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General investment advice

  • 28-09-2019 8:46pm
    #1
    Registered Users Posts: 217 ✭✭ DM1983


    Have accumulated savings €80k at the moment not earning any interest. Dabbled in some equities over the last year with some wins and losses, fairly flat over all, but not unexpected given my lack of expertise in the area. Given that we seem to be heading for global recession, I'm planning to just pay down my mortgage (340k remaining, 2.7% apr) for the next few years.

    Alternatives I'm considering are:

    1) hold the cash in anticipation of a serious drop in stock market in the next year or so and then go all in.

    2) tax relief on pension is maxed out but considering putting this limp sum in anyway as an AVC and then converting a significant portion of the pension (~60%) to self administered and buying a rental property through that for better returns than the stock market is currently offering.

    Any thoughts?


Comments

  • Registered Users Posts: 2,435 ixus


    How can you further your education/career/ business/ whatever it is you want to do so that 80k is less significant?

    Do that.


  • Posts: 17,733 ✭✭✭✭ [Deleted User]


    DM1983 wrote: »
    ......self administered and buying a rental property through that for better returns than the stock market is currently offering.

    Any thoughts?

    Ignoring the serious effort to do that & the fact you may not be able to...... What yield in % terms do you think you can knock out of property.

    When you consider property is currently pricey and you reckon we are heading for global recession why is property tempting you?


  • Registered Users Posts: 217 ✭✭ DM1983


    ixus wrote: »
    How can you further your education/career/ business/ whatever it is you want to do so that 80k is less significant?

    Do that.

    Good advice but actually very happy with the work side of life and not looking to advance that further for the foreseeable future. I'll keep an eye out for any entrepreneurial opportunities but it's not a goal for me at the moment.


  • Registered Users Posts: 217 ✭✭ DM1983


    Augeo wrote: »
    DM1983 wrote: »
    ......self administered and buying a rental property through that for better returns than the stock market is currently offering.

    Any thoughts?

    Ignoring the serious effort to do that & the fact you may not be able to...... What yield in % terms do you think you can knock out of property.

    When you consider property is currently pricey and you reckon we are heading for global recession why is property tempting you?

    It's not a great option! But it's probably the best I can see. I would expect 7ish percent yield minimum. Paying income tax on it makes this a no go hence the option to buy it out of pension.

    As I said, I'm probably going to pay down mortgage for the tax free guaranteed return but just wanted to get a few other opinions.


  • Moderators, Business & Finance Moderators Posts: 7,837 Mod ✭✭✭✭ Jim2007


    Pay down for debt and learn about investing and in particular learn about risk and asset allocation.

    For instance a portfolio with more than 6% or 7% in property is considered a high risk portfolio, you intend to put 60% of your pension fund in to it.....

    From a risk point of view the 6% or 7% mentioned above is assumed to be held in a diversified fund, but you intend to concentrate it in a single property...

    So what you are intending to create is a very hight risk portfolio with a return of around 7%. Now to put that into perspective the general consensus is that a well balanced portfolio will return about 6% over the next 20 years or so. That means you are taking on incredible risk for very little additional gain.

    Sending the next couple of years paying down debt, building a rainy day fund and reading up on investing.


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  • Registered Users Posts: 217 ✭✭ DM1983


    Thanks for advice. Decision made.


  • Registered Users Posts: 3,462 ✭✭✭ Bob Harris


    Jim2007 wrote: »
    Pay down for debt and learn about investing and in particular learn about risk and asset allocation.

    For instance a portfolio with more than 6% or 7% in property is considered a high risk portfolio, you intend to put 60% of your pension fund in to it.................................


    You can read some awful shíte on boards and I've posted my own fair share and then from time to time you'll get some considered and informed posts to help put things in context for you such as Jim's.


  • Registered Users Posts: 10,928 ✭✭✭✭ phantom_lord


    DM1983 wrote: »
    Have accumulated savings €80k at the moment not earning any interest. Dabbled in some equities over the last year with some wins and losses, fairly flat over all, but not unexpected given my lack of expertise in the area. Given that we seem to be heading for global recession, I'm planning to just pay down my mortgage (340k remaining, 2.7% apr) for the next few years.

    Alternatives I'm considering are:

    1) hold the cash in anticipation of a serious drop in stock market in the next year or so and then go all in.

    2) tax relief on pension is maxed out but considering putting this limp sum in anyway as an AVC and then converting a significant portion of the pension (~60%) to self administered and buying a rental property through that for better returns than the stock market is currently offering.

    Any thoughts?

    Worth being mindful of the tax implications of exiting your pension later in life. It may not as advantageous as it first appears, to put in a lump that doesn't get relief.


  • Moderators, Business & Finance Moderators Posts: 7,837 Mod ✭✭✭✭ Jim2007


    Worth being mindful of the tax implications of exiting your pension later in life. It may not as advantageous as it first appears, to put in a lump that doesn't get relief.

    One way or other you need to save for retirement and placing it in a recognised fund you benefit from the current tax rules at least. You have absolutely no idea of what the tax regulations are likely to be in 30 to 40 years time and making a definitive decision on something today based on something that might or might not happen in 30 to 40 years is not a great way to go.

    The reality is that there will have to be massive changes in pension regulations in the coming 20 to 30 years in order to recognise the benefits short fall. Most likely Ireland will move to the typical three pillar system and in such circumstances it will be very much to your advantage to have a sizeable pot on conversion to avoid being under insured. Most European countries charge a 10% - 15% exit or zero if the fund is converted to an annuity which is then taxed under normal income tax rules.


  • Registered Users Posts: 2,991 ✭✭✭ Taylor365


    I would have been paying extra off the mortgage every month instead of building up the savings to that extent.

    Small dents now add up to sizable returns later.


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