Existing investment policy - what would you do?

B

burmo

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Hi all,

I have a New Ireland investment policy (initially 12.5k). In 2008 when it had dropped to 7.7k I changed it into a secure cash fund for a year in October 08.

The end of the year has come and it is now worth 8.1k and this has now been placed in a deposit account of 1% and I have a management fee of 1.25% so in effect I am losing money albeit slowly.

I do not regret taking it out of the equities when I did but I am trying to decide what to do next. I would ideally like to leave it within the policy as I can grow it without the 28% tax back up to the 12.5k.

There are essentially four options I see so far:
1.Within the same policy I can change to 2014 government bond with net interest of min 6.6% typ. 7.98% after management charges. Very poor performance.
2.Put it back into an equities fund in the same policy and take the risk... what fund... General view of the markets? Evergreen still has a lot of commerical property... don't see that going up anytime soon!

3.Encash my policy and take out a secure advantage policy - like a guaranteed evergreen.
4.Take it out and put it in an An Post 5 year six month 21% account (4.7% equivalent EAR as there is no tax).

I won't be intending to use this money for a few years...
I don't want to 'accept' the loss in a way by closing the policy... but unless I go equities it doesn't seem like I should stay in the policy with the management charge.

Criticial response are fine!

Thanks everyone,
Burmo.
 
Oh, the other option is a 5% 2 year option policy switch but after management charges that works out at 1.46% PA, which is really poor...

Any opinions?
 
I would suggest leaving the money where it is and swithing to the 2014 government bond. (It does not make sence to incur charges on reinvesting at this stage and you will get a better return on the government bond that putting it on deposit)
Stay well clear of equity funds for the time being as most pundits feel that this rally is way over done and we are in for a significant correction next year which again will only be good for sovereign bonds.


Tuam Rocks!
 
Hi Flan, many thanks for your reply.

Regardless of my broker's opinion, I really believe equities are going to be really unstable for the next few years. I keep hearing all about DUBAI, the UK economy stability, Irish economy stability, US, etc... I think the bad times are far from over...

Now regarding the bond I worked out 6-7% return over the bond timeframe... An post is 21%. Should I just chuck in the policy and an post instead? I just can't see myself investing in equities in the next year or two, once bitten, etc. So should I just let that possible growth of 4k without tax fall away as it doesn't seem so likely in any case.
 
Hi Burmo,
Check out the following link in relation to the 2014 Government Bond [broken link removed]
As can be seen from this the Gross Redemption Yield is running at 3.78% pa which is not bad in this environment and as stated earlier if markets become more volatile next year, you will probably see a flight to quality and this may help bond prices.
 
Burmo,

Depending on when your initial investment was into a New Ireland fund, you will incur hefty exit penalties if you cash in. If you are a long term investor, the state of the equity markets in the long run doesn't make a massive difference. As for what a broker or New Ireland tell you I wouldn't believe a word of what they are saying. The Broker is doing it for the Commission and the Company have their own agenda. Check all the funds and make a decision yourself. Have a look at the Eurostox fund or the Pacific Basin Funds.
 
Burmo,

Can you add further monies to your investment even on an add-hoc basis over the next few years? If so, and you can take a 5-year view (as you say you can) then a well spread equity fund will not be as risky a choice as you might initially think. Remember, adding monies to it as you go allows you the flexibility of taking advantage of lower prices when available. All that went wrong first time is that you invested a lump-sum at the wrong time. Below I provide a link to an article I wrote on the merits of 'Regular Investing'. Might help clarify things for you.

http://www.investrcentre.com/index....ontent/id/2BC81967-A10F-4520-88153DF81E1BDD67

If the link does not work, go to www.investRcentre.com and go to featured articles.

Rory
 
Flan said:
Hi Burmo,
Check out the following link in relation to the 2014 Government Bond [broken link removed]
As can be seen from this the Gross Redemption Yield is running at 3.78% pa which is not bad in this environment and as stated earlier if markets become more volatile next year, you will probably see a flight to quality and this may help bond prices.
Click to expand...

My figures from the broker are as such

Fund Gilt 2014
Maturity Date 15/01/2014
GRY1 (annualised) 3.245% p.a. - this is not guaranteed
GRY (cumulative) 14.0%
Minimum Return2 (annualised) 2.9% p.a.
Minimum Return (cumulative) 12%

-1.25% pa management charge.
 
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