My DIY Investment Plan

[schuhart]

I’ve read the material around this site and tried a few books out of the library on personal finance, all of which has been very useful. Based on that, I've come up with an approach that I think suits me. Any comments are most welcome, as I’m interested if anyone sees a glaring gap in my reasoning.

I have no debts and pension is looked after. I have €45k that I have no immediate use for. I’d expect to be able to add at least €500 per month to that lump sum. I would regard capital accumulation/protection rather than income as the goal. I’ve no particular object in mind – but if the money is there I should try to make the best use of it. Hence I'd almost arbitrarily pick a timescale of seven years - just to have a target to plan around.

I would regard myself as moderately risk adverse. I would therefore aim for a split of 60% in some kind of deposit and 40% in equities. I have two shares at present – Bank of Ireland and Irish Life and Permanent. I’ve no deep reason for having them – the ILP ones date back to demutualization and I just bought the BOI ones a couple of years back because I’d cash spare and reckoned bank shares would be reasonably safe. I accept that this is not diversified – but I reckon given the money at stake (15k between both equities - included in the figure of 45k above) it’s just not worth the transaction costs to break them up.

I find myself unimpressed by what I read about funds – whatever benefits might come from diversification by the fund seems to me to be lost by the need to pick the right one. I would consider the ISEQ ETF as a potential option, but even there I’d prefer to control what I own. I know that I should probably accept the basket of shares in the ETF as necessary diversification, but I suppose I feel that the fact 60% of my money is in cash means that I'm reasonably protected in the event of a meteor hitting BOI or ILP.

I would plan to add to my equities in tranches of 5k – basically built up 5k in cash and buy one to keep that 60/40 ratio constant over the next seven years. (I’ve also opted to take the BoI dividend in the form of shares). I will probably add a non-bank equity next – just to have something else – but other than that I will simply buy more of the ones that I’ve got for the foreseeable. If I got to, say, owning 50k in equities I would probably think at that stage about adding a fourth company to my portfolio.

I’ve most of my cash in Rabodirect – I find the internet service fine, once its set up. I also have some Post Office bonds, which are rollovers of previous bonds that I’ve held. I am thinking about getting a long term bond, but as interest rates seem to be going up this weather I’m a little wary of committing to a long term rate just at the moment.

Apologies for going on at such length. If anyone got to the end of all that, I’m interested in any perspectives.

 

[capall]

Bloody hell,what are you asking

Should you buy more BOI and ILP permanent shares as opposed to putting money on deposit
Yes,Go for it!

 

[capall]

Apologies,that wasn't very helpful,got out of the wrong side of the bed this morning

You're not going to go very far wrong with the strategy as outlined above. I don't know what the analysts are saying about BOI or Irish life but remember they are very exposed to the fortunes of the irish economy and have enjoyed good growth over the last years so maybe future returns won't be as good in the immediate future,also they are going to be affected by how the irish property market fares,which is anyones guess at the moment ?

Really if you have 50k you don't need access to at short notice you would have to do better in equities over say 10 years. I wouldn't share your negativity about funds there are a great choice of funds available and you can get exposure to world equities,like everything else you need to research whats out there . Generally investing in blue chips shares wouldn't be considered a risky strategy and you will do better then in cash. But if equities would stress you to much its not worth it

 

[tyoung]

60% is too much too have in cash unless you're trying to live off your portfolio. Inflation is likely to be 2 to 4%. Add in the tax take and what's your real net yield?

 

[schuhart]

Fair points, and in honesty I don’t see myself needing access to the cash (unless in extraordinary circumstances – where transaction fees for selling equities would hardly be an issue) so I could view it as easily for a ten year time frame. I am sort of prepared for the idea that whenever I next buy some shares might be the day before everything drops severely. I see it as just trying to identify companies that can weather a storm.

I will cast an eye at funds again - I notice the Quinn and EBS funds get mentioned for their low charges. In fairness, I've generally only cast an eye over the shorter promotional material. I might have a read of the detailed prospectuses to see what exactly they sell you.


I know that I want some insulation from unexpected downward movements – which means I probably would look to keep a sum on deposit, even recognising that means a slow loss of real value. However, I might consider flipping the ratio more to 40/60 in favour of equities over the course of the next year.