Are these proposed investments foolish?

noelfitz

Since interest rates are low and Dirt is high I am thinking of changing bank deposits to the following, with different allocations in each.


1. KBC 14 month fixed term at 2.45%;
2. Standard Life MyFolio II and III Synergy Investment Bonds, these invest in bonds, equity, cash, property etc. (charge 1.5% p.a.);
3. Rabo fund with BlackRock, tracking the MSCI Europe index;
4. Davy EFT tracking the Stoxx index;
5. Equity in one FTSE 100 company with a good dividend.

I would be considered a low/medium risk person and am elderly.

Are my suggestions foolish? Please help.

Sonnenblumen

What a waste of money!

wired117

If you are looking for capital preservation seems like this is reasonable. If you are looking to make money you will need to choose other investments.

Thronegames

noelfitz wrote: »

Since interest rates are low and Dirt is high I am thinking of changing bank deposits to the following, with different allocations in each.


1. KBC 14 month fixed term at 2.45%;
2. Standard Life MyFolio II and III Synergy Investment Bonds, these invest in bonds, equity, cash, property etc. (charge 1.5% p.a.);
3. Rabo fund with BlackRock, tracking the MSCI Europe index;
4. Davy EFT tracking the Stoxx index;
5. Equity in one FTSE 100 company with a good dividend.

I would be considered a low/medium risk person and am elderly.

Are my suggestions foolish? Please help.

I'm no expert but make sure that options 2, 3 and 4 have some sort of capital guarantee built in. If there is a stock market crash your money could be wiped out otherwise. Exposure to the stock market is good in principle as apart of a balanced portfolio but make sure your capital is guaranteed. I repeat myself for good reason. Number 5 is also risky as you are relying on tONE stock to maintain both its current value and current dividend. No. 1 sounds OK but is 2.45% the AER over 12 months or return over 14 month?. From my research Ptsb bank gives the best return (of a bad lot) over 1 year fixed interest first account. That was last Nov though and things change. All above
are just from my experience. Sounds like you need INDEPENDENT financial advice (hard to get!). Best of luck.

Potatoeman

What is the capital gains tax on stocks and shares now? Didnt they change the rate a few years ago so its not as good as it was?

noelfitz

Thank you for all your replies. I appreciate it that you have taken the time to read my post and reply.

Sonnenblumen, Please let me know why my investments would be a waste of money.

Wired117, as I am elderly/old I am not too interested in making a lot of money, but I want to avoid losing it due to inflation, high Dirt and low interest rates. So my proposed investments are cautious.

Thronegames, 2.45% is the AER, I see in the ad at the right of this post that PTSB offers 2.34% AER. The investments do not have a capital guarantee, but the amounts invested in the various options differ, and the SL option has a relatively small amount of equities. But you have raised a serious concern.

I have consulted an independent financial adviser, who seems excellent. The KBC and SL suggestions are his, but the balance between various MyFolio options in SL is mine. He did a risk analysis for me. The Rabo and Davy investments will be execution only, but less will be invested in these, and not all my savings will be in my proposed new investments.

I agree one does not get a dog and bark oneself!!!

Potatoeman, I am not sure of the tax position, but I do not intend to cash in these investments, unless something serious and unexpected occurs.

So thank you all, and any more suggestions or clarifications will be welcomed.

Buzzliteyear

Hi Noel, just 2 points to add to above. If you're 65 or over you not have to suffer DIRT at source. You noted 2 European stock funds in your options. Once they are low cost funds they could be a worthwhile investment, at least in next 2-3 years. Maybe compare with Vanguard fund symbol VGK. No guarantees. US indexes seem well priced at this stage.

noelfitz

Buzzlitryear,

thanks for your comments,

I am getting near to make-your-mind-up time.

Today I rang Davy and considered carefully the Davy ETF fund and decided not to go with it. I will stick to the Rabo fund.

I think I have to pay Dirt at source due to my income.

I considered Vanguard, fees are very low, but as I never heard of it in the past I want to stay clear of it.

As time goes on I seem to be thinking of leaving more on deposit.

Thronegames

Hi I see your dilemma! I'm 50+ but I would never use the adjective 'elderly'! I have recently left work and have re-entered the stock market. I lost a small fortune in 1998 -2001 but I've learned a little and I'm back!

Just curious - what stock were you considering on the FTSE for dividend? I too am sticking with 85% cash allocation and yes you are right KBC has a slightly higher interest rate. The only thing I really like about ptsb is that you have a rate of approx. 2.3 or something in an instant access account and I can move money fast.

The other crazy thing I did was to buy Prize Bonds. A lotto ticket really but at least I can't lose the capital. If nothing significant happens after a year sure I can cash them in without risk of loss. And nobody tell me please that I might lose 1.5% of my investment after 1 year! Big deal.

noelfitz

I am thinking about GSK.
A person of 50+ is only a youngster.
I have prize bonds and I would love to get rid of them. Maybe I will tomorrow.
Thanks for all your help.
Now is the time to act, but in a far more cautious way than initially considered.

onemanband

My tuppence worth

1. Consider spreading your cash across various institutions at €100k each (depending on how much you have)
2. Are their exit penalties on the SL MyFolio funds? If there are and you have to cash in early it could wipe your gains and some
3. MyFolio has allocations to cash (you already have it), bonds (negative yields) and global equities for 1.5% a year. You can buy ETFs for less than 0.5% AMC which will do the same. MyFolio has to outperform your ETFS by 1% per year just to acheive the same outcome.
4. Rabo charge 0.75% in and out on their funds. You can buy the same Blackrock fund cheaper from any online stockbroker
5. Whatever about buying the Stoxx, Vanguard are the worlds second largest ETF provider after iShares (Blackrock).

I think you are right given your circumstances to have a decent allocation to cash. If you want a balanced portfolio that you don't have to manage yourself then you should consider MyFolio (with no exit penalties) or a basket of ETFs

Finally from a tax point of view you will pay 41% exit tax (same as DIRT) on any profits from your funds including ETFs. You will not be able to off set gains against losses. This is unless the structure is life wrapped which will cost you about 1% extra.

If you buy dividend paying stocks you can offset gains and losses and pay 33% CGT rather than fund exit tax. You can also use any previous losses to offset gains.

Your "independent" financial advisor should have explained all of this to you!

noelfitz wrote: »

Since interest rates are low and Dirt is high I am thinking of changing bank deposits to the following, with different allocations in each.


1. KBC 14 month fixed term at 2.45%;
2. Standard Life MyFolio II and III Synergy Investment Bonds, these invest in bonds, equity, cash, property etc. (charge 1.5% p.a.);
3. Rabo fund with BlackRock, tracking the MSCI Europe index;
4. Davy EFT tracking the Stoxx index;
5. Equity in one FTSE 100 company with a good dividend.

I would be considered a low/medium risk person and am elderly.

Are my suggestions foolish? Please help.