Where to put 1000 for 21 years

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pgrim

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Thinking of putting away a lump sum of 1000 euros each for my 2 babies. We are emmigrating so was thinking of leaving the money in Ireland for them until they were 21 where they could then access the money and use the funds for a deposit. What are the options available and how much would 1000 euros be in 21 years, given an interest rate of say 4-8% on avarage. Would a managed fund be the best for the long term or would the fees eat away any profit. Also the children would be non resident for tax when they are old enough as we will probably still be overseas.
Appreciate any comments
 
If you are looking for investment advise then please post to the investments forum.

For savings rates - Normally, the longest term deposit rates out there is 5 years. The best rate for a 5 year term deposit is currently with Halifax at 4.27 % .

See [broken link removed]
 
€1000 after 21 years = €6422 (provided 8% return during the term). Sum is subject to tax
 
Of course 8% is not likely to be reality. I have inflated the figure for purpose, so it could be seen that after 21 years theres not much to expect even if investor has a cosmic return. If we assume that average inflation during next 21 years will be 3.5%. Then €6442 in todays terms will be worth €3118 after 21 years. So it is worth considering feeding this saving account with some regular instalments to make it work better
 
21 years is quite a long horizon so I think it makes sense to invest it in something with a bit more risk (and so usually better return over the long run) than a simple savings account. Historically, there were long periods where savings rates were below the rate of inflation so in reality, although you may end up with a bigger number after 21 years, it may actually have less purchasing power than the €1000 today.

Historically, stock market returns tend to outperform equivalent savings returns over the long run. This does not guarantee shares will out-perform savings over your 21 year stint but you could say that it is a more probable outcome

You could invest it in a fund. I recommend a passive fund over an actively managed fund as the commission rates are usually considerably less and tend to outperform the actively managed ones anyway. You should shop around for the cheapest fees. This includes fess to enter and exit the fund as well and most importantly the funda management fee. I think Rabobank have a number of funds avaialable with mnagement fees around 1% but you may do better

Another option is to buy a some shares yourself. This would negate the ongoing management fee but I believe some places have ongoing account maintenance fees so you need to shop around. Also, brokers tend to charge a large transaction fee but shop around and over 21 years this should work out quite small per year. You could reduce the risk by buying a number of different shares.across a number of different sectors.

Maybe some others have a few ideas of alternative investments
 
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