Where is the best place to save

crazyasafox

We are thinking long term but would like a guaranteed amount at the end as opposed to stock exchange types.The deal is we want to invest our Kids "childerens allowance" which combined (2kids) will be around €250 amonth.IT will be invested for the next 17-18yrs which at the end with any luck there will be a reasonable sum for them to get started with

Thanks

daveg

We are doing the same thing for my son with the child allowance (approx €90 - how are you getting €250 for 2 ).. anyway. We were advised to open a Pep or Pip (can't remember which but I can check details if you need me to) with Irish life. We have made a loss in the last 2/3 years (it's 2/3 years old) but we were told we are buying shares now at the lowest value they are likely to be. As we are in for the long haul were told that the share values should go up considerably by the time we cash in the policy (probably in about 15 years).

I'm open to suggestions on this policy though

hamster

crazyasafox & daveg ,

I myself have a pep fund with Ark Life for the last 4 years. Like daveg says most funds are down for last few years. I plan to stop contributing to this pep next year (5 years total) and leave it sit for 10 to 15 years. Why? A 1.5% charge per year and a 5% bid/offer price is a noticeable drag on long term growth.

I then plan to contribute to another fund. This time a low cost one and repeat the above and so on.

crazyasafox ,
Can I suggest a few things?

For your 250 euro/month you could:

* put it in a low return deposit (below inflation) and watch it fall behind. The best on the market is 2.75% with Anglo Irish Bank. 27.5 euro on every 1000 after a whole year. Pretty poor eh? Please don't give this money to the banks... it will be used against people for Loans or they themselves use your money in property/shares for themselves while giving you a paltry interest rate.

* put it in a tracker bond type fund. These guarantee or near guarantee your money by having a mix in cash and in shares with complex rules that return, say for example, 30-60% of the growth of a selection of shares or a market. Note that these limit any upside and are very restrictive. Also most tend to require lump sums and usually stop after a defined period, eg 3 or 5 years. Not recommended!

* put it in a managed fund like daveg or myself. This can grow over the medium or long term which suits your time scale. The only thing about managed funds is that the charges can be a little too excessive. Typically you faced a 1.5% annual charge on your entire fund and a 5% bid/offer charge on every 250 you put into your savings. A managed fund tries "manage" a selection of shares and some cash/gilts. The cheek of it is that these managers claim to out-perform the index or area that they manage. 75% of these managers actually under perform the average. Charges do matter. Remember there are stamp duty / broker charges internally already. The risk element is low as time goes on.

* put it in a low tracker fund like Quinn Life: http://www.quinn life.com/Life/QuinnLife.nsf/Homepage?OpenPage

I like this because:
i) It's clear to see what your money does: it buys a number of units every month
ii) want to know how it's performing: easy -> (no. of units) x (current price on newspaper or webpage) = total value
iii) Low single annual charge of 1% per year. That a huuuge difference to 1.5% especially as the fund gets bigger year. Note that putting away 250 every month is a good idea compared to say putting in a lump sum because it means you never pick the worst time. You pick the average and do better as time goes on. It's time not timing. Risk element again is like managed funds.... lower and lower as time goes on.

Have a look at the attached notes I picked up on this subject I picked up. Unformatted but I hope explains this much better!

Also visit AskAboutMoney's guide: http://www.askaboutmoney.com/guide/
and the website: www.askaboutmoney.com

daveg,

I suppose the most cheerful thing I could say is that while the markets are down you tend to buy more units than when they are high (ie like 2 years ago) hence the reason I'm leaving the pep run another year. prices are fairly low. The longer you invest long term the less risky the outcome is in the long run.


Anyone else with a managed fund? Also do anyone know if these life companies pocket the dividend that comes with the shares internally in these funds?

crazyasafox

Guys thank you and hamster really appreciate your time,will have to go through it in detail as I am very new to all this.Daveg could be wrong but the last time I checked it was in or around €125 for each child after the buget,will let you know one way or the other

daveg

Hamster thanks very much for the informed post and the Zip attachement (it's actually a Winrar file for anyone trying to download it). I'll check the charges assosiated with the account tonight but the burning question is what is the best investment for say 10/15 years ? Is the PIP/PEP fund the way to go... especially now that shares are at the lowest they have been for a long time. I suppose the risk is if you bought all your shares now (in the pip/pep asccout) while markets are low and when you wanted to close your account markets are still where we are now you'll make nothing.

hamster

Originally posted by daveg
but the burning question is what is the best investment for say 10/15 years ? Is the PIP/PEP fund the way to go... especially now that shares are at the lowest they have been for a long time

Daveg,

If you're definitely able to hang in for the long term I would definitely recommend it. It's just the pep has high charges. Actually is it "gross roll up" or "net charged" ? ie, after 2000 I think all new investments are now only taxed when you cash it in (on profits of course)... ie that is gross roll-up. Pre-2000 funds were taxed every year on their profits (if any).

Any low charging equity fund such as the PEP or a simple index tracker will do well if the markets picks up but it will eventually (not guarenteed of course) as it has in the past. As you say you are buying more units each month cheaper than say 2 years ago. Also by spreading the investment over several years it reduces the risk even further compared to a single lump sum say.

Ask Irish Life if you haggle down the charge or hint you might stop and continuing investing with a cheaper provider like Quinn Life. Ask if they have a index tracker fund that doesn't have managed charges!

daveg

Originally posted by hamster
Daveg,

If you're definitely able to hang in for the long term I would definitely recommend it. It's just the pep has high charges. Actually is it "gross roll up" or "net charged" ? ie, after 2000 I think all new investments are now only taxed when you cash it in (on profits of course)... ie that is gross roll-up. Pre-2000 funds were taxed every year on their profits (if any).

Any low charging equity fund such as the PEP or a simple index tracker will do well if the markets picks up but it will eventually (not guarenteed of course) as it has in the past. As you say you are buying more units each month cheaper than say 2 years ago. Also by spreading the investment over several years it reduces the risk even further compared to a single lump sum say.

Ask Irish Life if you haggle down the charge or hint you might stop and continuing investing with a cheaper provider like Quinn Life. Ask if they have a index tracker fund that doesn't have managed charges!

Thanks for that Hamster. I'll check the related charges on the account. I think we will stick with it as we are deff in for the long haul (15 years at least).

The Corinthian

Monaco. Most banks there are presently offering 6% plus even on small deposits. Subject to Irish tax (DIRT, etc) upon repatriation. It is not taxed there, although there are some bank charges.

You can set up an account yourself (EU passport & proof of residency required) or via your existing bank (although I don't know if Irish banks do this).

RainyDay

Hi Corinthian - Got any links for those Monaco banks. 6% is a huge rate for a deposit account in this day & age. I did a bit of Googling but couldn't find anyone offering anything near this. Note that there are some huge scams out there like Monaco Capital Bank offering 12.9% interest. Would you really want to put your money with a bank claiming to be registered in Indiana USA, a subsidiary of the Pinapple corporation of Vanatu, have their contact address in Malaga, Spain and are not covered by the Irish (or any other) investor compensation scheme?

No thanks...

Going back to the original question, a low-charging equity fund is best for a long term investment - Try Quinn Life or EBS.

l3rian

Monaco Capital Direct, Inc is wholy owned by the "Pineapple Corporation"

A bank owned by a fruit company? This scam isnt even plausible. These fraudsters could have put more effort into this.

The Corinthian

Originally posted by RainyDay
Hi Corinthian - Got any links for those Monaco banks.

Not presently. It was a reccomedation made by my family's lawyer in Rome. I'm probably going to be in either France or Switzerland in the next few months and will make enquiries then.

If I get any details I'll let you know.

RainyDay

If I get any details I'll let you know.

Great - I'd be very interested (and a bit surprised) to see any reputable banks offering 6% interest to Irish residents.

antoinolachtnai

6 percent interest on a regular bank account (not equities or bonds) is patently ridiculous. That's three times the rate that a bank can borrow money off the European Central Bank for. How could they possibly make a profit?