Advise on a managed fund

[LONELY-EURO]

Hi everyone.
I would like to put 400 euro into a managed fund every month for 15yrs, im am just wondering what would be the best options open to me,what kind of returns could i expect or losses...i was lookin at the foursight family saving plans,does anyone have any eperience with these particular ones,they are claiming to have at least a 6% return over a 15 yr period..thanks for any help with this

 

[LDFerguson]

You mention the Foursight plan. Is this something being offered to you by Cornmarket? Do a search for Cornmarket on Askaboutmoney.com - they're not known for being competitive on charges.

Ask them to detail in writing exactly what charges will be levied against your contributions and fund over the fifteen years - both charges per contribution and annual charges on the fund. Ask them to detail everything - policy fees, bid/offer spreads etc. Post the reply back here. For comparison, we have a savings plan available with no charge per contribution, no Government levy (normally 1% on every contribution) and annual management charges from 0.75% to 1.25% depending on the size of the contribution and whether or not you kick the plan off with a lump sum.

As regards what level of retun you can expect, I'd be concerned to hear this...

...they are claiming to have at least a 6% return over a 15 yr period..

If a salesperson is promising you at least 6% return over the next 15 years, walk away. Why? Because no such guaranteed returns exist at the present time in the Irish savings plan market. There are plenty of funds out there that have the potential to pay a 6% return (and more) after 15 years, but none that guarantee to pay "at least 6%".

There are many funds to choose from. In order to recommend a fund or funds that would be suitable for you, we would need to establish your own tolerance for risk, investment experience, understanding of the whole risk/reward relationship etc. For example, if your tolerance for risk is low, I'd be inclined to suggest you stay away from life insurance company savings plans altogether as better value can be had for the moment on deposit.

Liam D. Ferguson

 

[LONELY-EURO]

Thanks for your informative reply ld.ferguson..
As for my experience its none existant,im oly a dad and a husband tryin to make the best possible future i can for my family,by saving a bit every month and tryin to get the best return i can,you said in comparison we have a savings plan............could you please tell me more about this.
my risk tolerence is a very high medium and yes it was cornmarket who offered us this as my wife is in public sector

 

[LDFerguson]

There are two generic types of regular savings plan - deposit savings and unit-linked savings. The former is a type of bank account with a bank or post office. There's no explicit charge. You get the quoted rate of interest. For example EBS pay 4.1% AER for the first year on their regular saver account and 3.6% in year two. See the Best Buys section here on Askaboutmoney. Interest is subject to DIRT tax.

The unit-linked savings plan is a more complicated beast. There are usually charges, which can be a charge on each monthly contribution, a charge on the fund every year and often both. After charges, your savings go into one of the funds that the company offers. In theory, such plans have the potential to provide a better return over the long term than deposits. BUT - like any investment the greater the potential for return, the greater the risk. They might not produce a return greater than deposits and indeed they might drop in value.

Be wary of charges on unit-linked savings plans. They can be complex and hard to understand. Ask any potential provider for the "Reduction in Yield" figure. That takes all the charges and summarises them into one figure which represents how much of your annual return is being eaten by charges. For example, if the RIY figure is 1.5% and your fund achieves 6% growth in a year, you'll only see 4.5% of that growth because the charges have eaten the other 1.5%. For comparison purposes the sort of unit-linked savings plans we offer would have RIY figures of 1.5% or less depending on the amount of the savings and whether or not the client kicks off their savings with a lump sum. Growth is subject to Exit Tax.

Neither type is categorically better than the other - it's down to personal choice. Do you want the certainty of deposit even though you have lower growth potential? Or are you prepared to take higher risks with your savings in order to have the potential for higher returns? Your advisor should go through all these factors with you.