Where to invest lump sum for a young adult?

[Positively]

My son is to recieve an inheritance of about €70,000 and I'm hoping to get some advice on the best place to invest it for him. He will not need to access the funds for at least 5 - 10 years so its okay if it will be locked away for that time.

I hope this is the right forum for this, apologies if not.

Thank you.

 

[Sarenco]

Maybe the 10-year National Solidarity Bond?

22% total return (tax-free) if held to term.

 

[Corola]

2.01% AER is poor to lock up funds for ten years. There are better rates here with instant access:

Best Buy - Savings Best Buys

Savings Best Buys: There are 3 savings best buy threads on AskAboutMoney that are updated frequently. Instant Access and Notice Accounts - Lump sum variable rate savings. Fixed Term Deposits - Fixed Lump Sum Term Deposits from a few months to a few years. Regular Savings - Smaller sum...

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[Brendan Burgess]

I think it's a very good opportunity to educate people about the stockmarket.

Some of it should be invested in stocks so that he sees that it goes up and down.

Brendan

 

[Sarenco]

2.01% AER is poor to lock up funds for ten years. There are better rates here with instant access:

Which is subject to reinvestment risk (ie the rates on the instant access deposits might fall).

Some of it should be invested in stocks so that he sees that it goes up and down.

I don’t think anybody should invest in stocks with an investment horizon of just 5-10 years.

Plus you would have all the hassle of filing tax returns, etc.

 

[Corola]

€70,000 is the deposit for a house. Locking it up for explicitly ten years as a young adult is also a risk, what if they need it sooner?

 

[ClubMan]

Plus you would have all the hassle of filing tax returns, etc.

Select companies/shares that don't pay dividends and you don't have any tax filing issues until you sell and have to deal with CGT. That's one reason that I hold a chunk of Berkshire Hathaway. Another is that it's an already diversified conglomerate - I didn't want the hassle of selecting and managing a diversified basket of shares.

 

[Sarenco]

Well, a CGT return is still a tax filing.

TBH, I don’t think the OP should be taking any real risks with her son’s inheritance over such a short holding period. At the end of the day, it’s not her money.

 

[ClubMan]

TBH, I don’t think the OP should be taking any real risks with her son’s inheritance over such a short holding period. At the end of the day, it’s not her money.

Every investment option involves risks.

 

[Sarenco]

Every investment option involves risks.

Profound.

Investing in a single stock is not remotely comparable with investing in a State issued fixed-income instrument over a 5-10 year time horizon from a risk perspective.

 

[fayf]

€70,000 is the deposit for a house. Locking it up for explicitly ten years as a young adult is also a risk, what if they need it sooner?

It is not locked up for 10 years, you can exit at any stage, and a get a full refund in a matter of a week or two, they come with near zero risk, usual government guarantee, and zero charges,

Everyone knows interest rates are dropping, so those 3 and 6 month higher rates will drop, and they are all subject to 33% DIRT tax, the 10 year bond has zero DIRT, no tax returns,
so its 22 % nett, which is comparable to a gross rate of circa 30 % (some compound interest involved).

If he is young and won’t need the money, its definitely worthy of consideration. It might be wise to invest in a number of 10 year bonds seperately, so one can cash in one or more of them if required, while leaving the rest invested for the full term.

 

[Corola]

It is not locked up for 10 years, you can exit at any stage, and a get a full refund in a matter of a week or two, they come with near zero risk, usual government guarantee, and zero charges,

Sure, but you forgo all the interest so you may as well have stuffed it under the mattress.

 

[fayf]

Sure, but you forgo all the interest so you may as well have stuffed it under the mattress.

not accurate, interest is mainly accrued from year 5 onwards, but it is a sliding scale, based on what year you withdraw, explained in full in table 1, part 2.4:

Product Terms & Conditions | Ireland State Savings

Ireland State Savings Product Terms & Conditions

www.statesavings.ie

This is why, it is better to invest in a number of seperate 10 year bonds, so one can take one, and leave the others intact, investing all in one bond means, if your circumstances change, you forego more interest, as the whole amount is subject to the early withdrawal.