50k to invest - looking for ideas/advice

InvestQ2020 · 17-08-2020 12:12pm #1

Hi

Firstly apologies if this is posted in the wrong place -

I've a few bob sitting in a bank acc at the moment and yes i know it's losing money there but i was waiting on a few things to line up before i could feel comfortable knowing i wouldn't need access to the cash over the foreseeable

I'm in my early 50s and i'm looking for 5 to 10 yr investments -
i'm not sure if i'd be confident playing the stock market myself - wouldn't really know where to start

I was thinking of putting 15k in to the Government 10yr savings bond which would yield €17,400.00. I know this is guaranteed and tax free but is it really a good return on a 10yr investment?

And as for the remainder of the cash, what would be the best way to divvy it up to high risk - low risk investments etc?

Just kicking tyres at the moment and looking for ideas

Tnks

Browney7 · 17-08-2020 11:09pm

InvestQ2020 wrote: »

Hi

Firstly apologies if this is posted in the wrong place -

I've a few bob sitting in a bank acc at the moment and yes i know it's losing money there but i was waiting on a few things to line up before i could feel comfortable knowing i wouldn't need access to the cash over the foreseeable

I'm in my early 50s and i'm looking for 5 to 10 yr investments -
i'm not sure if i'd be confident playing the stock market myself - wouldn't really know where to start

I was thinking of putting 15k in to the Government 10yr savings bond which would yield €17,400.00. I know this is guaranteed and tax free but is it really a good return on a 10yr investment?

And as for the remainder of the cash, what would be the best way to divvy it up to high risk - low risk investments etc?

Just kicking tyres at the moment and looking for ideas

Tnks

How is your pension situation looking?

InvestQ2020 · 18-08-2020 9:21am

Browney7 wrote: »

How is your pension situation looking?

Tnks for reply Browney - Pensions ok, the company i work for give a decent contribution and i'm upping my own personal contributions/AVCs

I'm looking for something outside of that pension pot that I can treat as more of a short term investment

Mantis Toboggan · 18-08-2020 9:51am

Are you mortgage free?

InvestQ2020 · 18-08-2020 12:26pm

Mantis Toboggan wrote: »

Are you mortgage free?

No i'm not Mantis - i suppose i could lob it off the mortgage but the mortgage is manageable and i like the idea of being able get my hands on the 50k if i needed to for any unforeseen need

So if i pay it off the mortgage it's "gone" where as if it's invested i can still access it

dxhound2005 · 18-08-2020 6:47pm

InvestQ2020 wrote: »

No i'm not Mantis - i suppose i could lob it off the mortgage but the mortgage is manageable and i like the idea of being able get my hands on the 50k if i needed to for any unforeseen need

So if i pay it off the mortgage it's "gone" where as if it's invested i can still access it

You won't get much value out of the 10 year bond if you find you have to take the money out in the first few years. After 4 years your 15K will have added only €150.

Irish_rat · 18-08-2020 7:54pm

The 10 year bond is a terrible return. Inflation is eating away at it more than the interest you'll receive.

Sorolla · 18-08-2020 9:36pm

I think the most sensible thing would be to pay off the mortgage first.

Also any personal loans.

Make sure you have a rainy day fund of about 3 net salaries.

You never know what emergencies may occur.

If you are sure you can do without the rest for the next 15 years then I would suggest all in in an All World ETF

This is highly diversified so the risk is a lot less than individual shares

PHG · 19-08-2020 1:20pm

Sorolla wrote: »

I think the most sensible thing would be to pay off the mortgage first.

Also any personal loans.

Make sure you have a rainy day fund of about 3 net salaries.

You never know what emergencies may occur.

If you are sure you can do without the rest for the next 15 years then I would suggest all in in an All World ETF

This is highly diversified so the risk is a lot less than individual shares

You want return but not confident in the stock market so you will not get a decent return or beat inflation

Sorolla gives good advice above

I would say pay off credit card debt (if you have it) as you will be charged 16% plus on what you owe which is a lot more than a govt bond. Keep 3 months expenses in Cash so add what you need from the amount to your current savings. Then put the rest at the mortgage (as you have mentioned a decent pension).

Will put it this way, imagine the thought of not having a mortgage payment anymore!!!

Bob24 · 19-08-2020 1:31pm

Agree with others that given the awful return of savings accounts or government bonds, you’re better off paying your mortgage/loans with your spare cash than getting those (besides what you are keeping as your emergency fund or any expensive thing you have in mind which will require a lot of cash in the near future).

Another option if you are fairly prudent but prefer to invest the money could be this investment trust (or any similar one): https://patplc.co.uk/

It is very conservatively managed (with a mix of inflation protect bonds, gold, and very safe company shares) but still manages a decent return (6% annualised in the past 10 years, and you can see it only dropped slightly during the stock market crash this year and has since then more than recovered): https://tools.morningstar.co.uk/uk/cefreport/default.aspx?SecurityToken=E0GBR01KRI%5D2%5D0%5DFCGBR%24%24ALL

(taxation is also better than ETFs in most circumstances).

s3ndnudes · 20-08-2020 11:34am

If I was in your situation, I would do in the following order:

1) Pay off any high interest debt in order of the highest interest rate (Credit cards, term loan, car loans etc).

2) I would allocate at least some of the 50k to the mortgage (personally i'd allocate 100% to it but nothing stopping you adding less). Assuming a 4% interest rate annually, i'd go for this guaranteed return over expected returns in the stock market.

3) I would do any home improvements that generate a RETURN and do the one that gives the best Return On Investment (E.g could EUR 10,000 spent on insulation or say solar panels save you Eur 500 a year on heating costs? That would also be tax efficient as you won't be paying any tax on cost savings but you could (depending on your tax rate) be paying up to 50% on income tax on dividends. It will also add value to your property. There can also be some fairly lucrative grants for certain home improvements.

4) I would invest part of the funds into a well diversified stock market ETF. Personally i'd go for VANGUARD FTSE AW or VANGUARD S&P500. They are near all time highs but you could average in your contributions over a couple of months. Also, you have a 5-10 year horizon so on the upper end of that I would expect some appreciation.

You could take a blended approach- pay down some of the mortgage and Invest in the stock market. Just my two cents for what it's worth. The main factors for me would be Return on Investment, Guarantee vs Risk and tax efficiency.

Ironman76 · 21-08-2020 4:48pm

I am in a similar position to the OP.
I don’t have 50k mind, but I am looking to start investing about 5-10k.

One thing that read about ETFs in Ireland is they are prone to high CGT?

Can anyone shed any light? This is the biggest stumbling block for me currently.

Thanks

Bob24 · 21-08-2020 5:15pm

Ironman76 wrote: »

I am in a similar position to the OP.
I don’t have 50k mind, but I am looking to start investing about 5-10k.

One thing that read about ETFs in Ireland is they are prone to high CGT?

Can anyone shed any light? This is the biggest stumbling block for me currently.

Thanks

See here: https://www.informeddecisions.ie/blog42/

The problem actually is that you don’t pay CGT but rather exit tax at 41%, and that it is due every 8 years after buying a share even if you haven’t sold that share (so you are taxed on capital gain you haven’t even made, and reporting is a mess because for each of your shares you need to remember to pay the tax after 8/16/etc years, meaning if you invest every months after 8 years you will also have new tax liabilities each month). Dividends are also incurring exit tax.

LessOutragePlz · 21-08-2020 5:19pm

Bob24 wrote: »

See here: https://www.informeddecisions.ie/blog42/

The problem actually is that you don’t pay CGT but exit tax at 41%, and that it is due every 8 years after buying a share even if you haven’t sold it (so you are taxed on capital gain you haven’t even made). Dividends are also incurring exit tax.

Correct me if I'm wrong but I thought CGT only applied when you realise a gain due to a chargeable event such as selling shares or your shares in an EFT. So in your example you haven't made a gain until you sell the shares/eft and the money is in your account?

Bob24 · 21-08-2020 5:25pm

LessOutragePlz wrote: »

Correct me if I'm wrong but I thought CGT only applied when you realise a gain due to a chargeable event such as selling shares or your shares in an EFT. So in your example you haven't made a gain until you sell the shares/eft and the money is in your account?

For regular company shares, CGT is triggered on the day you have sold the share.

But for ETFs there is something different called “exit tax” (see the link I provided) which is due every 8 years *even if you haven't sold the share and the gain hasn’t been realised* (yes, taxing a theoretical gain which might never be realised is a complete rip-off and to my knowledge it is not common at all in other tax jurisdictions - but our great politicians thought differently and put this in the law).

James Bond Junior · 21-08-2020 5:54pm

Following with interest. Similar position to OP but don't want to go past 2 year investment. Reluctant to pay down the mortgage as the interest is tax deductible against rental income.

Saudades · 21-08-2020 6:10pm

As a beginner to investing, following with interest too.

UK Investment Trusts look appealing as a basket of stocks but taxed at 33%.

Bob24 · 21-08-2020 6:15pm

Saudades wrote: »

As a beginner to investing, following with interest too.

UK Investment Trusts look appealing as a basket of stocks but taxed at 33%.

Also they are not subject to the deemed disposal rule every 8 years.

For sure this is not something they were thinking about, but from a tax perspective Irish legislators have actually made UK based Investment Trusts more attractive to Irish resident than Irish based mutual funds and ETFs.

Saudades · 21-08-2020 6:55pm

Bob24 wrote: »

Also they are not subject to the deemed disposal rule every 8 years.

For sure this is not something they were thinking about, but from a tax perspective Irish legislators have actually made UK based Investment Trusts more attractive to Irish resident than Irish based mutual funds and ETFs.

Nice. So from my limited reading, pros and cons of UKIT's;

Pro -
*8% less tax than Euro domiciled ETF's.
*No 8 year deemed disposal.

Cons -
*Higher volatility as they're all trying to beat the index rather than ETF's that track the index.
*Around 0.5% higher fees than a standard ETF tracker.
*0.5% UK stamp duty? (Not sure about this one if we don't live in the UK).
*Currency conversion of Euro to Stg - risk of currency loss when converting back into Euro in the future?

Bob24 · 21-08-2020 7:02pm

Saudades wrote: »

Nice. So from my limited reading, pros and cons of UKIT's;

My feedback on your points:

Pro -
*8% less tax than Euro domiciled ETF's. [Yes for capital gains. How dividends compare depends on your income tax band.]
*No 8 year deemed disposal. [Yes]

Cons -
*Higher volatility as they're all trying to beat the index rather than ETF's that track the index. [Not necessarily, for example Personal Assets Trust would be less volatile as it is managed very conservatively. But yes at the other end of the spectrum a trust like Scottish Mortgage has performed insanely well but is more risky and volatile.]
*Around 0.5% higher fees than a standard ETF tracker. [Yes or maybe sometimes a little more.]
*0.5% UK stamp duty? (Not sure about this one if we don't live in the UK). [Unfortunately yes we have to pay it.]
*Currency conversion of Euro to Stg - risk of currency loss when converting back into Euro in the future? [Currency exchange fees when you buy and sell yes. But not really a currency risk as the underlying assets aren't necessarily in GBP. The fact that the Trust price is in GBP just makes it harder to compare performance vs EUR or USD denominated funds]

Also one more thing I would add is that ITs are close ended funds as opposed to ETFs which are open ended. Not necessarily an advantage or an inconvenient but a difference to have in mind (it is a good idea to understand the concept of premium/discount of the share price v.s. the net asset value (NAV).

dxhound2005 · 21-08-2020 7:12pm

Before dismissing the mortgage paydown option, people could do a calculation to see how much could be saved.

https://www.ccpc.ie/consumers/tools-and-calculators/extra-mortgage-payments-calculator/

Ironman76 · 21-08-2020 7:13pm

Bob24 wrote: »

See here: https://www.informeddecisions.ie/blog42/

The problem actually is that you don’t pay CGT but rather exit tax at 41%, and that it is due every 8 years after buying a share even if you haven’t sold that share (so you are taxed on capital gain you haven’t even made, and reporting is a mess because for each of your shares you need to remember to pay the tax after 8/16/etc years, meaning if you invest every months after 8 years you will also have new tax liabilities each month). Dividends are also incurring exit tax.

Thanks so much for the info.

ETFs look like a waste of time so? Shame as it’s not like a get rich quick scheme. Better to invest in individual shares albeit more risk I suppose.

Bob24 · 21-08-2020 7:48pm

Ironman76 wrote: »

Thanks so much for the info.

ETFs look like a waste of time so? Shame as it’s not like a get rich quick scheme. Better to invest in individual shares albeit more risk I suppose.

I wouldn’t say they are a waste of time and I think many people still use them, but yeah for me the way they are taxed tends to make me avoid them.

Yes going for direct share ownership is one option, and as mentioned is the past few posts British investment trusts are another one.

Bob24 · 21-08-2020 7:55pm

Bob24 wrote: »

Also one more thing I would add is that ITs are close ended funds as opposed to ETFs which are open ended. Not necessarily an advantage or an inconvenient but a difference to have in mind (it is a good idea to understand the concept of premium/discount of the share price v.s. the net asset value (NAV).

And one more potential difference which just came to mind: while it is easy to find a capitalising ETF which doesn’t distribute any dividends, ITs almost always distribute dividend (but for many of them most of the gains are ire invested and the dividend is small - 1% or so).

InvestQ2020 · 24-08-2020 9:41am

Thanks to everyone for their input to date - lots of good advice there to mull over

27-08-2020 4:52pm

James Bond Junior wrote: »

Following with interest. Similar position to OP but don't want to go past 2 year investment............

Two years is too short a term for an investment IMO, 5 years minimum I reckon .......

C0N0R · 28-08-2020 2:29pm

Can I dip my hat in here please,

Currently have no debt, of any kind, sitting on over 100k of savings generating nothing, working overseas (Middle East) and looking to do something with savings, not interested in buying individual shares, don’t have the time to do the level of research required, and happy to lock up the money for at least 5 years and probably longer. Anyone care to give some advice on where to go? And to potentially pay the least amount of tax.

Thanks

ECTime · 28-08-2020 4:16pm

InvestQ2020 wrote: »

Hi

Firstly apologies if this is posted in the wrong place -

I've a few bob sitting in a bank acc at the moment and yes i know it's losing money there but i was waiting on a few things to line up before i could feel comfortable knowing i wouldn't need access to the cash over the foreseeable

I'm in my early 50s and i'm looking for 5 to 10 yr investments -
i'm not sure if i'd be confident playing the stock market myself - wouldn't really know where to start

I was thinking of putting 15k in to the Government 10yr savings bond which would yield €17,400.00. I know this is guaranteed and tax free but is it really a good return on a 10yr investment?

Oh forgot to say you can also trade virtual money to practice trading.

And as for the remainder of the cash, what would be the best way to divvy it up to high risk - low risk investments etc?

Just kicking tyres at the moment and looking for ideas

Tnks

I only new to trading stocks but been studying the markets over the past few months, but my advice is to:

Hold your cash, and wait for a pullback, drop in stock market prices. But timing is difficult but there is a high likelihood that it will happen before the year ends, Hopefully for me

For Long Term Investment follow and trade stocks that Warren Buffett is investing in.

I use a certain trading platform (I will direct message the link as I believe it's against T&C to post link) to trade long Term as it's easy to use and popular in the UK especially, also if you're not yet confident you can invest by copying professional traders, they trade you trade and they have the experience to spread their trading portfolio for security.

Recommend Trader to copy is jaynemesis who is from the U.K he is up 55.65% this year, he recommends copying for at least 2 years and has a good spread of stocks.

By the way I am a partner with this Trading platform so hope its okay to post, you can direct message me anytime, or respond to the trend, I am happy to help.

Oh forgot to say you can also trade virtual money to practice trading.

ixtlan · 28-08-2020 4:54pm

On ETFs:

Bob24 wrote: »

I wouldn’t say they are a waste of time and I think many people still use them, but yeah for me the way they are taxed tends to make me avoid them.

Yes going for direct share ownership is one option, and as mentioned is the past few posts British investment trusts are another one.

I know where you are coming from and it is important that people understand the tax implications of ETFs if they are investing directly. I would add though that there are ETF funds available via for example BOILife where they will handle all the tax liability for you, selling as required to cover the 8-year rule. The annual charges are higher than perhaps is reasonable, but they are convenient...

Ix.

Bob24 · 28-08-2020 5:11pm

ixtlan wrote: »

On ETFs:

I know where you are coming from and it is important that people understand the tax implications of ETFs if they are investing directly. I would add though that there are ETF funds available via for example BOILife where they will handle all the tax liability for you, selling as required to cover the 8-year rule. The annual charges are higher than perhaps is reasonable, but they are convenient...

Ix.

Do you have an example of those out of curiosity? I know Irish mutual funds are handling the 8 years rule, but I haven't seen one based solely on ETFs and I'd be curious to see what kind of fees they charge (the main selling point of ETFs is the low cost structure, so wrapping them into a mutual fund seems to defeat the purpose unless the fees for the fund are really low).

Also I would say that the issue with the 8 years rule isn't just tracking the paperwork, but also the fact that it is reducing the compounding power of your investment (being taxed throughout the investment period rather than just once when you sell the asset prevents from compounding part of the yield, so at the end of the day you end up-up with less capital than if you could have compounded your full gains).

s3ndnudes · 28-08-2020 5:21pm

I am open to correction, but it is my understanding that it is only the accumulating ETFS that the 8 year rule applies to. It was my understanding that you could have a distributing ETF whereby you pay the Income tax for the dividends each year, and then when you sell the ETF, you would only then pay capital gains tax? If i'm correct a distributing growth ETF with low dividend yield would be quite tax effective.

Is this not the case?

50k to invest - looking for ideas/advice

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