# Lump Sum Investment Advice



## peepee (15 Nov 2016)

(Please don't post if your advice is to contact a financial adviser)

Im early 40's, two young children, I have 750k, homeowner, no debts, no mortgage, BUT no pension.

We are both part time self employed and happy with that, very modest income, about 30k total.

We live a simple life and are risk averse.

Best investment option with this scenario????


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## Sarenco (15 Nov 2016)

Interesting scenario.

There is obviously no "right" answer to your question but I think if I was in your shoes, I would do something along the following lines:

I would use ~€200k to buy a rental property;
I would invest ~€300k in a diversified portfolio of global equity investment trusts;
I would invest ~€200k in 5-year State Savings certificates; and
I would put the remaining ~€50k in an instant access savings account with Rabo.


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## cremeegg (15 Nov 2016)

Do I understand correctly that you have €750k in the bank ?

I would largely agree with Sarenco, with perhaps a bit more into rental property, a bit less in state savings.

However, can you get a tax benefit from putting some money into a pension every year.


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## peepee (15 Nov 2016)

Yes, at the moment its in the bank. Combination of some previous good luck in shares from a company I used to work for and an inheritance.
Unless I am in the higher tax bracket I can see no benefit to a private PRSA; too costly.
I guess what I am looking for is to have enough for my wife and I to live fairly simply through to retirement and on. 
I'm not interested in leaving my children a lot of money. They will get a good education and the family home ultimately.
Rgds global equity investment trusts, where do I start when researching these?


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## Fella (15 Nov 2016)

Sarenco why would you go for a rental property? Seems like a lot of hassle and you've argued before here the yield is not worth it , would 200k into a REIT not be better ? 
I'd avoid the investment property myself, seems like a second job for minimum gain.


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## Marc (15 Nov 2016)

.


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## jim (15 Nov 2016)

Marc said:


> I'm speaking at a conference of over 50 Financial Planner professionals on Thursday with a representative from the Central Bank and the Financial Ombudsman's office in attendance.
> 
> One of the questions I will be putting to the floor is this; why is it that the level of trust is so low around Financial Advice in Ireland that someone who clearly needs Independent Financial Advice has absolutely no interest in obtaining it and prefers to seek out unregulated and uninsured, often anonymous opinions in preference to written, professional, regulated and insured advice?


Not a trust issue but rather a Cost issue, i would hazard.

Your question should be " why is the cost of obtaining independant financial advice so prohibitivly high resulting in individuals seeking out free advice on forums?"


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## Marc (15 Nov 2016)

Jim that's a very good point.
Research from Vanguard estimates that the value a competent (I know) financial planner adds is about 3%pa compared to an average DIY investor.
So, under those conditions for most people on average, not engaging an adviser is a substantial opportunity cost.

Google: Vanguard Advisor Alpha


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## Fella (15 Nov 2016)

Marc said:


> I'm speaking at a conference of over 50 Financial Planner professionals on Thursday with a representative from the Central Bank and the Financial Ombudsman's office in attendance.
> 
> One of the questions I will be putting to the floor is this; why is it that the level of trust is so low around Financial Advice in Ireland that someone who clearly needs Independent Financial Advice has absolutely no interest in obtaining it and prefers to seek out unregulated and uninsured, often anonymous opinions in preference to written, professional, regulated and insured advice?



For me, it's the country in general there are very few professions that act in the best interest of a client, even a doctor is probably getting a back hander for prescribing certain drugs. Ultimately is there anyone that cares more about my money than me ? Probably not. 
Like every profession you have great people but a few bad eggs , risking my net wealth with the chance I get a bad egg is a big risk, I'd rather try myself or ask here. 
When you post on a forum and someone gives you bad advice it's likely someone else will point that out . If I'm sitting in an advisors office there is no one to point out that to me. 
There is also the cost element , if I can do it myself I save on these ongoing or one off costs.


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## peepee (15 Nov 2016)

Marc said:


> One of the questions I will be putting to the floor is this; why is it that the level of trust is so low around Financial Advice in Ireland that someone who clearly needs Independent Financial Advice has absolutely no interest in obtaining it and prefers to seek out unregulated and uninsured, often anonymous opinions in preference to written, professional, regulated and insured advice?



Insured? Please explain how a 'professional's' financial advice to me is insured?


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## Marc (15 Nov 2016)

Financial Advisers are required by the Central Bank of Ireland to hold professional indemnity insurance so that you can make a claim against an insurance policy if the advice you receive is incorrect. [broken link removed]

If you receive incorrect advice on the internet, you have absolutely no come back at all.


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## peepee (15 Nov 2016)

Marc said:


> I'm speaking at a conference of over 50 Financial Planner professionals on Thursday with a representative from the Central Bank and the Financial Ombudsman's office in attendance.
> One of the questions I will be putting to the floor is this; why is it that the level of trust is so low around Financial Advice in Ireland that someone who clearly needs Independent Financial Advice has absolutely no interest in obtaining it and prefers to seek out unregulated and uninsured, often anonymous opinions in preference to written, professional, regulated and insured advice?



My money is my responsibility. It is up to me to educate myself about all the options available. By posting the above your are assuming that I am not going to go to anyone else and seek advice. You are also assuming that I will take any 'bad' advice I receive and not have the sense to do my own research. I believe if I walk into a financial advisers office with a clear idea of what I want and armed with knowledge I have from forums/friends etc I will make a good and informed decision. How is that a bad thing?



Marc said:


> Financial Advisers are required by the Central Bank of Ireland to hold professional indemnity insurance so that you can make a claim against an insurance policy if the advice you receive is incorrect.
> If you receive incorrect advice on the internet, you have absolutely no come back at all.



Is this a joke? Good luck trying to prove anything other than the absolute worst advice is negligent.
By the way the first line of my thread is pretty clear about what advice I was soliciting.
You have hijacked my thread and made a base assumption re the advice here and my ability to make an informed decision.
How about you actually give a positive input and comment on the advice given here instead. You have actually turned me off
walking into a professional financial advisers office.


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## johnny1234 (15 Nov 2016)

Peepee, at least you are awake and won't be sold a pup. Anyone thay classes themselves in this country are in the main only interested in their own pockets. That's from the biggest institutions to the smallest This post will be deleted if not edited to remove bad language holes out there.

If I put my story up here, all proven, people would run a mile, literally. I'm sorry Mark, you might mean well, but there is no level of honesty in this country. This comment is of no reflection on you. 

The only alternative I can see, is by going to a Stock Broking Co, get a contact and tease it out with them. This is the only sector that is heavily compliant. The person you choose will in many cases treat the money as if its their own. Full compliance should be the order of the day.


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## Gordon Gekko (15 Nov 2016)

I have a major issue with some of the stuff being posted here.

There are some excellent firms and advisors out there.


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## johnny1234 (16 Nov 2016)

Gordon, If i put up my experiences with the biggest you would be shocked. I'm not embarrassed by this and should not me either. But believe me you will be shocked. PM me if you wish, then take a seat before you fall over.

I do agree with you, there are some good advisors out there now, but it cost me a seven figure sum and a very hard lesson. Central Bank know all about it, from the top of these companies to the bottom, but do zilch. I'm beyond tears at this stage, just want my pound of flesh.


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## sunnydonkey (16 Nov 2016)

peepee said:


> (Please don't post if your advice is to contact a financial adviser)
> 
> Im early 40's, two young children, I have 750k, homeowner, no debts, no mortgage, BUT no pension.
> 
> ...



I would keep it simple;

100k in the bank for rainy day/emergencies
650k in 10 divident paying large blue chips.

Stay away from rental property. Its hassle, illiquid and not flexible enough to minimise your CGT.


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## PGF2016 (16 Nov 2016)

sunnydonkey said:


> I would keep it simple;
> 
> 100k in the bank for rainy day/emergencies
> 650k in 10 divident paying large blue chips.
> ...


100k is far too much for a rainy day in my opinion.


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## sunnydonkey (16 Nov 2016)

PGF2016 said:


> 100k is far too much for a rainy day in my opinion.



Agreed, but given that the bluechips will rise AND FALL with the market, a good cash sum will keep the temptation to panic/sell at bay at down times.


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## cremeegg (16 Nov 2016)

Marc said:


> I'm speaking at a conference of over 50 Financial Planner professionals on Thursday with a representative from the Central Bank and the Financial Ombudsman's office in attendance.
> 
> One of the questions I will be putting to the floor is this; why is it that the level of trust is so low around Financial Advice in Ireland that someone who clearly needs Independent Financial Advice has absolutely no interest in obtaining it and prefers to seek out unregulated and uninsured, often anonymous opinions in preference to written, professional, regulated and insured advice?



You have hijacked this thread, but you do raise an interesting point. 

I wonder do you realise that many readers will find your tone in raising the point offensive.

Perhaps the simplest response to your question is that the regulatory authorities have not ruthlessly rooted out, misleading practices or even dishonesty in financial planning or financial services more generally.


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## johnny1234 (16 Nov 2016)

Cremegg, now that's a post with purpose. The advisers in this country are only interested in one thing -- what's in it for them. And in the main, the bigger the company the more they'll slice and dice an investor.


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## elacsaplau (16 Nov 2016)

cremeegg said:


> You have hijacked this thread........I wonder do you realise that many readers will find your tone in raising the point offensive.



I fully agree and believe that the offending post was arrogant, inappropriate and hilariously ironic. The spirit of Askaboutmoney is that members of the public can raise questions and seek information and then, those concerned, can decide how best to proceed. Everyone knows that this is an internet forum and consequently has specific advantages and dis-advantages.

In fairness to the OP, I suggest future posts to this thread should be addressed to the substantive issue and that if people wish to develop the other "theme" - they do so in a separate thread.


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## Steven Barrett (16 Nov 2016)

After reading through this thread, I'm a bit afraid to give my tuppence worth on the OP 

It's impossible to give good advice on what investment strategies you should employ based on 'I've €750k and am risk averse". Peepee, what is your goal? What do you want to spend the money on and when? Money is only ever good if you have something to spend it on. You will never look back at life and be talk about the money you had saving in a bank account but you will always talk to your wife and kids about the great experiences you had throughout your life.

So my advice is talk to your wife about what you would like to do over the next number of years and then figure out what you need your money to do for you so you can make it happen. 



Steven 
www.bluewaterfp.ie


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## KOW (16 Nov 2016)

SBarrett said:


> After reading through this thread, I'm a bit afraid to give my tuppence worth on the OP
> 
> It's impossible to give good advice on what investment strategies you should employ based on 'I've €750k and am risk averse". Peepee, what is your goal? What do you want to spend the money on and when? Money is only ever good if you have something to spend it on. You will never look back at life and be talk about the money you had saving in a bank account but you will always talk to your wife and kids about the great experiences you had throughout your life.
> 
> ...



Wise man. Honest comment.


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## Sarenco (16 Nov 2016)

Fella said:


> Sarenco why would you go for a rental property? Seems like a lot of hassle and you've argued before here the yield is not worth it , would 200k into a REIT not be better ?
> I'd avoid the investment property myself, seems like a second job for minimum gain.



Hi Fella

I've certainly made the argument in the past that the yield currently achievable on a residential rental property is invariably insufficient to justify a leveraged investment at current BTL rates, having regard for our tax code.

You are, of course, absolutely right that a basket of REITs could be substituted for the rental property in my suggested allocation and an investor would achieve a far greater degree of diversification with such a holding.

The FTSE EPRA/NAREIT Global REIT Index currently has a distribution yield of 3.87% and I'm pretty confident that I could purchase an investment property in an area with high rental demand at the moment for around €200k that would give me a comparable net yield of around 6%.

I would then ask myself whether the additional hassle and risks associated with such an illiquid, concentrated investment is worth an extra ~2% in projected yield?  Well it might be if the rental property only constituted a portion of my investment portfolio, if the balance of my portfolio was highly liquid and well-diversified and I had the capacity to commit the time that inevitably comes with a direct property holding (I'm assuming that is the case given that the OP told us he only works part-time).

I did try to emphasise in my post that there is no "right" answer to the question asked but I do think it's critical to look at the portfolio as a whole when trying to formulate an allocation that might address the OP's stated financial goals.


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## Sarenco (16 Nov 2016)

SBarrett said:


> Peepee, what is your goal? What do you want to spend the money on and when?



To be fair Steven, the OP has already told us his financial goals:-



peepee said:


> I guess what I am looking for is to have enough for my wife and I to live fairly simply through to retirement and on.
> I'm not interested in leaving my children a lot of money. They will get a good education and the family home ultimately.


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## johnny1234 (16 Nov 2016)

This is now a post that is well set out with some strong views from qualified advisers. There is no single approach that can be deemed as the one that I got.

I personally am not allowed state my story as Brendan will simply erase it. I did exactly what the OP is seeking opinion on. And I went to the biggest in the Irish market and Yes, I have been to Hell. I'm not back yet.  The Statutory Body made a determination as did the High Court. But it is not very pleasurable for a family to be taken to the cleaners and watching Financial Institutions and staff break their hearts laughing. All I can say to the OP is 'be careful'. The biggest is not always the best.


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## Sarenco (16 Nov 2016)

peepee said:


> Rgds global equity investment trusts, where do I start when researching these?



The industry association website (www.theaic.co.uk) is a super resource.

I specifically mentioned investment trusts (as opposed to other equity investment vehicles) because I think they give the best balance between achieving an appropriate degree of diversification and (relative) tax simplicity. Something like Foreign & Colonial Investment Trust plc is a good core holding - well diversified, relatively cheap, hands-off investment vehicle that is taxed in the same way as individual stocks (income tax on dividends, CGT on capital gains). 

I think the tax treatment is particularly relevant in your circumstances (where your income is modest relative to your investable assets).


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## cremeegg (16 Nov 2016)

Sarenco said:


> The industry association website (www.theaic.co.uk) is a super resource.
> 
> I specifically mentioned investment trusts (as opposed to other equity investment vehicles) because I think they give the best balance between achieving an appropriate degree of diversification and (relative) tax simplicity. Something like Foreign & Colonial Investment Trust plc is a good core holding - well diversified, relatively cheap, hands-off investment vehicle that is taxed in the same way as individual stocks (income tax on dividends, CGT on capital gains).
> 
> I think the tax treatment is particularly relevant in your circumstances (where your income is modest relative to your investable assets).



Hi Sarenco, is an investment like this not likely to fare worse than just buying shares. Isn't it the case that most investment managers underperform the index, and in addition do the charges not reduce the return.

Thanks for any response.


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## Sarenco (16 Nov 2016)

cremeegg said:


> Hi Sarenco, is an investment like this not likely to fare worse than just buying shares. Isn't it the case that most investment managers underperform the index, and in addition do the charges not reduce the return.



Very briefly:-

1.  The probability that a widely diversified portfolio of equities (such as a portfolio held through an investment trust) will achieve acceptable returns is far higher than the probability that a highly concentrated portfolio of individual shares will achieve acceptable returns;

2.  I'm not particularly advocating active management but I wouldn't be comfortable investing in a vehicle with a fixed 41% exit tax if I expected to have a much lower marginal tax rate.  Investment costs and taxes reduce returns.


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## Steven Barrett (16 Nov 2016)

Sarenco said:


> To be fair Steven, the OP has already told us his financial goals:-



That's still pretty vague Sarenco. If Peepee is in his early 40's, is there nothing he will be spending money on between now and retirement? Is he going to wait out the decades until retirement? They are already part time self employed. Maybe they like doing what they are currently doing and will tip along doing that as long as they are enjoying it. He mentions the kids will get a good education. Does that mean private education, even boarding school? If so, how much are school fees? And how many kids? Lots and lots of questions. 

Steven
www.bluewaterfp.ie


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## irish_investr (20 Nov 2016)

Hi,
This kind of question "what should I do with €x" always draws responses like "put it in this, put it in that". The suggested investments all have merits and risks, but I think a key thing to consider is HOW. Right now, the sum is entirely risk-free, and "Capital preservation" is certain. YES, a diversified portfolio will generate positive returns OVER TIME, but any transaction opens up the possibility of instant loss. Its a fairly stressful situation, even if its a luxury problem  In relation to current income level, the sum involved is major, and that probably reflects the potential for stress in the situation.
Having decided on an appropriate asset allocation or portfolio (thats the easy part) you will probably be well served by incremental investing. Every month move a small portion from the bank account to the investment account. Considering the sum involved, I would say this is a multi-year project (if it was me, I'd say ten years). You (OP) seem to be well clued up on "professionals" - of course, they want you to be invested for as much as possible, for as long as possible. All kinds of charts and statistics will prove them right "over time", but the small print clearly states "past results are no guarantee...". nuff said..


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## johnny1234 (20 Nov 2016)

And coupled with all this are the costs which have to be given full consideration. Those been the fees for buying the equities plus Tax if applicable plus a Management Fee if and where applicable. Much of all this is down to the right broker, who can only offer suggestions and guidance. Nobody can predict the future. And to take personal investment advice from a Web page is pure madness. You must also check the credibility of any company offering services. Personally, I wouldn't touch an Irish owned investment organisation no matter what they tell you.


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## peepee (20 Nov 2016)

SBarrett said:


> they like doing what they are currently doing and will tip along doing that as long as they are enjoying it. He mentions the kids will get a good education. Does that mean private education, even boarding school? If so, how much are school fees? And how many kids? Lots and lots of questions.


Yes we will continue to work part time. If I was planning another child I would have included this in the original post. Spending lots of time with the kids on weekends away (can be done cheaply with a camper van), 1-2 hols abroad a year. There are lots of excellent schools where I am that are not private. I will not pay 3-5k a year for six years for an education I dont think is any better. However in a system that rewards rote learning and focused/exam prediction preparation I would consider moving the children to a Bruce college type environment for the 2 years into Leaving if they wanted it.

Thanks for all the replies so far, keep them coming. I will investigate the suggestions and post again in the new year.


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