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1st time investment conundrum...pay off mortgage vs take a punt on something?

  • 28-02-2020 5:53pm
    #1
    martco
    Registered Users Posts: 420 ✭✭


    sorry if this is a stupid question

    I very recently came into a bit of inheritance, not unexpected it took 2 years for the probate to complete...now the money is sitting in my ordinary regular current account today and I'm not sure what to do next.

    i'm 47 Married, 3 kids (1 in uni 2nd yr, 1 doing Leaving wants uni, 1 is 12yo)
    I'm 10 years into a 30 year 350k mortgage

    Originally I had thought of putting it into a 2nd property, fix it up and sell on and see if I could keep going on that basis (i'm decent diyer) but there isn't quite enough in the pot for that to work out imo (Dublin) and anyway I can see the property market has fairly halted now/I've missed that wave

    I opened a stock trading account but so far have chickened out...just watching what's going on this last week has put me off doing anything there for the forseeable

    I had also considered using a chunk of it to halve or even go further and completely pay off my mortgage BUT I'm one of the really lucky ones on a gold plated Tracker and that's probably the cheapest money in existence afaik? so would be pointless

    The only other thing I can think of is to place it in one of those An Post longterm products (10 years @16%?)


    Nothing is really ringing a bell but I think the money might as well be under my bed as sitting in that current account. Thoughts?


Comments

  • #2
    delta_bravo
    Registered Users Posts: 4,567 ✭✭✭delta_bravo


    How's your pension?


  • #3
    robman60
    Registered Users Posts: 2,222 ✭✭✭robman60


    In your position I would put half towards the mortgage and then drip another portion into the market. Now could be a decent time to put in maybe 10% and then put a bit more in as you see fit. I tend to put a bit into the market each month regardless of conditions. Will be putting in more now that there's been a good dive.

    An ETF could be a good place to start and I would go with the FTSE 100 right now as 1) you get a great exchange rate versus GBP and it pays almost a 5% dividend rate at the moment. I haven't gone into that ETF myself as I tend to prefer individual stocks as there is no fee and I enjoy researching the companies I buy. However, it is ideal for passive investment and is obviously hugely diversified as it is market capitilisation weighted to the 100 companies that make up the FTSE 100.


  • #4
    Static M.e.
    Registered Users Posts: 3,087 ✭✭✭Static M.e.


    Why not just pay it all off your mortgage? Wouldn't that be a nice gift from whomever left the inheritence "X knocked 15 years off my mortgage"...Unless you a have tracker it is probably the best & safest return you can get right now even if stocks have dropped a lot in the last week.


  • #5
    martco
    Registered Users Posts: 420 ✭✭martco


    thanks for all the replies so far...
    to answer a couple of questions:

    Pension? yes but I have a minimal one established years back as part of my employment package....the problem for me is I watched my dad get crushed by his supposed gold plated "vehicle"...he got all the excuses in the world for not coming away with the projected outcome (just over half what he was supposed to get so I have a bit of an attitude problem there... I'd want more control I suppose despite the tax advantages

    an ETF? yes, I think this might defo be the way to look at part of the problem at least. In theory this is spare (but very welcome) money, I do think I could stake a 1/3 of it on a riskier horse but I'm not one of those guys who wants to spend his day watching individual stocks like a hawk. The reason I'm chickening out of individual trades is that years back I had a basket of tech stocks, balanced (or so I thought) I had half
    of them in a very particular rock solid company (Lucent) who nearly collapsed overnight...less info available maybe back then but it still taught me that you have to be sitting on the shares daily and be able to see a trend to be successful and I'm not sure I can

    Pay off Mortgage? yeah I'm luckily on a tracker so I just can't see the advantage apart from the joy of having the deeds in my hand. Low interest rates + deteriorating value of money....I think there if interest rates tilt badly I just make sure I have some cash on hand to deploy when that happens....or an I missing something?

    +++++++++++++


    One other option that has come to my attention is peer to peer lending, anyone know the craic there?


  • #6
    antimatterx
    Registered Users Posts: 2,649 ✭✭✭antimatterx


    Non USA ETFs have a rotten tax regime. We also can't buy US ETFS anymore so be careful.


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  • #7
    Taylor365
    Registered Users Posts: 2,994 ✭✭✭Taylor365


    Taking a punt? Go to Cheltenham.

    Want to invest? Do some proper study. Figure out your risk tolerance and go from there.

    I'm spread across 17 US stocks since 2018. Up 30% even after the small correction.

    You pay CGT on gains,

    Dividends are split; 15% to US(after filing W8-BEN) and rest is treated as income and filled on ros.ie/myaccount.


  • #8
    martco
    Registered Users Posts: 420 ✭✭martco


    Taylor365 wrote: »
    Taking a punt? Go to Cheltenham.

    Want to invest? Do some proper study. Figure out your risk tolerance and go from there.

    I'm spread across 17 US stocks since 2018. Up 30% even after the small correction.

    You pay CGT on gains,

    Dividends are split; 15% to US(after filing W8-BEN) and rest is treated as income and filled on ros.ie/myaccount.

    Taylor, those 17 stocks, whats the balance there for you between riskier stuff and safer bond type stuff? 60/40? 70/30?

    I'm reasonable with tech stuff (although its hard to believe how some of it is so successful) but have poor knowledge on everything else where I'm limited to basic supply/demand thinking


  • #9
    markpb
    Registered Users Posts: 9,239 ✭✭✭markpb


    martco wrote: »
    I watched my dad get crushed by his supposed gold plated vehicle

    The reason I'm chickening out of individual trades is that years back I had a basket of tech stocks, balanced (or so I thought) I had half of them in a very particular rock solid company (Lucent) who nearly collapsed overnight...

    I just can't see the advantage apart from the joy of having the deeds in my hand.

    Be careful about investing your money with your heart rather than your head. Your dad's negative experiences with a pension should not be a guiding principle. Pension products have changed significantly since then (for better or for worse). The main advantages of paying off a mortgage early are an immediate increased cash flow and security in the even of you losing your job for any reason. It's not just about the warm fuzzy feeling inside.

    I was in a similar situation recently and saw it as great opportunity to take some risky investments and try to leave myself in a comfortable position in a few years. After doing a *lot* of reading and educating myself, I took the more sensible (and boring) approach, paid down part of my mortgage and topped up my pension. Then I used Revolut to trade in a small amount of shares. I won't make a fortune from it but it's ticking along nicely (or it was until last week!) and I get the experience of investing/gambling without massive risk.


  • #10
    Mitzy
    Registered Users Posts: 238 ✭✭Mitzy


    Rather than pay a lump sum off your mortgage how about paying back say an extra €2k per month? Once you pay a lump sum off it's gone for good.
    It will give you a bit of thinking time about what you would like to do with it depending on markets for investments etc and you will see the capital reducing.
    Leaving the cash on deposit is a waste of money but also be wary of investing. The markets are very jittery at the moment and if a recession does hit it's good to have a nest egg there.


  • #11
    Taylor365
    Registered Users Posts: 2,994 ✭✭✭Taylor365


    martco wrote: »
    Taylor, those 17 stocks, whats the balance there for you between riskier stuff and safer bond type stuff? 60/40? 70/30?

    I'm reasonable with tech stuff (although its hard to believe how some of it is so successful) but have poor knowledge on everything else where I'm limited to basic supply/demand thinking


    Nearly all blue chip, mature, stable companies. The only risky ones are weed(currently in the gutter) and i wouldn't include them in my 'investing' portfolio. I've held these through bad times and lately, very good times.


    Breakdown below:

    Tech 4

    Consumer Goods 2

    Pharma 1

    REIT 2

    Finance 2

    Entertainment 2

    Food 1

    Comms 1

    Tobacco 0

    Insurance 1

    Weed 2

    Garbage 1


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  • #12
    cooperguy
    Registered Users Posts: 2,650 ✭✭✭cooperguy


    How much did you inherit compared to the value of the mortgage? Putting your money in that is tax free, risk free return. This looks like the perfect type of question for Askaboutmoney.com's money makeover thread.


  • #13
    darragh o meara
    Registered Users Posts: 3,221 ✭✭✭darragh o meara


    A good idea I heard recently from someone in a similar situation. They bought an apartment in the town where their kids intend to go to college so they will one less expense to worry about when they go plus they can also rent the second room to make some income at the same time. Once the kids are finished college they will either sell or rent out. The hope is that the value will go up and that the money saved by not having to pay rent for the kids will make it a very tidy investment indeed.


  • #14
    Coil Kilcrea
    Registered Users Posts: 215 ✭✭Coil Kilcrea


    Maximize your pension, very tax effective and invested for the long term. Put 6 months equivalent salary or living expenses away for a rainy day or unexpected expense. Pay off the mortgage or a chunk of it and invest the remainder in a basket of equal amounts in 8 or 10 global superstar companies for the long term. But only invest if you are prepared to do some reading, understand the basics and not lose any sleep over it.

    As others have said, don’t view pensions or investing through the rear view mirror. You only learn by having the odd failure. We all do ..... and I have done all of the above and been invested for years. It’s performed very well, I don’t look too often, I know the market rises and falls but equally, I know that over time equities are a good investment.

    And I’m not afraid of what I don’t know.

    Don’t rush and take your time.


  • #15
    bilbot79
    Registered Users Posts: 1,980 ✭✭✭bilbot79


    Your dad's pension sounds like defined benefit which doesn't happen so much now and is why there were excuses. He wouldn't have thought of it as a place to invest excess cash and you shouldn't discount a regular private pension as a good place to invest cash.

    Maximise your pension contributions and use the inheritance to live off if you need to but make sure to get those pension benefits.

    No harm to buy Norwegian Cruise Line/Royal Carribean stocks on Revolut tomorrow either


  • #16
    Coil Kilcrea
    Registered Users Posts: 215 ✭✭Coil Kilcrea


    Very good advice but don’t start your foray into equities on crushed cruise lines with piles of debt and no customers because it will be a long and lumpy ride. Worse, and I’m sad to day it, they will have an awful lot to do to convince punters to take a spin on what are now virtually coffin ships.

    Nibble at a few Twitter, Exxon or Disney, all of whom have better prospects.

    Just a suggestion .....


  • #17
    bilbot79
    Registered Users Posts: 1,980 ✭✭✭bilbot79


    Coil Kilcrea wrote: »
    Very good advice but don’t start your foray into equities on crushed cruise lines with piles of debt and no customers because it will be a long and lumpy ride. Worse, and I’m sad to day it, they will have an awful lot to do to convince punters to take a spin on what are now virtually coffin ships.

    Nibble at a few Twitter, Exxon or Disney, all of whom have better prospects.

    Just a suggestion .....

    Coronavirus will be done by July


  • #18
    Diemos
    Registered Users Posts: 1,417 ✭✭✭Diemos


    martco wrote: »
    thanks for all the replies so far...
    to answer a couple of questions:

    Pay off Mortgage? yeah I'm luckily on a tracker so I just can't see the advantage apart from the joy of having the deeds in my hand. Low interest rates + deteriorating value of money....I think there if interest rates tilt badly I just make sure I have some cash on hand to deploy when that happens....or an I missing something?

    Risk.

    There is a good chance that if you invested in the markets and left it there for a long term that financially you would be better off than if you paid down the mortgage. But it is a risk, you could lose out.

    Once you pay off your mortgage then you have very few living expenses. It gives you a lot of wiggle room to invest at your leisure and if your investment crashes the impact would not feel nearly as harsh.


  • #19
    cooperguy
    Registered Users Posts: 2,650 ✭✭✭cooperguy


    Diemos wrote: »
    Risk.

    There is a good chance that if you invested in the markets and left it there for a long term that financially you would be better off than if you paid down the mortgage. But it is a risk, you could lose out.

    Once you pay off your mortgage then you have very few living expenses. It gives you a lot of wiggle room to invest at your leisure and if your investment crashes the impact would not feel nearly as harsh.

    Also worth pointing out, the return on your mortgage overpayment is tax free. If you have a 3% interest rate on your mortgage its the equivalent of earning 5 or 6% on the stock market (which you then have to pay tax on).


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