best deposit rates on offer and see if you can negotiate an even better rate for your large lump sum) until you get independent, professional advice along the lines that I mentioned and the work off that.


I agree that its not a good idea to try to time the market, but do you concede that it is a poor idea to enter the market without regard to short-term prospects?


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## hhhhhhhhhh (18 Jan 2008)

venividivici said:


> Balanced managed fund appears to us to be best.



Take your time and talk to a discount broker


Example if you buy a fund from a *non discount broker*
100% of your money wil be invested
1.5% annual management charge

If you buy from a *discount broker
*103% of your money will be invested
1% annual managment charge

Investing a million you could get even better options


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## ClubMan (18 Jan 2008)

yoganmahew said:


> I agree that its not a good idea to try to time the market, but do you concede that it is a poor idea to enter the market without regard to short-term prospects?


Prevailing/short term market fluctuations are irrelevant if you are investing for the long term in my opinion. It's time in the market that matters not timing the market. Long term investing is done with a view towards such volatility smoothing out.


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## oopsbuddy (18 Jan 2008)

Definitely note LDFerguson's comments above about striking a better deal then the norm (in light of the size of the investment), as well as noting all the other sound advice given here, in particular, stay away from teh bank's 'investment advice'. 

Consider paying a fee for advice only from an authorised advisor (contact IFSRA for a list in your area), and if you do then invest through them they will refund you the commission. I would be concerned if I was in your shoes and was told by my accountant that Hibernian's Balanced Managed Fund was the best, not because it's not OK, but to put all that money with one fund manager, with one fund, which has not historically been the best performing amongst managed balanced funds (I know, past performance etc, etc, but it DOES help to see how a fund has performed in the past) ....well, its just not diversifying the risk! Is there a close relationship between the accountant and Hibernian, ie, does he tend to put a lot of his clients' business there? 

Would definitely echo the view to put it on a good deposit rate, and take your time deciding what to do - many fund investors currently licking their wounds after recent market falls would love to have been on deposit recently! Good luck.


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## roland (19 Jan 2008)

hhhhhhhhhh said:


> If you buy from a *discount broker*
> 103% of your money will be invested
> 1% annual managment charge


 
Can you explain that?  If I invest €1m the investment company will invest €1,030,000 i.e. they will give me an extra €30,000??  I presume I can't just withdraw the full €1,030,000 the next day so is there some catch?


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## messyleo (19 Jan 2008)

OP, I would definitely take my time in choosing where to put my money, once you get it into a high interest deposit account asap. A few months won't make any difference over the long term.

Higherstate, According to their website the rate is 4.5%
[broken link removed]

Which is the same as Anglo's rate for a 30 day notice account.

Any info on the tracker bond (if the bond offers 130% of theupside, the charges must be high??)


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## markowitzman (19 Jan 2008)

If you have a 10 year plus time frame you must get the money working for you today and not loosing money in real terms on deposit. This means asset allocation into multiple asset classes with multiple geographic spreads etc etc. Remeber the opportunity cost of keeping your money on deposit "until the market stabilises!!". In your case could be 60k per annum..........10% return versus 3 or less on deposit nett of dirt.
My advice for what it is worth is get investing and stop giving it to the bank at less than inflation so they can invest it for themselves.


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## ClubMan (19 Jan 2008)

Higherstate said:


> I have just recently come across an investment bank called Investec. They are one of the very few that offer you 4.59% CAR which is one of the most competitive in the market for a 30 day notice account.


I[broken link removed] will give you 5.1% _AER _on balances up to €200K. There are other similar rates on offer albeit some with much lower than €1M limits on the balance.


> No management fee.


Why would a deposit account ever have a management fee?


> They also have a tracker bond launching soon that guarantees 80% of your money and offers 130% of the upside. No management fee. The bond will be tracking 3 banking stock AIB, BoI and Anglo. Money has to be invested for 3.5 years. Well worth looking into.


I would be more circumspect. No management fee means little when the 80% capital guarantee is arguably a 20% charge up front and tracker bond pricing and likely/maximum returns are often difficult to figure out due to the arcane and complex way in which such products are structured.


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## roland (20 Jan 2008)

Higherstate said:


> I have just recently come across an investment bank called Investec. They are one of the very few that offer you 4.59% CAR which is one of the most competitive in the market for a 30 day notice account. *No management fee*.


 
I think some wool has been pulled over your eyes.  I doubt it very much that the management of Investec (or any other financial organisation) will provide a product for free.


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## ClubMan (20 Jan 2008)

Do any deposit accounts, even those from investment banks, charge management fees?!


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## z109 (20 Jan 2008)

ClubMan said:


> Do any deposit accounts, even those from investment banks, charge management fees?!


They get to lend out nine times the amount you deposit and charge interest on it.


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## ClubMan (20 Jan 2008)

yoganmahew said:


> They get to lend out nine times the amount you deposit and charge interest on it.


Huh!!? What has that got to do with my question?


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## markowitzman (20 Jan 2008)

it illustrates the point that the bank is the one who is investing were the op to put money on deposit and stresses the fallacy of putting money on deposit with a 10 year time frame.


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## messyleo (20 Jan 2008)

Actually I'm pretty sure the minimum reserve ratio is 2% at the moment (so they can lend out 50 times your deposit)


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## ClubMan (20 Jan 2008)

markowitzman said:


> it illustrates the point that the bank is the one who is investing were the op to put money on deposit and stresses the fallacy of putting money on deposit with a 10 year time frame.



Why was it in response to my question about any bank (including an investment bank) charging a management fee on a deposit account?


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## markowitzman (20 Jan 2008)

This thread is a perfect illustration of investor psychology. When markets are poor everyone is advising deposit,  deposit deposit  whereas  last year all were saying stock market!
discussion of management fees etc are completely off the point in relation to deposit accounts.
the original q was how to *invest 1 MILLION *for 10 years.
The thread  thus far is a perfect illustration  of rabbit in the headlights advice.
To obtain inflation beating returns the op must be invested in a broad mix of asset classes with good allocation, period!!
Rant over!


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## ClubMan (20 Jan 2008)

markowitzman said:


> This thread is a perfect illustration of investor psychology. When markets are poor everyone is advising deposit,  deposit deposit


Fine if that were actually the case. But it's obviously not. Many people have always answered this sort of thread/question with the standard "build a diversified/balanced portfolio" answer regardless of prevailing market conditions or volatility.


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## messyleo (20 Jan 2008)

I think you'll find I was recommending that the OP takes their time in deciding what to do with the money - rushing into something would be the worst thing to do imho. A few months on deposit could be time well spend in this sense.


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## markowitzman (20 Jan 2008)

to illustrate my point further.....
between 1926 and 1987 stocks in USA averaged 9.5% pa.
This time frame corresponds to 744 months and of these months 61% were profitable.
However if you removed the top 50 months (only 6.7% of total months) the return would be...........................*ZERO!
*Stock markets generally spike upwards 15-20% the year after a crisis so it is critical for the op to be fully invested to catch the upturn when it comes
http://www.ricedelman.com/cs/education/article?articleId=208
http://www.ricedelman.com/cs/education/article?articleId=207


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## ClubMan (20 Jan 2008)

markowitzman said:


> to illustrate my point further.....


But your point was moot if it was meant to apply to feedback from _AAM _posters in general on this sort of query...


markowitzman said:


> This thread is a perfect illustration of investor psychology. When markets are poor everyone is advising deposit, deposit deposit whereas last year all were saying stock market!


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## hhhhhhhhhh (20 Jan 2008)

roland said:


> Can you explain that?  If I invest €1m the investment company will invest €1,030,000 i.e. they will give me an extra €30,000??  I presume I can't just withdraw the full €1,030,000 the next day so is there some catch?



Yes your figures are correct.

This is what I got using LABrokers on the Eagle Star Matrix Funds, they do lots of funds.
The reduction in management charge is more valuable if you are investing for a 10 year period.

There is a claw back period for the first 3 years Y1(3%) Y2(2%) Y3(1%).
Check with them it will depend on the policy you want to take out.

The dicsount brokers charge you a fixed fee to set-up the policy and then add the commission onto your policy, thats where you get the 3% from and the reduction in management charge is the commission they would normally get for each year you have the policy.


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## Duke of Marmalade (21 Jan 2008)

- managed fund?

Straight answer to question is No, not a (balanced) managed fund.

About 30% is in government bonds earning just over 4% p.a. Deduct 1% management charge and 30% of your investment is "dead" money earning just 3% p.a. There are much better deposit offerings for that portion.


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## z109 (21 Jan 2008)

ClubMan said:


> Huh!!? What has that got to do with my question?


Sorry, I understood your question to be related to the previous post:



			
				roland said:
			
		

> I think some wool has been pulled over your eyes. I doubt it very much that the management of Investec (or any other financial organisation) will provide a product for free.



So I was providing the information as to how a bank makes it's money on deposit accounts without charging a fee, while also trying to show that any bank that not giving ECB+ on it's deposit accounts is profiteering at your expense.

Your response indicates that this was not the case and you were rhetorically rhapsodising about the benefits of deposit accounts - that they do not charge any fees. Or maybe not. In which case, what was your question about:


			
				Clubman said:
			
		

> Do any deposit accounts, even those from investment banks, charge management fees?!


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## ClubMan (21 Jan 2008)

yoganmahew said:


> Your response indicates that this was not the case and you were rhetorically rhapsodising about the benefits of deposit accounts - that they do not charge any fees. Or maybe not. In which case, what was your question about:


Try reading my posts. In particular note the following questions:


ClubMan said:


> Why would a deposit account ever have a management fee?





ClubMan said:


> Do any deposit accounts, even those from investment banks, charge management fees?!


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## AJM (31 Jan 2008)

you are mad investing €1m in a product designed for mere mortals like myself who have €1000  to invest. 

The hidden fees in these life compnay products are ridiculous ! With €1m Anglo or Davy would be falling overthemselves to look after you! If i had that sort of money to invest I think i would rather see which one of them would give me the best deal !


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## ClubMan (31 Jan 2008)

AJM said:


> you are mad investing €1m in a product designed for mere mortals like myself who have €1000  to invest.


I don't necessarily disagree but...


> The hidden fees in these life compnay products are ridiculous!


... precisely what "hidden" fees are you talking about? In these days of mandatory disclosure it's usually or always the case that all fees and charges must be clearly itemised in the proposal and policy documentation.


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## AJM (31 Jan 2008)

ClubMan said:


> I don't necessarily disagree but...
> 
> ... precisely what "hidden" fees are you talking about? In these days of mandatory disclosure it's usually or always the case that all fees and charges must be clearly itemised in the proposal and policy documentation.


 
costs is probably a better word to use ... when was the last time you saw the charges that the real underlying provider was charging? you dont really think that BOI and Irish life and all the rest are writing options now do  you? 

also these managed fund manage to a benchmark why pay someone to do what the rest of the market is doing ?


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## ClubMan (31 Jan 2008)

AJM said:


> costs is probably a better word to use ... when was the last time you saw the charges that the real underlying provider was charging? you dont really think that BOI and Irish life and all the rest are writing options now do  you?


I still don't know what you're talking about. Sorry.


> also these managed fund manage to a benchmark ...


What precisely do you mean by this as well?


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## AJM (31 Jan 2008)

ClubMan said:


> I still don't know what you're talking about. Sorry.
> 
> What precisely do you mean by this as well?


 

Bank of Ireland etc etc go to an investment bank in the UK who structures the product for them... the investment bank in the UK takes a fee for doing this... also the kind of products they tend to do tend to have lots of potential for these fees


a manged fund aims to produce the same return as other funds i.e its benchmarked against its peers.. ther is no real incentive to outperform the others as to do so e.g the proteted consenus is a concensus fund which means it looks at what all other funds are doing and does the same.


so if you have a fund whose strategy is to do copy what everyone else does how do they justify a management fee


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## Daithi7 (17 Jun 2008)

There is no right and wrong answer to this question but I think you have the basis for a good strategy in the replies to date, i.e.:

1. Don't rush into anything and do your research on anything you may think of buying into
2. Get as a high paying an deposit interest account as possible while doing so
3. Observe the old adage 1/3 of your money in equity, 1/3 in property and 1/3 in cash and you can't go too far wrong
4. Be fees and indirect cost allergic, identify them in any proposal and negotiate them down or walk away
5. Study what Mark***** posted above re equities, that shows to me that even in a long term strategy timing still matters a fair bit. If I were you I'd buy ETFs by sector when you think their finished declining and I'd aim at investing in only 1 every 3 months i.e. a drip feed investment strategy, so that you are not trying to time the market so much (that's for pros)
6. So you might end up with an investment strategy something like this:
330K in high paying deposit account
330k in equities e.g. 110K in iseq 20 ETF, 110 in food company ETF, 110 in renewables ETF, as examples
333K in property: Ireland still sucks at the mo at it was hyperinflated by bubble, so maybe 150K in 2 syndicated funds or else overseas property direct (tho I'd avoid that if I were you cos of hassle)

Lastly, since ye are farmers and general property is so weak close to home at the mo, you could consider investing in something that you know e.g. agri tourism project (neighbours B&B, guesthouse, etc), Forestry, or Environmental reps based investment. I give this advice without knowing what returns any of these may give except that a general good principle when investing is to try to stick to what you know something about and do your research on that.

PM me if you have any other queries, I am a private investor like yourself and have no other agenda. I would be very keen to learn more re agricultural based investment proposals currently.

D


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## John Rambo (17 Jun 2008)

ClubMan said:


> Timing the market is a mugs game. Don't do it.


 
Clubman, when you say that what do you mean? I don't think it's unreasonable to think now is a good time to invest in equities.


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## Marc (17 Jun 2008)

Don't buy a managed fund!

Nearly forty years of academic research has shown that traditional fund managers are unable to outperform the markets by anything more than that which would be
expected by chance. 

Trying to beat the markets through active management or market timing has been described as “a zero sum game, with costs". That is to say the expected result of active management is zero, less the additional charges paid to the fund manager.

The reason that most advisers would recommend a managed fund is that it pays a commission. Commissions are an inducement to sell products and the bigger the commission the bigger the inducement.

Therefore, with that amount to invest, you should only seek fee-based asset allocation advice.

Let me break that down:

Fee-based: Not trying to sell you a product to earn commission but offering you impartial advice. Matching the investment portfolio to your goals and attitude to risk. Not a packaged off the shelf product.

Asset allocation: Empirical studies have shown that around 90% of the long term return of a portfolio can be attributed to asset allocation. That is to say the mix of assets that make up the portfolio ie equities, bonds, cash, property, commodities, hedge funds, venture capital, art, fine wines whatever the list goes on and on.

A typical "balanced" managed fund on sale in Ireland today might have around 60% invested in equities and of this, around half of the funds might have about 20% invested in Irish Equities.

Yet the Irish market makes up less than 1% of the wider European market. Why so much invested in Irish companies?

Ireland is in the Euro (last time I checked) so your approach to investment should be Euro focused - not Ireland focused.

Let me leave you with a final thought from a Nobel Laureate in Economics:

“The idea that any single individual without extra information or extra market power can beat the market is extraordinarily unlikely. Yet the market is full of people who think they can do it and full of other people who believe them….Why do people
believe they can do the impossible? And why do other people believe them?

Daniel H Kahnemann,


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## John Rambo (17 Jun 2008)

Wise words Marc. The OP should look at speaking to someone for a fixed fee rather than a percentage. With this size of lump sum, professional advice is a must. If I had this sort of cash lying around today I would consider spreading it across shares in the Irish banks (say 20%), forestry (one of those coillte products-say 20%), an apartment in Shanghai (say 20%), cash deposits or government bonds (20%) and some kind of renewable energy project (Airtricity or windfarms-20%). Is that a mad strategy? I don't see the advantage of the managed funds with their charges. The only reason so many of us enter them is because we're forced to through pensions and the tax relief makes it a no brainer.


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## Daithi7 (18 Jun 2008)

John,

Re: managed funds - why does tax relief make it a no brainer???

All you get is tax relief on entry and rounded up capital gains (if any) when in a pension fund, you still get taxed (on 75%) when you take your money out. Ok so the rounding up of capital gains without tax in the interim is valuable, (can anyone work out how valuable versus a taxed scenario here??), but for lack of access to your cash until your 60+, for incurring significant indirect costs, that despite what they say are still not nearly transparent enuf, for having to admin the fecking thing and for the general pig of an investment that most pensions are- they ain't worth it IMHO. As Mark says you are paying overpaid prima donnas to do the impossible which historically they never pull off over the longer term.

The only two instances I can see when a pension is worth going into is for a self employed, self administered pension close enough to retirement where you can use it legitimately to take a lump sum tax free out of your business (this all assumes trading conditions allow, etc), or if your employer is paying a significant contribution into one with yours, otherwise they're for dummies IMHO. And the government only back them cos of vested interests. rant over - feel free to prove me wrong...if you can!?


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## Daithi7 (18 Jun 2008)

check this out rescribed reading if you want to save yourself a lot of pain and heartache investing in funds and by implication pension funds.


*p.s. thanks leghorn*


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## z103 (18 Jun 2008)

^ try www.tinyurl.com


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## BallinaTipp (27 Jun 2008)

Just pay an independent advisor a fee to properly ascertain you objectives, your time line, your tolerance for risk, requirement for income etc......

Wahtever product/products you purchase at the end of the day should be driven by the advice and your careful consideration that it is approprate for what you are trying to achieve.

Being recommended products without an advisor knowing your total circumstances and requirements is a mugs game.  Control you own destiny and don't live to regret not getting correct advice.


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