18 year old - best investment?

[hubble]

Many thanks for your kind posts.

1. My initial thoughts were to set up an ETF. I think I tried to do it for her with an online broker a few years ago but came to the conclusion that it was not worth the hassle given that she is a minor and I said let her set up her own trading account when she turns 18. This would give her some exposure to managing her money with an exposure to the stock market. Also I wouldn't advise her to buy individual stocks. An All World ETF maybe.
2. The thinking above would be that she would have gained a small amount of education in finance with access to the money for a house deposit in 10 or more years or whenever.
3. There may be small gifts up to the CAT limit over the next few years which would also help in accumulating a house/apartment deposit.
4. She could spend some of the money travelling or whatever.
5. However the PRSA idea was said to me in recent times. It had never occurred to me. She has no income and is unlikely to work during college term. She may work in the summers. I was not aware that you could carry forward tax deductions on a pension, if that is the case.
6. Maybe she should set up a PRSA and online trading account. Or simply leave the money in the bank or post office and let it accumulate for a house deposit or medium term use!

 

[Gordon Gekko]

And this is exactly why the country is under provided in terms of pension coverage.

you are “anchoring” your arguments only to the facts presented without making any 2nd stage analysis.

Let’s take a really simple two stage example

she puts €4,500 into a state savings certificate earning 1% tax free and €500 into a PRSA

Over the next 5 years her state savings will grow to €4,750 give or take what she started with no material impact on her ability to use her savings.

As noted the income tax relief on the PRSA is equivalent to a guaranteed return of almost 50%

Let’s say she starts work after college and of course can then deduct the €228.75 as a tax rebate to add to the above giving a total of €4,978

Her pension investment will grow completely tax free no tax returns to deal with no minimum fee brokerage charges or stamp duty. Just a simple clean investment wrapper which facilitates small monthly contributions of just €50pm.

In equities over 5 years her €500 might be worth €669 with no immediate tax to pay on the profit. Whereas an ETF would be worth say €600 after tax.

so the combination of the income tax relief plus the tax free returns make this unquestionably the best return she could possibly assume to make on, and this is critical, a modest sum.

These post all assume that investing in an ETF as a taxable investor in Ireland is like jumping on the Luas. Show me what it costs to buy €500 worth of an ETF and properly account for the tax liability for no higher expected return and makes saving €50 pm possible in a taxable environment- go on please I’m waiting.

Explicitly the poster also mentioned future small gifts.
Materially impacting on the amount of cash she will have available at any given point in the future. This isn’t “all the money in the world” and needs to be wrapped in cotton wool but suggestions to gamble away with an ETF make no sense at all

My own “tuppence” is that your advice is overly complex, overengineered, and probably suboptimal. However, more detail regarding the individual’s circumstances is required.

 

[Marc]

How much will in cost in professional fees to set up a PRSA?

I can only speak for my own business but for our wealth management clients we provide pro-Bono advice to our clients children up to the age of 30.

So for my clients at least, literally nothing

 

[NoRegretsCoyote]

Or simply leave the money in the bank or post office and let it accumulate for a house deposit or medium term use!

To me this makes most sense.

The sums involved are small, it is not serious wealth.

For this amount at 18 there are many things (education, travel) that could pay off in the long run much more than financial returns.

 

[joe sod]

another possible fall out from Brexit is that U.K. investment trusts could go the way of non-EU ETFs.
at present they are regulated as AIFM with an EU Kid document but post 1/1/21 they are going to be treated as a “complex instrument” by some EU trading platforms.

but sure why would that be an issue, aren't non-EU ETFs treated like shares anyway ? There are whole discussions on the ETF threads about ways to buy US domiciled ETFs for that very reason because they have the tax advantages. Is it the case that it might be more difficult to buy and sell these on EU platforms rather than the tax treatment being the issue. Afterall they can't single out UK investment trusts for different tax treatment when they dont do it with US ETfs and funds.

 

[Marc]

thanks for acknowledging one of my points.

This is not to do with tax, this is to do with the distribution and marketing of Third county funds in the EU by regulated entities.

UK investment trusts could go the same way as non-EU etfs did recently when the PRIIPs regulations came out.

putting all of these investment options effectively out of reach for EU retail investors

 

[Brendan Burgess]

so the combination of the income tax relief plus the tax free returns make this unquestionably the best return

But Marc

The best return up to the age of 65 is not what she wants! You have been told that repeatedly.

She wants access to the money now and in the next few years.

Brendan

 

[SGWidow]

I must admit finding Marc's posts a little irritating.

Within not such a long thread, we have

Estimated cost of professional advice to ensure tax compliance with an ETF purchase €750 plus Vat.

When it suits one argument

and

How much will in cost in professional fees to set up a PRSA?.........So for my clients at least, literally nothing

When it suits a different argument


Mixing apples and oranges in this way is boards.ie level discussion.

 

[Marc]

From the original post “What do you think is the best way to invest the deposit and possible future small gifts?”

“But Marc

The best return up to the age of 65 is not what she wants! You have been told that repeatedly.

She wants access to the money now and in the next few years.”

you are all of course entitled to your own opinions sadly not your own facts

 

[Gordon Gekko]

Marc,

I have to admit I am growing really tired of your long-winded posts, your constant advertising, and the way you always seem to overcomplicate things.

Good financial advice should be easy for the recipient to understand.

I think that on balance your contributions to this forum do more damage to your business than anything else. I’m not a fan of ‘brokers’ per se, but I much prefer the relaxed style of an ‘SBarrett’ for example. I wouldn’t hesitate to talk to him if I needed to, and there are others here to be fair.

“Keep it simple”

 

[Sarenco]

Am I the only one that thinks this thread is completely surreal?

An 18 year-old student could easily spend €5k in a single year - even if living at home and having her tuition costs met by a parent.

The idea of investing any money in equities - in whatever vehicle - that might be required within a year seems like a bad idea to me.

 

[SGWidow]

Am I the only one that thinks this thread is completely surreal?

No

 

[messyleo]

Am I the only one that thinks this thread is completely surreal?

An 18 year-old student could easily spend €5k in a single year - even if living at home and having her tuition costs met by a parent.

The idea of investing any money in equities - in whatever vehicle - that might be required within a year seems like a bad idea to me.

Praise be!! In short, to answer the subject of thread imo:

18 year old - best investment? Life experiences / living (and also maybe just let her do what she wants with it herself!)

 

[NotMyRealName]

I'm new to this forum but find this a very interesting discussion. I've a similar situation with my daughter. Amount of capital is larger though. After much investigation, including bare trust, I decided to go with execution only with her own DeGiro account ( now she's 18) and 1 emerging mkts and 1 all world fund. Bit of thinking and work involved and hope......sure you pay tax on early disposal or 7 year deemed disposal....but you can't avoid death and all taxes. If she starts employment after college, well then maybe liquidate account and use it to start a PRSA.

 

[Geoff Tipps]

Interesting discussion. Perhaps I'm being overly simplistic here but I don't see what's so complicated about buying an accumulating ETF on Degiro and filing a return after 8 years to pay the 41% tax on the gain. Let's not over egg the pudding here! 750 euro + VAT??

 

[Leper]

The young lady is 18 and all her life is ahead of her. Keeping the money in any financial institution will teach her that the value of it is being flushed down the waste pipe "exponentially" every month.

She is about to start college. If I were her I'd be using the money there to in some way allay the 3rd level costs from her parents. She is young and probably wants to enjoy life a bit too. Talks of financial this or financial that are likely driving her around the bend. Let her enjoy a few bob for Crying Out Loud. Unless . . . . . . . she is Greta Thunberg.

OK! some investment advice for a low money investor:- Buy some art painting and if you use your head you should turn a good profit in a year or two even after commissions.

 

[Brendan Burgess]

Buy some art painting and if you use your head you should turn a good profit in a year or two even after commissions.

What?

You can't be serious?

Art should never be an investment for anyone because of the high costs of buying and selling and the odd nature of the market. The vast majority of art works fall in value, often to zero.

It definitely should not be an investment for low earners.

Brendan

 

[Leper]

What?

You can't be serious?

Art should never be an investment for anyone because of the high costs of buying and selling and the odd nature of the market. The vast majority of art works fall in value, often to zero.

It definitely should not be an investment for low earners.

Brendan

If I can turn a few bob buying the occasional landscape painting so can you and I ain't Gordon Gekko.

 

[Brendan Burgess]

If I can turn a few bob buying the occasional landscape painting so can you

If you have done, then you have been extremely lucky. Alternatively, you have some astonishing skill. I don't have such a skill and I very much doubt that an 18 year old student would have either.

 

[Leper]

If you have done, then you have been extremely lucky. Alternatively, you have some astonishing skill. I don't have such a skill and I very much doubt that an 18 year old student would have either.

I don't have any astonishing skill, but I am not in the big league. Occasionally, I buy a piece from an Irish artist (never spent >€300.00). I'd hold onto the picture for perhaps 2 years and even change the frame before selling it on. Sometimes it's the source of the painting (especially if it has some sort of story with it) will increase the value.

I should add painting is a continuous hobby for me (I've even sold some). Like I already said, I'm no Gordon Gekko but with a little bit of knowledge and the ability not to get too attached to a painting you can turn a profit. It'll never be or near a fulltime occupation for me. Perhaps I've had some luck too? - But, you make your own luck.

Incidentally, all our offspring buy and sell art works too and they themselves are pretty good artists. Producing art is like showbusiness and like showbusiness you must know your audience.