Investment diversification

M

Mayo1969

Registered User
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So I've done a breakdown of my investment diversification and the following are the results:

Be interested on anyone's perspective of the extent or nature of the diversification:

Cash in savings (incl. state savings) 39%
Cash in hand 2%
Foreign currency bank accounts 1%
Prize bonds 2%
Children's Education saving fund (Zurich) 8%
2 pension funds (AVC's)
Self (new Ireland) 17%
Wife (Irish Life) 11%
Peer to Peer lending 1%
Gold 7%
Stock portfolio 13%

No mortgage and house value about €300k.

Have followed the advice on here for years to prioritise mortgage payments first and then pensions. Slightly concerned I probably have too much in bank savings earning minimal interest, but I like to know I have access to it if needed without too much hassle.
 
Diversification should not be your concern.

Your concern should be that you should not be leaving cash on deposit earning next to nothing when it could be invested in the stock market.

Mayo1969 said:
I probably have too much in bank savings earning minimal interest, but I like to know I have access to it if needed without too much hassle.
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What is the issue? If you own shares directly, you can access it directly within a few days.

You have €300k in property.
The rest should be in equities.
 
Do folks really advise to prioritise paying down mortgages ahead of funding pensions?

If so, I think that’s terrible advice.

Your scattering of different investments only gives the illusion of diversification. The reality is that you are over-allocated to a single asset - your home.

The fact that you have ended up with the vast majority off your investments outside of tax-advantaged retirement accounts is a failure of good financial planning.
 
You're not diversified if your invested assets are all in the same thing, just in different policies.

And the funds themselves should be diversified as it is. There is also little risk in having all your policies with one insurer, they are well capitalised and there is little risk of them going bust.

It is difficult to give much more advice considering we do not know how much 39% in cash is, what your salary is, stage in life, future outgoings.

I do think that Prize Bonds are a waste of time though.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
I'd also question the 7% in gold - hopefully not some sort of prepper hedge?
As I said, a Money Makeover would make help others to give more targeted feedback.
 
ClubMan said:
I'd also question the 7% in gold - hopefully not some sort of prepper hedge?
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While I would not invest in it myself, many do believe that gold is a good hedge against inflation and turmoil. And we are certainly closer to turmoil that we have been for a long time.

Brendan
 
I've had the gold (In physical Kruggerands - nothing "prepper hedge" about it!) for over 10 years and in that time it's more than doubled in value so that's good enough for me, especially considering the potential "turmoil" if AI fecks up the world financial markets at some point down the road. Only began dabbling in stocks in the last year (cashed in a load of prize bonds!) and in that time I've also diversified my cash savings down from 59% to 39% so figure I'm moving in the right direction away from savings in low earning bank deposits.

Find your take interesting Sarenco. A lot of advice I've encountered on here in following various threads in the last decade plus would have advocated paying down ones mortgage and then maximising ones pension contributions before considering other investments. The fact as I see it re my home for life (I don't regard it as an investment property) and my paid off mortgage, is that it is no longer a financial burden and whatever I accumulate in excess of the 3% odd interest I was paying on the mortgage puts me ahead (perhaps not that far considering prevailing inflation over the past couple of years). I'm maxing the annual amounts I can contribute to both pensions AFAIK

Finally, not that I think it should be hugely significant in this context, but I am <10 years to retirement and the overall spread outlined constitutes about €300k.
 
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Gold and precious metal ETCs have been good to me and also dont suffer from our odd deemed disposal and exit tax rules. Well worth a look given that Gold is listed in US$ and we all know that's going to be deflated and loose it's reference currency designation in the next 10 years. Steer clear of Crypto as that will inevitably tank. World war 3 will be financial and cyber first before the nukes come out. It's already started.
 
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Mayo1969 said:
A lot of advice I've encountered on here in following various threads in the last decade plus would have advocated paying down ones mortgage and then maximising ones pension contributions before considering other investments.
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There have been different views.

In my opinion, people should pay down their mortgage to a comfortable level before maxing their pension contributions.

But it seems very odd that you have 28% of €300k in a pension fund or €84k while having €120k in cash.

Even if you decided to clear your mortgage first before maxing your pension, there is no justification in having so much cash and so little pension. I assume that these are AVCs on top of a generous defined benefit pension? Even so, you should be maxing your pension contributions for the next 10 years.
 
With Central Bank mortgage rules and individual lender underwriting criteria, mortgages are already “comfortable” from draw down.

There’s no need to apply some additional arbitrary criteria to determine what constitutes a “comfortable” mortgage balance.

Prioritising paying down a mortgage ahead of schedule over maxing pension contributions makes no financial sense - it’s simply terrible advice in an Irish context.

The return on an appropriately invested pension fund would be expected to comfortably exceed the weighted average mortgage rate over the duration of the mortgage term.

And that’s before you add in the massive boost provided by the mortgage relief that applies to pension contributions.

Also, annual limits apply to pension contributions - there’s no way to subsequently catch up, it’s a case of “use it or lose it”.
 
Sarenco said:
Prioritising paying down a mortgage ahead of schedule over maxing pension contributions makes no financial sense - it’s simply terrible advice in an Irish context.
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You have clearly not dealt with the misery and destitution of people in deep mortgage arrears.

The correct strategy is to get your mortgage down to a comfortable level. For a non-public servant that is about twice the salary or 50% of the value of the property. A 90% mortgage , 4 times the combined salary of two people is very uncomfortable. Paying it down to a comfortable level gives the borrowers flexibility and when the mortgage is more comfortable their mortgage payments will be lower and they can make higher pension contributions.

A lower mortgage also makes it easier for the borrower to trade up or to split up.
 
I strongly disagree.

If you lose your job and fall into mortgage arrears, then you are obviously in difficulty. No question about it.

But that’s the case regardless of the ratio of the mortgage balance to your previous salary.

IMO a 90% mortgage of up to 4 times your salary is perfectly comfortable and there’s no need to get it down to 2 times your salary (why 2 times?) before maxing your pension contributions.

Regardless, I think we can hopefully agree that waiting to completely clear your mortgage before maxing your pension contributions is a big mistake.
 
Have many or even any regular Askaboutmoney posters recommended clearing the mortgage completely before focusing on the pension? I very much doubt it.
 
Mayo1969 said:
Cash in savings (incl. state savings) 39%
Cash in hand 2%
Foreign currency bank accounts 1%
Prize bonds 2%
Children's Education saving fund (Zurich) 8%
Click to expand...
Cash
Mayo1969 said:
2 pension funds (AVC's)
Self (new Ireland) 17%
Wife (Irish Life) 11%
Click to expand...
Pension
Mayo1969 said:
Peer to Peer lending 1%
Gold 7%
Stock portfolio 13%
Click to expand...
Investments

Your actual portfolio is Cash: 52%, Pension: 28%, Investments: 21%. 101%! (Rounding i'm sure).

To me, your portfolio is upside down. Its high risk, low return (Highly inflation exposed in a high inflation environment - Cash + peer to peer). You're positioned to withstand a near-term catastrophe and it seems highly tax inefficient. I dread to think what investments are in your pension and stock portfolio, if we were to look through. More cash? You have 10 years to retirement. I would go to a financial planner and make sure you're opitmised to achieve your financial goals.
 
Working our way back to the OP…

Maximising pension contributions over the last 20 years (or so), instead of prioritising paying down his mortgage ahead of schedule, would have left the OP very materially better off financially.

With 10 years to go to retirement, that matters. A lot.

Investing relatively trivial amounts of after-tax savings in gold, crypto, whatever, is to miss the point.

Big picture - the OP should not have prioritised paying down his mortgage ahead of making meaningful pension contributions and investing in a conventional equity/bond portfolio.

That was a big mistake.
 
Over 45% on cash, but also 7% in gold? Doesn't look to be any sort of logical thoughts put into investment allocation.
 
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