25k to invest for grandchildren

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David_Dublin

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Hi - I'm in a quandary. My kids were left 25k each by a grandparent in their will. It is sitting in cash in a well known stock broking firm in Dublin. Has been for 2 years. I am terrified of an investment decision that loses money for my kids. I know that investment carries risk. They will not have access to this for 6 years and 8 years, respectively.

Obviously, with hindsight, putting in equitities, or some sort of version of equities, would have delivered good results. But a lot of the sentiment at the time, and since (apart from a blip last year) was that markets were very high and were due a reset. In my own pension, I am fully in equities (late 40s) and am happy to see ups and downs, I take a long term view.

I know you can't pick the bottom, but I just didn't want to get in at the top and see a sharp soon after. Now I am not sure what to do, but I feel I have to have a strategy, even if that strategy is to sit tight until x happens, or y date, or whatever.

Anyone else been through this? Anyone got any smart ideas for what I should do?
 
You should look at the educational value here.

Put some percentage of it in equities and tell them what you are doing. So even if they go down, at least they will learn a lot.

Brendan
 
Just wondering if the children's bequest was actually given as the investment to them, or given in cash for you to do the investment? Might make a difference as to whether you can now change the investment portfolio legally.
 
Thanks for the advice folks.

noproblem said:
Just wondering if the children's bequest was actually given as the investment to them, or given in cash for you to do the investment? Might make a difference as to whether you can now change the investment portfolio legally.
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It was given as cash and remains cash.
 
David_Dublin said:
Thanks for the advice folks.



It was given as cash and remains cash.
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Now I see it and understand. Had thought it was given to the stockbrokers to invest and not just left there.
Sorry, don't know enough legally as to what you may be allowed to do with regard to using the money investment wise. Bit of a waste just leaving it there but at least inflation isn't a factor at the moment.
 
Is the money already in your children's names? And will the broker allow it to be traded in their names, even though they are minors?
 
The money is in Bare Trust, as Trustee I can so with it as I see fit. So I'm looking for advice on the situation, what type of investment to consider or avoid, rather than what I am permitted to invest the money in.
 
I cashed in my investments two years ago, making a nice profit. Unfortunately I left it sitting in a stockbroking firm for two years, missing out on even more serious gains, dividends etc. Didn't get any interest on my parked money, only maintenance charges for two years. I fully understand where you are coming from.

However. I decided to go back in to the market recently. I decided to invest in a high yielding pharma stock. Not doing so well at the moment. Other choices that I could have made are doing much better. I have decided to take a longer term view and see what happens.

You can leave the funds in cash, without risk but without any growth. It is difficult to know what kind of world we are facing in to as we go forward. How will the world change. You could invest in a portfolio of shares, some stocks may suffer in our changing world and some might thrive. Old reliables may fall by the wayside.

I have taken the decision to opt for a high yielding share so at least I am getting a decent dividend, but who knows how long this will last.
 
Brendan Burgess said:
David

Do you have a mortgage?

If so, pay down the mortgage and give them the interest you would have paid on it.

Best tax-free and risk-free return.

Brendan
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Brendan has made a good suggestion. I also did this. I gave my son €100k to put against his mortgage. He is saving about €2.5k per annum in interest. He is paying me back the capital sum over 10 years.
 
never invest in only one stock - that's putting all your eggs in one basket
 
Grizzly said:
I have taken the decision to opt for a high yielding share so at least I am getting a decent dividend, but who knows how long this will last.
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Hi Grizzly

fully agree with jpd. It doesn't matter how good the share is. It doesn't matter how good the dividend yield is.

I had shares in a great pharma company as part of a portfolio. Well managed. Good dividends. Then it made an acquisition and the share price halved. As it's part of a portfolio, I can live with it. But if it had been my only share, I would be kicking myself.

Brendan
 
Brendan Burgess said:
David

Do you have a mortgage?

If so, pay down the mortgage and give them the interest you would have paid on it.

Best tax-free and risk-free return.

Brendan
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Interesting suggestion.....yes, I have a ~140k mortgage on tracker, but about to undertake a refurb that I will need to borrow up to 150k.

How would this work in practise? Would I work out a nice rate for the kids based on a separate term for each (2.5 year age gap to when they are due the money), maybe 1% above what I'd be paying the bank, and then DD to their bank accounts the monthly repayment?
 
Actually just thinking it might make way more sense, and be easier to manage, if this was interest only repayment. I just pay them the principal when they want it.
 
Sorry but paying off your mortgage from the trust monies is a terrible idea.

Trustees have a fiduciary duty towards beneficiaries. A trustee must administer the trust solely in the interest of the trust beneficiaries and cannot place his or her interests in conflict with beneficiaries.

Taking money from the trust to pay off your mortgage would be a clear violation of your fiduciary obligations towards the beneficiaries.

How do you know you will be able to pay anything to the beneficiaries in the future? You could die or go bust in the interim.

Just put the lot in State savings products for the entire relevant periods.
 
Hi Sarenco - hadn't thought of the violation of duties angle. I might explore more with a solicitor to cater for the scenarios you suggest.

Re ability to pay back, worse case scenario is I have a pension/buy out bound that I will be able to access from age 50 (a couple of years). This will comfortably exceed the 200k I can access tax free.
 
David_Dublin said:
Re ability to pay back, worse case scenario is I have a pension/buy out bound that I will be able to access from age 50 (a couple of years).
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What if you die in the interim?

Think of it this way - if the grandparent wanted you to have the money, he/she would have left it to you and not your kids.

You simply can't touch the trust money for your own purposes - you have to administer the trusts solely for the benefit of your kids.

Given the timeframe involved, State savings products are the obvious place for the money.
 
When u have loans and you die, doesn't the estate pay the loans? Not arguing with your general point, this is what I was going to talk to solicitor about. No intention of short changing the kids. And there's no scenario where they don't get paid.
 
Maybe sit down and have a chat with said "kids". After all it is their money and they need to have an input. Just in case you feel they wouldn't know much "about such stuff", it might help to remember what the professionals in the financial world did with our money when they thought we knew very little "about such stuff".
 
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