your thoughts on my money!

TippinDub

Hi everybody
Just wanted to get people’s thoughts on how I should proceed with my money/investing/what to do with it. This is probably going to be very long so apologies in advance!!

A little background first. I’m single, 37 years old and with a salary in the 90k region. I have purchased a house in the last 6 months for which I have a mortgage of 390k over 30 years, first 10 years fixed and I’m availing of the rent a room scheme.

Since I have purchased the house I seem to be able to save 1200 a month (from the rent a room) and that combined with my bonus means I should be able to save somewhere between 15-20k a year, depending on how much of it I blow!!

The next question is what are my aims for investment. Here I’m not really sure. I have a good income already so capital growth is probably more important for me than income streams, although both would be good and I certainly wouldn’t turn my nose up at a good income stream. I would say that my timeframe is in the 5-10 year bracket. So I don’t plan on buying something and flipping it many times – more of a buy and hold kind of guy, certainly for the first 5 years. Also it would be nice to have the option to pay a large chunk from my mortgage when the 10 years fixed period is up.

So now the question is what to do with it. I should have 10k saved by the end of Feb so this will be my starting point. The obvious choices are shares and property.

Property first – well I’ll only have 10k to start, so not enough for a deposit. I wouldn’t mind owning a second property, not sure on the pluses and minus of commercial versus residential. But I’ll have to wait/stay saving a couple of years to get any kind of deposit together. I like the idea of commercial property and the prices of some down the country would make you think.

Shares – I love the idea of shares, plus they are highly liquid which would be a major plus for me, however I am inexperienced in this area. A few things that I would look for in a company are 1) strong balance sheet 2) strong cashflows 3) I want companies that produce physical goods and/or have physical assets. Irish companies that I would be interested in are Glanbia, CRH, Kerry, Ryanair. With regards to non-Irish companies, US and UK stocks are very expensive at the moment with the weakness of the EUR. So buying on these markets brings in the added element of FX risk – which I’m not sure I want.

I am however very interested in dividend income investing – but it seems I would probably have to invest in US stock to get any decent dividend income. If I went down the shares option I don’t want to have a large stock portfolio, 20 max but less if I could. Also I would be buying monthly – say 1000 to 1500 per month. So if I went down the share investing route I’d buy 1000 shares of Stock A this month, 1000 of stock B the next month etc etc. I don’t plan on being a day trader!!

And then of course there is tax to consider – given my salary Mr Noonan is getting more than his fair share already – I would prefer not to be writing him too many more cheques if I can help it!! Of course it’s unavoidable but tax efficiency would be important, although no doubt things will change a lot in the next 5-10 years that I am looking at

So I am not really sure what to do – so I am on here seeking people’s opinions and ideas. I would consider other investments as well so feel free to throw anything at me

Nody

Well first step is take a long good look at your costs because you should have plenty more to save...

Using Deloitte we have based on a 90k income monthly net income of:
Net monthly income: €4,643.00
Loan 30 years BOI for 390k with 10% downpayment 1 year fixed: 1,761 monthly, let's round it up to 2k to make it easy
That still leaves you with 2,643 EUR to cover your other expenses and yet you're claiming you can only save 1200 a month due to renting out a room or simply you spend another 2.6k EUR a month on living expenses and you might blow some of that as well. That will make more difference than any dividend stock...

Anyway, moving back to the question you raised, dividend stock exist in Europe as well (Allianz for example was around 4.5% last time I checked) but the thing is with all stock they go up and down and with a 10 year to the dot window when you want to cash out you'll need to consider if you're willing to wait another 5 years if needed or not. At the end you can not, and should not, try to do that without reading up on value investment strategies. If you're sure you want to get out after 10 years then your goal is most likely going to be high dividend, no growth type of stocks (this tend to be mature business such as power grids, telecom etc.) and possibly bonds from larger firms (do not go for companies you've never heard of, you will be burned!). If you think you're going keep them then you need to go for dividend growth as well and then we start to talk about dividend aristocrats (25+ years of dividend with growth) and value growth companies as well.

Sonnenblumen

Nody wrote: »

Well first step is take a long good look at your costs because you should have plenty more to save...

Using Deloitte we have based on a 90k income monthly net income of:
Net monthly income: €4,643.00
Loan 30 years BOI for 390k with 10% downpayment 1 year fixed: 1,761 monthly, let's round it up to 2k to make it easy
That still leaves you with 2,643 EUR to cover your other expenses and yet you're claiming you can only save 1200 a month due to renting out a room or simply you spend another 2.6k EUR a month on living expenses and you might blow some of that as well. That will make more difference than any dividend stock...

Anyway, moving back to the question you raised, dividend stock exist in Europe as well (Allianz for example was around 4.5% last time I checked) but the thing is with all stock they go up and down and with a 10 year to the dot window when you want to cash out you'll need to consider if you're willing to wait another 5 years if needed or not. At the end you can not, and should not, try to do that without reading up on value investment strategies. If you're sure you want to get out after 10 years then your goal is most likely going to be high dividend, no growth type of stocks (this tend to be mature business such as power grids, telecom etc.) and possibly bonds from larger firms (do not go for companies you've never heard of, you will be burned!). If you think you're going keep them then you need to go for dividend growth as well and then we start to talk about dividend aristocrats (25+ years of dividend with growth) and value growth companies as well.

In my opinion there are plenty of blue chip FTSE stocks (incl but not exclusively Utility/Telco stocks) which are paying divis ranging from 4.5% - 7.0% + and many also offering SP growth! Admittedly the growth would be much less than a well performing speculative alternatives, but picking winners from this category has more to do with luck/black art than logic? Consistent divi paying stocks with annual capital growth of 5-10% is very realistic and especially over a 5-10 year period. Sure there may be so blips along the way, but small in comparison to the hassle etc of managing rental property? The latter is a nightmare and for people who only wish to become professional landlords? By all means expand horizon to include some new stocks, but for fewer sleepless nights with goo ROI, bluechip divi darlings are just that, darlings