Lump Sum Investment Options

J

JennaFlect

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Age: 37
Spouse’s age: 37

Annual gross income from employment or profession: €31k
Annual gross income of spouse: €0

Monthly take-home pay: €1,933

Type of employment: Civil Servant

In general are you: (B) Saving

Rough estimate of value of home: €150k
Amount outstanding on your mortgage: €0

Other borrowings – car loans/personal loans etc.: €0

Do you pay off your full credit card balance each month? Yes

Savings and investments: Approx €56k in savings in current account, €5k in prize bonds and €2k investment fund with Cantor.

Do you have a pension scheme? €31k in PRSA from previous employment. Now AVC PRSA with max contribution for tax relief and will continue to do so.

Do you own any investment or other property? No

Ages of children: 8 and 18

Life insurance: Yes both of us covered for €150k each


What specific question do you have or what issues are of concern to you?

I want to do something with approx €40k of savings as a lump sum.
The remaining €16k will cover first year of college for 18 year old starting in September (€6k) and also as the emergency fund (€10k).
The rest of college we will be able to cover with yearly net savings.

To simplify the math I am thinking to do 4 different €10k lump sum investments.
I don't have a specific goal for the lump sum investments other than to earn some form of return other than zero/subject to inflation.

Only possible future expenditures will be college in 10 years for the 8 year old and possibly trading up house wise but again I don't see that happening within 10 years.

I am aware of the risk of investing a lump sum and would prefer to drip feed but if I can diversify enough across 4 different types of investments I would hope to reduce this risk somewhat. My PRSA and PRSA AVC are in a mix of New Ireland and Zurich funds between 4, 5 and 6 risk rating.

I am just looking for opinions on the different options available for a €10k lump sum investment based on a minimum 5 year time line (this is partly based on seeing some timeline options for state savings and investment bonds) but will probably longer as no expected need to access/encash. Some of the options I am coming up with are:

10k: 5 Year Savings Certificates (3% return, no risk)
10k: S&P 500 ETF (low risk)
10k: 6 year Investment Bond (high risk but can be capped at 80%)
10k: Another fund or funds maybe €5k each
10k: Shares split over a few blue chips
 
JennaFlect said:
10k: 6 year Investment Bond (high risk but can be capped at 80%)
Click to expand...
Do you have details of this, so we can pick it apart?

Overall, I'd be going much simpler. You're talking about investments with completely different tax treatments, but possibly with crossover in the underlying assets they are invested in. The problems with different tax treatments is if one makes a loss you can't set it off against a gain on the other.
 
I should have clarified it's 80% capital security.

It was just an email I received from Cantor about a couple of investment bonds, Protected Stoxx Global ESG Leaders Bond II and Protected Robotics & Automation Bond were two of them.

I suppose the main negative is you have to take the maturity value, so if invested in 2014 and maturing in 2020 obviously you are forced to crystalise your loss, although limited to 80%. Whereas if in a fund you could have waited until now or longer for it to rebound. At least that is my understanding from reading it.

I'm just wary about investing the full amount in one thing but that's mainly if it's funds only I suppose, at least with the PRSA AVC I am drip feeding.
 
Those bonds are what are called "structured products" elsewhere. I worry about a 'bond' that comes with a 700 page document explaining it!

I've linked some previous threads on similar products. I haven't read the details of the Cantor ones but 1 thing is guaranteed - the 'index' they are tracking is something that doesn't exist for any other purpose apart from this particular bond.

Not the easiest threads to follow, but recommend you give them a read.

Diary of a Private Investor - structured product too good to be true

Too good to be true Colm Fagan Diary of a Private Investor Update 17 10 September 2019 A conversation with my friend Brian Woods almost four weeks ago started it all. “Colm, I found an investment you might like. It’s called Accelerator Bond 4. Google it and see...
www.askaboutmoney.com

Indo article on altenatives to deposit accounts

Alternatives to deposit accounts being suggested in the Indo, could see many liking the 90% protection but fees would hurt...some at over 4% https://m.independent.ie/business/personal-finance/how-you-could-double-returns-by-ditching-lowrate-savings-accounts-but-tread-carefully-36716533.html
www.askaboutmoney.com
 
As far as I am concerned, anything that's dressed up like this is just to get a fool parted from his money.

All of these "structured bonds" are just fancy ways of persuading people looking for a decent return on savings that it is possible to have your cake and eat it. of course, it is not FULL STOP

They also have, in general, the added attraction of paying nice, hefty fees to the providers and distributors
 
JennaFlect said:
10k: 5 Year Savings Certificates (3% return, no risk)
10k: S&P 500 ETF (low risk)
10k: 6 year Investment Bond (high risk but can be capped at 80%)
10k: Another fund or funds maybe €5k each
10k: Shares split over a few blue chips
Click to expand...

You need to understand risk.

There is risk with the State savings, inflation risk. CPI over the last 6 months is 0.47%. State Savings 5 year certificate pays 0.59%, so if inflation increases by a small amount, the purchasing power of your investment will be less when you get your money back.

This time last year, the S&P 500 had fallen 31.12% in a month. Starting in June 2007, it fell by 51%, hitting the bottom in April 2009. The shocks to the market at that time was something that I have never experienced before. The economic impact of that crash can not be under estimated. Being invested in a basket of assets that can fall 50% in value is high risk.

Investment bond - you are literally giving a product producer €10,000 so they can take fees out of it and will give you back what you gave them in 6 years. You may only get €8,000 of the €10,000 you gave them. You may, but it is unlikely that you will get more than your €10,000 back.

Blue chip stocks - what do you think the companies in the S&P 500 are? They are a basket of massive blue chip stocks. Some of the smallest companies in that index are News Corps, Under Armour, Ralph Lauren, Fox, Invesco. HP is 189 on the list, Morgan Stanley is 62. Visa, Mastercard, Disney, Proctor & Gamble don't even make the top 10. You will have lots of blue chip in the S&P. No Irish company is blue chip.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Thanks for the replies.

I'll just stick to Zurich funds then based on the above and spread it out in increments of €5k or €10k.
 
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