Advice welcome

Dan_The_Man

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Age: 45
Spouse’s/Partner's age: 39

Annual gross income from employment or profession: 140K
Annual gross income of spouse: 50K (part-time)

Type of employment: e.g. private sector employment.

Mortgaged paid, no other borrowings, no other investment property.

Savings and investments: 100K in An post 10yr plus 300K in various funds, plus 50K rainy day cash.

Do you have a pension scheme? Yes DC AVC Maxed I also have a DB pension.

Do you own any investment or other property? No

Ages of children: one young child in primary school.

Life insurance: yes

Advice needed on

1. 300K (net after tax) currently in an assortment of funds that will mature over the next 6months to 1yr ..I looking for advice on alternative to bank deposits.
I don't feel I need to take on a lot of risk , the goal is to fight inflation.

2. I am open to advice on regular savings also as outgoings are small and I have a decent surplus most months.
 
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Sarenco

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5,754
Would you consider a rental property?

€300k would buy a decent 2-bed apartment in most parts of Dublin, as things stand, that could reasonably be expected to achieve a rent of around €15k pa, net of costs.

A rental property certainly isn't a risk-free (or hassle-free) option but it should provide you with a good inflation hedge.

If that doesn't appeal, you could do far worse than invest the €300k in accumulating shares of a world equity tracker (something like iShares MSCI World UCITS ETF). The tax treatment is a bit of a pain but otherwise it should prove to be a good long-term, hands-off, investment.

I also like UK investment trusts but you need to be mindful of possible UK inheritance tax at this level of investment.

Incidentally, I think you should maintain a high allocation to equities in your DC pension for the time being - you already have plenty of cash and fixed-income investments for somebody at your age and stage in life.

Hope that helps.
 
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Dan_The_Man

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Would you consider a rental property?

€300k would buy a decent 2-bed apartment in most parts of Dublin, as things stand, that could reasonably be expected to achieve a rent of around €15k pa, net of costs.

A rental property certainly isn't a risk-free (or hassle-free) option but it should provide you with a good inflation hedge.

If that doesn't appeal, you could do far worse than invest the €300k in accumulating shares of a world equity tracker (something like iShares MSCI World UCITS ETF). The tax treatment is a bit of a pain but otherwise it should prove to be a good long-term, hands-off, nvestment.

I also like investment trusts but you need to be careful of triggering any UK inheritance tax issues at this level of investment.

Incidentally, I think you should maintain a high allocation to equities in your pension for the time being - you already have plenty of cash and fixed-income investments for somebody at your stage in life.

Hope that helps.

Thanks ...it certainly does help

Yes I would consider investment property - threads on here and else where seem to suggest it is more hassle than its worth, but I guess its horses for courses and maybe bad news travels quicker.

iShares MSCI World UCITS ETF - I'll check it out , but I take its subject to the rise and fall of equity markets

Pension - with Irish life ....its 60% Equites, 30% Bonds and 10% cash
 

Sarenco

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Messages
5,754
[/QUOTE]
Pension - with Irish life ....its 60% Equites, 30% Bonds and 10% cash
[/QU

That's really very cautious for your age (and I am often accused of being overly conservative around here).

I very much take your point that you are in a strong financial position so don't need to take on too much investment risk. But unexpected inflation is also a risk to bear in mind - cash and fixed-income got killed in the late 70s/early 80s, in real terms.

It's really all about trying to achieve a reasonable balance accross (and, less importantly, within) the different core asset classes.

Maybe aim to have something like 1/3 of your total net worth in property (including your PPR), 1/3 in business (equities, including equity funds in your pension) and 1/3 in reserve (cash, bonds and other fixed-income investments) by your normal retirement age.

It's very important to think of your financial position as a whole and not to compartmentalise it into different accounts or buckets.
 

Dan_The_Man

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Thanks ...it certainly does help

Yes I would consider investment property - threads on here and else where seem to suggest it is more hassle than its worth, but I guess its horses for courses and maybe bad news travels quicker.

iShares MSCI World UCITS ETF - I'll check it out , but I take its subject to the rise and fall of equity markets

How about 50% in property, borrow the rest or do BTL rates make it a bad proposition?
50% in the ETF.

Pension - with Irish life ....its 60% Equites, 30% Bonds and 10% cash
 

Dan_The_Man

Registered User
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14
That's really very cautious for your age (and I am often accused of being overly conservative around here).

I very much take your point that you are in a strong financial position so don't need to take on too much investment risk. But unexpected inflation is also a risk to bear in mind - cash and fixed-income got killed in the late 70s/early 80s, in real terms.

It's really all about trying to achieve a reasonable balance accross (and, less importantly, within) the different core asset classes.

Maybe aim to have something like 1/3 of your total net worth in property (including your PPR), 1/3 in business (equities, including equity funds in your pension) and 1/3 in reserve (cash, bonds and other fixed-income investments) by your normal retirement age.

It's very important to think of your financial position as a whole and not to compartmentalise it into different accounts or buckets.
Thanks for that

in terms of iShares MSCI World UCITS ETF
Where's the the best (safest, low cost) place to purchase?

also,

was thinking in terms of your 2 suggestions and a view to achieving a balance as you say over time, perhaps:

150K into iShares MSCI World UCITS ETF
and may 150K in an investment property and borrow the rest? (or does BTL borrowing costs make sense)
 

Sarenco

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5,754
That's obviously an option but BTL rates are pretty horrendous at the moment. There's obviously no point borrowing money at, say, 4% while simultaneously holding bonds paying, say, 1%.

Equally, it doesn't make a lot of sense to me to hold low or even negative yielding cash/bonds in your pension (to which an AMC is applied) while holding an ETF outside your pension, which is subject to a fairly punitive tax regime. Where you have the choice, I think it makes more sense to hold equities within your pension and your cash/fixed-income outside your pension.

It's generally agreed that property falls somewhere between cash and equities on the risk/reward spectrum. Another option might be to buy something like €100k of 5-year State Savings Certs and invest the balance of your after-tax savings in a world equity ETF.

Again, it's really a question of trying to balance your overall portfolio and not looking at individual component parts in isolation.
 

Sarenco

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5,754
in terms of iShares MSCI World UCITS ETF
Where's the the best (safest, low cost) place to purchase?
Well, the lowest cost platforms won't necessarily be the safest.

I would probably stick with one of the bigger "bricks and mortar" brokers (Davy, etc),
 

Dan_The_Man

Registered User
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14
That's obviously an option but BTL rates are pretty horrendous at the moment. There's obviously no point borrowing money at, say, 4% while simultaneously holding bonds paying, say, 1%.

Equally, it doesn't make a lot of sense to me to hold low or even negative yielding cash/bonds in your pension (to which an AMC is applied) while holding an ETF outside your pension, which is subject to a fairly punitive tax regime. Where you have the choice, I think it makes more sense to hold equities within your pension and your cash/fixed-income outside your pension.

It's generally agreed that property falls somewhere between cash and equities on the risk/reward spectrum. Another option might be to buy something like €100k of 5-year State Savings Certs and invest the balance of your after-tax savings in a world equity ETF.

Again, it's really a question of trying to balance your overall portfolio and not looking at individual component parts in isolation.
Well, the lowest cost platforms won't necessarily be the safest.

I would probably stick with one of the bigger "bricks and mortar" brokers (Davy, etc),
Fair enough ..thanks, yes what I meant was balance between safety / Cost ....thanks again
 

Dan_The_Man

Registered User
Messages
14
That's obviously an option but BTL rates are pretty horrendous at the moment. There's obviously no point borrowing money at, say, 4% while simultaneously holding bonds paying, say, 1%.

Equally, it doesn't make a lot of sense to me to hold low or even negative yielding cash/bonds in your pension (to which an AMC is applied) while holding an ETF outside your pension, which is subject to a fairly punitive tax regime. Where you have the choice, I think it makes more sense to hold equities within your pension and your cash/fixed-income outside your pension.

It's generally agreed that property falls somewhere between cash and equities on the risk/reward spectrum. Another option might be to buy something like €100k of 5-year State Savings Certs and invest the balance of your after-tax savings in a world equity ETF.

Again, it's really a question of trying to balance your overall portfolio and not looking at individual component parts in isolation.
thanks ..I'll think about the rebalancing as your describe, risker assets through pension and play it safe outside the pension.
I suppose my thinking of borrowing @ 4% is to give me more access to this asset class with the potential of '15k pa net of costs.'?
Maybe I'm just too risk adverse but there's an element of 'keeping my powder dry' If I have cash I can always clear off the BTL if rates where to rise in the future
 

Sarenco

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5,754
Well, leveraging an investment increases risk.

It's best to think of a mortgage as a non-callable "negative bond" - it's an obligation to pay back the principal, with interest. Admittedly, the interest payments are tax-deductible, which reduces the effective rate. But it will still be materially higher than the interest you would receive on any deposit/bond.

Think of it like this - you would be taking out a loan @4% to place it on deposit @1%.
 
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Dan_The_Man

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Well, leveraging an investment increases risk.

It's best to think of a mortgage as a non-callable "negative bond" - it's an obligation to pay back the principal, with interest. Admittedly, the interest payments are tax-deductible, which reduces the effective rate. But it will still be materially higher than the interest you would receive on any deposit/bond.

Think of it like this - you would be taking out a loan @4% to place it on deposit @1%.
I guess the question is how much will a mortgage of say 150k @ 4% eat into the 15pa? (on a notional 300K BTL)
I accept I have funds on the sidelines doing less than 4% but this would be a hedge (not all eggs in one basket, future opportunity) ....if circumstances (rates etc) change I can always just pay it off
 

Dan_The_Man

Registered User
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I guess the question is how much will a mortgage of say 150k @ 4% eat into the 15pa? (on a notional 300K BTL)
I accept I have funds on the sidelines doing less than 4% but this would be a hedge....if circumstances (rates etc) change I can always just pay it off
Well, €150k @4% is obviously €6k.

TBH I suspect BTL rates are higher than 4% at the moment.
I think they nearer 5%
Anyway , thanks for your advice Sarenco, I like the construct of high risk assets in pension and lower risk outside ..useful framework.
I think one set of decisions is a lump into 5yr An Post and make my Pension funds more aggressive
 
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