# 23YO learning how to put money to work



## Eight Itou (14 Feb 2017)

Hello everyone,

I'm not entirely sure if this would be the right subforum for my post as I have a lot of questions for general finances but also some more specific questions about Investments so please let me know if I need to divide it up or anything.

I've been reading up on this forum; learned a lot over the past few weeks, but I feel like every time I learn something new; 3 more questions pop up.

Let me get started on my financial situation, and I hope someone somewhere will spot something off.

23 Years Old, Single, Employed for 2 years, 5 months
€37,100 annual salary
€2,400~ monthly take home
No loans
No credit card
Defined Contribution Pension with employer; matched at 5.0%
Car insurance premium at €1,400 annual + motor tax of €199 + monthly fuel costs of around €40-80
Renting at €450 per month
Bills at around €50-150 every two months
I have no health/life insurance, and no children.

€10-20k usually in a current account, occassionally transferring to a Credit Union which now has €25k

I idiotically thought I could just set my money in the Credit Union and forget it; gain nice interest but for the two years I've spent with the Credit Union, I got just about €60. I am generally a saver, occasionally splurging on things like a PC I personally built but I don't really have a solid goal to save for.

However, seeing myself get nothing from interest annoyed me and *I want to put the money I have to work and grow it* so it was time to study up. At first, I looked at the Deposits forum and the KBC Regular Saver which looked good at first so I inquired about it; and I was discouraged from it because it wouldn't be suitable for what I really wanted- high growth. It would take more than 2 years to really make the most out of the €40,000 @ 3.00% from the savings and it was variable.

The next step then, was looking at Investments. Being completely new to the game, I'd been reading through some literature and I think a diversified index may be exactly what I'm looking for but I'm not sure about specifics yet; and maybe things work differently in Ireland.

So a few questions:
- Given my current situation and just a desire for growth; can you make any suggestions that I may have missed? I feel like I may currently have tunnel vision on Investments.

- From what I've read; it looks like a passive index fund or ETF may be for me for the low overall costs of maintaining it, if done through lump sums.

I'm not sure if I'd really go for lump sum rather than monthly payments though. It seems like monthly payments would be easier psychologically; and wanting a set-and-forget setup means I could keep putting money in every month regardless of fluctuations, fully accepting of the fact that I'd never be able to perfectly time the market

- Is investment into an index / ETF even the right path at all? I have considered buying a house; and my parents have agreed that if I go for buying a house, that they would support me and contribute half of the value. The houses we're interested in are in the €200-280k range and I have gotten mortgage approval of up to €133k.

I'm just not sure if I should try growing my money through investments first or if I should take the plunge with a mortgage and hope the house's value goes up. The big difference I can see between the two is that a mortgage puts me in debt but this may be too simplistic considering my parents' support may offset a lot of downsides.

--

Sorry if my post is a bit rambling and my goals not very clear. I really just want to gain as much money as possible over time while not letting the pursuit of it eat up all of my sanity.


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## PGF2016 (14 Feb 2017)

Most (not all) would say that you need to put money away for at least 15 years if you're investing. If you're saving for a mortgage you should stick to the bank providing the highest rate for your savings. 

You're correct in that your goals are not very clear but it sounds like buying a house will be a short to medium term goal. In that case stick to the banks.


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## Eight Itou (14 Feb 2017)

PGF2016 said:


> Most (not all) would say that you need to put money away for at least 15 years if you're investing. If you're saving for a mortgage you should stick to the bank providing the highest rate for your savings.



Mortgage for a house wasn't really definite; just a thought. If I were to go this route, I'd be looking at the purchase as an investment and renting out spare room(s); hoping I'll come out on top eventually.

Because of this, I'm okay with the idea of putting away money in an index fund for 15 years when the alternative is borrowing money for a house that probably carries the same risk for a similar amount of time. I'm not exactly settled where I am either, so I'd have to hope that the house could pay itself, the mortgage and more through renting / sale if I need to move.

Furthermore, maybe I'm being way too optimistic but if the end goal turns out to be a house; then maybe invest into funds now and eventually buy a home for cash, no mortgage to worry about.


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## Brendan Burgess (14 Feb 2017)

Hi Eight

Well done for thinking about it at such an early stage. 

Your first priority should be to be in a position to buy a house on your own.  While parental help is welcome, it would be better not to rely on it. 

So stay flexible. Don't put your money anywhere with high initial charges or with exit penalties. 




Eight Itou said:


> - From what I've read; it looks like a passive index fund or ETF may be for me for the low overall costs of maintaining it, if done through lump sums.



Spot on.



PGF2016 said:


> Most (not all) would say that you need to put money away for at least 15 years if you're investing.



Certainly not all.  There is absolutely no reason why you would not invest your money in a 100% equity fund when your future plans are so uncertain.  Let's say you are ready to buy a house after 5 years.  Your fund could be worth more or less than you invest, but over 5 years, it is more likely to have increased in value than to have reduced in value. 

If your plans harden and you know you will be buying a house within the next year or two, then cash the investment as you won't want a sudden market crash to reduce your deposit. 

The best place to invest your money is low cost American domiciled ETFs.   Don't invest in anything Irish. The costs are too high, and the tax treatment is not favourable. 

Brendan


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## Sarenco (14 Feb 2017)

Brendan Burgess said:


> Let's say you are ready to buy a house after 5 years.  Your fund could be worth more or less than you invest, but over 5 years, it is more likely to have increased in value than to have reduced in value.



Well by that logic why wouldn't you simply stick with a regular savings deposit account?  That's guaranteed to have increased in value over five years, at least in nominal terms.

Is it more likely than not that VT (or whatever equity ETF you have in mind) will beat a 3% regular saver, after taxes and costs, over 5 years?  Yes, it's probably just about more likely than not if history is any guide.  However, it's also very possible that the ETF could lose 50%+ of its value over that short timeframe.  That's a pretty big gamble.



Brendan Burgess said:


> If your plans harden and you know you will be buying a house within the next year or two, then cash the investment as you won't want a sudden market crash to reduce your deposit



And what happens if the stock market crash happens just before the OPs decides to cash out his investment?  It's impossible to reliably time stock market crashes.

I've always thought that Warren Buffet's first (and second) rule of investing made a lot of sense...


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## Brendan Burgess (15 Feb 2017)

Sarenco said:


> Is it more likely than not that VT (or whatever equity ETF you have in mind) will beat a 3% regular saver,



I wasn't aware that he could get 1.5% net (3% gross) on €35k?  

I would probably still invest in the stock market. 



Sarenco said:


> And what happens if the stock market crash happens just before the OPs decides to cash out his investment? It's impossible to reliably time stock market crashes.



He should cash his investment around two years before he is ready to buy his house. If the stockmarket crashes two years beforehand, then leave it and wait for it to recover. 

Brendan


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## Eight Itou (15 Feb 2017)

Brendan Burgess said:


> There is absolutely no reason why you would not invest your money in a 100% equity fund when your future plans are so uncertain.  Let's say you are ready to buy a house after 5 years.  Your fund could be worth more or less than you invest, but over 5 years, it is more likely to have increased in value than to have reduced in value.
> 
> If your plans harden and you know you will be buying a house within the next year or two, then cash the investment as you won't want a sudden market crash to reduce your deposit.
> 
> ...



Good to hear I'm at least somewhat on the right track. I'm now just studying up on what broker and what indices in particular I want; and how to compare them.

Maybe this requires a new post in the Investment forum, but can you suggest any posts in particular I should look at over there to get me started?

I just read this thread and ouch.. big lesson to learn from it, at least.
http://www.askaboutmoney.com/thread...bear-market-crash-either-way-i-bailed.195818/



Sarenco said:


> And what happens if the stock market crash happens just before the OPs decides to cash out his investment?  It's impossible to reliably time stock market crashes.



Very valid concern.. however, I just can't see myself needing to cash out hard soon. I feel confident about being able to outlast dips.. or maybe even cliffs as I don't have any debts or foreseeable commitments.

I plan on putting in up to half of my cash at any given time but maybe someone has advice on this too. How would you guys divvy up the money if you were in my shoes?

Also, should I choose to see a qualified financial advisor, I would present the same information and questions from this thread but can you think of anything to add to make the most out of them? I may be missing key posts about them.


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## Lamps (18 Mar 2017)

Eight Itou said:


> Good to hear I'm at least somewhat on the right track. I'm now just studying up on what broker and what indices in particular I want; and how to compare them.
> 
> Maybe this requires a new post in the Investment forum, but can you suggest any posts in particular I should look at over there to get me started?
> 
> ...




What did you end up doing in the end and why? I'm in a similar position and trying to figure out my options. Most likely will invest a few quid in the VANGUARD S&P 500 ETF through DeGiro.


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## Bronte (20 Mar 2017)

- when you find the high growth with no risks please come back and tell us
- your mortgage range is wide (200 - 280)
- who is 'we'?


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## Eight Itou (11 May 2017)

Lamps said:


> What did you end up doing in the end and why? I'm in a similar position and trying to figure out my options. Most likely will invest a few quid in the VANGUARD S&P 500 ETF through DeGiro.


Yeah, Degiro was the broker I decided on using and I have since put money towards the below ETFs:
US4642872265 iShares Core U.S. Aggregate Bond (50%)
US8085241029 Schwab U.S. Broad Market (20%)
US8085248057 Schwab International Equity (20%)
US46434G1031 iShares Core MSCI Emerging Markets (10%)

I just wanted to try a 50/50 bonds/stocks to get me started and I plan on readjusting depending on how the next few years go.

My breakdown between the bottom three stock ETFs is just because I wanted more exposure to US and EU than Emerging Markets.

As of now, the first two are losers and the bottom two are winners but it's only been a few months.



Bronte said:


> - when you find the high growth with no risks please come back and tell us



I don't think there is such a thing and it sounds too good to be true. The closest might be a savings account with a high interest rate.

I'm only just getting started with this and already, I'm down €100 on a starting portfolio of €10,000. The most important thing that keeps popping out at me in reading about investment is to keep holding on over time; and not panic over market movements because they will fluctuate and there's nothing you can do about it. Can't control the market, but you can control your own behaviour. You won't lose money unless you keep buying high and selling low so just be patient and disciplined.



Bronte said:


> - who is 'we'?


If this is referring to what I think you're referring to:
"Is investment into an index / ETF even the right path at all? I have considered buying a house; and my parents have agreed that if I go for buying a house, that they would support me and contribute half of the value. The houses we're interested in.."


Critique on my decisions would be appreciated.

I'm not entirely sure if my selection of ETFs is sound- particularly if I'm over-diversifying. I'm not at all an expert in any of this, just really trying to find my way around it.


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