Advice needed for an inexperienced small time private investor

D

Donnie

Registered User
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Hi All,

I have a small sum of €3,000 and am looking to invest it in a fund(s) for a max period of 2/3 years depending on the rate of returns during this period. The current depost rates with the major providers are very low at the moment as are the government bonds which is why I am looking at an investment fund(s). As I said I have no experience in investmetns but would be looking at funds with no or small withdrawal lock up fee's, steady growth curve and a low minimum initial subscription level obviously seeing as my small pool of available subscription cash. Also any advice on tax implications when I am withdrawing cash or receiving potential dividends would be helpful as I am aware that this differs depending on the product type and on the fund domicile.


Any advice or tips on investment proodcuts/funds would be helpful.

Thanks,
Donnie
 
For that kind of sum and that kind of investment horizon, you should simply keep it on deposit (I would suggest Rabo's instant access deposit account), assuming you are not carrying any high interest debts.

There is no such thing as risk free return.
 
Sarenco said:
For that kind of sum and that kind of investment horizon, you should simply keep it on deposit (I would suggest Rabo's instant access deposit account), assuming you are not carrying any high interest debts.

There is no such thing as risk free return.
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Thanks for the prompt response. I see a number of banks and financial institutions such as KBC, Rabobank provide low risk investment fund products. Any thoughts on these products as I see some tend to offer a higher return than deposit accounts based on the fund performance charts on display?

Regarding deposits, I already have €5k in a KBC instant regular saver depost account and €13k in a KBC 18 month fixed term deposit account, which is why I was looking at the idea of investment fund products.

Regards,
Donnie
 
Well, past performance does not equal future success.

The only possible way an investment product can produce a higher return than a (relatively) risk free deposit is because it involves more risk. You might expect to achieve a better return but the risk is that you won't - and you might actually lose money.

A lower risk investment (such as a bank deposit) has a low potential return. A higher risk investment has a higher potential return but also a potential for a greater loss. There is no free lunch in investing - higher potential returns always come with greater risks.

Over the long term, higher risk investments (such as property and equities) would be expected to provide higher returns than lower risk investments (deposits and government bonds). However, in investing terms, 2/3 years is not long term - it is very definitely short term.

If you think you will need to access your cash in 2/3 years, you should stick with deposits.

Hope that helps.
 
Just to advise regardless of the amount of money to invest, Management Fees will eat up any growth or in fact eat through your Capital. You should investigate and learn about ETFs (exchange traded funds). These might just suit what you are looking for.

As an end note, do not rely on what your Standard Financial Sales person tells you. They work on commission, so the more you listen to them, the more they earn.
 
Donnie said:
Regarding deposits, I already have €5k in a KBC instant regular saver depost account and €13k in a KBC 18 month fixed term deposit account, which is why I was looking at the idea of investment fund products.
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As you have a total of €21k , €3k represents about 15% of your wealth. ( Or a lot less if you have other assets)

Under the circumstances, you could consider buying a single blue chip share or two blue chip shares. This would give you equity exposure at the lowest cost. Of course, the stock market is volatile, and the company could fall by 50% the day after you buy your share, but you can handle that risk.

It's also fairly tax efficient. The first €1,270 of your capital gain is tax free, and the rest is taxed at 33%.

If you hold your shares via share certificates, the initial cost will be a bit higher, but there will be no ongoing management fees.

Brendan
 
As an addendum to Brendan's suggestion, I would look into bluechip stock with a track record of high-dividend returns. High dividend returns can be very substantial indeed. You are taking a bit of punt on the shares and the dividend, but all things being equal, you are likely to come out better off than a deposit. At least that's been my experience. As an aside, if you opt for shares make sure you check out the fees charged by various brokers beforehand.
 
High dividend returns used to be synonymous with bank shares but we know what happened to them :)
 
jpd said:
High dividend returns used to be synonymous with bank shares but we know what happened to them :)
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True, but believe it or not there are quite a large range of H.D yielding stocks from companies that actually make and sell THINGS! A quick search on Google will throw up a fair range, the trick, if there is one, is to be sensible. ;)
 
The banks going wallup was a sharp reminder of the risk that shares bring but I would still say a well spread in them is a good investment. Just do not have all your eggs in the one basket.
 
id buy an energy company etf , oil company stocks are heading for the lows of the financial crisis , they will surely recover within three years if they are going to at all , the time to buy hated assets is when no one wants them
 
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