Advice on best equity based investment balance for savings

S

Snapper79

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Age: 43
Spouse’s/Partner's age: 43

Annual gross income from employment or profession: 120k

Annual gross income of spouse: 65k

Monthly take-home pay €8200

Type of employment: e.g. Civil Servant, self-employed Both Public Sector

In general are you:
(a) spending more than you earn, or
(b) saving?

Saving varies depending on projects undertaken around home etc. Generally in the region of €2500 - €3000 per month

Rough estimate of value of home €400,000
Amount outstanding on your mortgage: 0 mortgage just paid off
What interest rate are you paying? N/A

Other borrowings – car loans/personal loans etc Small car loan remaining – total interest due on money approx. €500 over next 18 months.

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? N/A

Savings and investments: 15K Cash , 50K invested in stocks

Do you have a pension scheme? Yes, both are in defined benefit public sector pension schemes. Spouse can retire at 60 (non new entrant). We will both be marginally short of full service at retirement so are maximising using AVCs.

Do you own any investment or other property? N/A

Ages of children: One child - 11

Life insurance: Yes, Life, Income Protection, serious illness all paid for through salary deductions.


What specific question do you have or what issues are of concern to you?

  • How much would people recommend to hold in such an execution only account before the risk becomes too high? We have approx. €50k in this joint Goodbody execution only account.
  • I have been reviewing different funds over the last number of months and reading on here and have a reasonable understanding of how they operate. My plan here would be to set up a saving/investment fund with monthly contributions, which I can basically forget about for a period of time. A couple of specific questions here:
    • Is this the correct route at all?
    • Should I look at just setting up with one provider or is there any merit in going with more than one? For example would it make sense to have one lower risk fund and a second higher risk fund?
    • Some seem to have different pricing structures – what ones would people recommend?
    • At present I am looking at ones such as:
      • Goodbody Global Leaders Fund (where I can get a zero entry and exit charge with an ongoing 0.75% charge. They also have similar information presented on their other funds that I am reviewing.
      • Foursight Savings Plan for Public Sector employees (through Cornmarket) with a € 375 consultation fee to set up and then a 1.5% AMC.
      • I have also been looking at options such as Zurich Savings plans that have entry costs of 1.53%, portfolio transaction costs (-0.05% to 2.85%), and other ongoing costs (1.72% to 2.86%).

This is the bit that confuses me somewhat – it doesn’t look like I am comparing like with like in terms of costs? For example are there other costs with the Goodbody fund that I am not seeing?

I am looking for advice on where the best fund for us may lie? I understand that we will have to pay 41% and the eight year revenue implications and that they have a government levy of 1%. I am looking for a fund that has the capacity to cover its costs and provide a return (taking into account that investments can also go down). I have a reasonable tolerance to risk but don’t want all of my eggs in one basket. We have a cash deposit of approx €15k and feel this is probably adequate given employment status and ability if absolutely required to unload some equities.

All advice appreciated.
 
I don't have advice for you OP.

I just want to say I'm interested in hearing views as I also wanted to look at investing in equities on a monthly basis without the hassle of getting into etf. I thought something like this would take the hassle out of the 8 year tac rule while also allowing one to invest in equities.

Any advice on the products mentioned by the OP?
 
You should be aware that money going into your AVC's may be taxed at the high rate when you withdraw them. In retirement any combined income in excess of 70,600 will be liable to 40% tax rate. (In todays terms).
Money in the AVC will benefit from gross roll up (no tax every 8 years), but you would want to ensure your getting good returns which may mean going into a higher risk category. But you have 20+ years so I wouldn't be too worried about the risk level.

Picking individual stocks is a lot higher risk than a managed fund, even a higher risk one. To get the most out of it (risk adjusted returns) you would need about 400 different stocks. Its easier just to invest in a fund. Zurich have a very good track record. Make sure your allocation is 100%. Dont know much about the goodbody account.
 
Fresh-Start said:
You should be aware that money going into your AVC's may be taxed at the high rate when you withdraw them. In retirement any combined income in excess of 70,600 will be liable to 40% tax rate. (In todays terms).
Click to expand...
Thank you Fresh. I had been reviewing this and based on the premise of retirement income being taxed at 40%, I have this balanced with only small monthly contributions which will maximise lump sum payments but won’t push us into tax savings on the way in simply being taxed on the way out. Effectively at this point my AVC is maxed out from a tax advantage point of view, so we are focusing on my spouses AVC to achieve the same.
 
Snapper79 said:
    • At present I am looking at ones such as:
      • Goodbody Global Leaders Fund (where I can get a zero entry and exit charge with an ongoing 0.75% charge. They also have similar information presented on their other funds that I am reviewing.
      • Foursight Savings Plan for Public Sector employees (through Cornmarket) with a € 375 consultation fee to set up and then a 1.5% AMC.
      • I have also been looking at options such as Zurich Savings plans that have entry costs of 1.53%, portfolio transaction costs (-0.05% to 2.85%), and other ongoing costs (1.72% to 2.86%).

This is the bit that confuses me somewhat – it doesn’t look like I am comparing like with like in terms of costs? For example are there other costs with the Goodbody fund that I am not seeing?

I am looking for advice on where the best fund for us may lie? I understand that we will have to pay 41% and the eight year revenue implications and that they have a government levy of 1%. I am looking for a fund that has the capacity to cover its costs and provide a return (taking into account that investments can also go down). I have a reasonable tolerance to risk but don’t want all of my eggs in one basket. We have a cash deposit of approx €15k and feel this is probably adequate given employment status and ability if absolutely required to unload some equities.

All advice appreciated.
Click to expand...


Questions to ask each provider (or the intermediary)
  • Is there a policy fee and if so how much is it
  • What's the allocation rate ie. is 100% of your money invested - some products offer 101% allocation to cover the cost of the Levy
  • Are there early exit charges and what are the %'s in each year
  • What are the other ongoing costs on the specific fund/s that you want to invest in
  • What's the AMC
  • Is there an additional broker fee
For Info:
  • The Other Ongoing Costs (OOCs) and Portfolio Transaction Costs (PTCs) in KID's are indicative of the worst charging structure you could buy from that provider and not necessarily representative of what you are buying via the intermediary/provider
  • Other Ongoing Costs for specific funds are disclosed (usually) on Fund Fact Sheets/Guides
  • Portfolio Transaction Costs aren't explicitly disclosed but are included in the fund prices/performance figures on the providers websites (also included are the Other Ongoing Costs)
  • OOCs & PTCs are relevant to all funds
Gerard

www.InvestAndSave.ie
 
Fresh-Start said:
You should be aware that money going into your AVC's may be taxed at the high rate when you withdraw them. In retirement any combined income in excess of 70,600 will be liable to 40% tax rate. (In todays terms).
Money in the AVC will benefit from gross roll up (no tax every 8 years), but you would want to ensure your getting good returns which may mean going into a higher risk category. But you have 20+ years so I wouldn't be too worried about the risk level.

Picking individual stocks is a lot higher risk than a managed fund, even a higher risk one. To get the most out of it (risk adjusted returns) you would need about 400 different stocks. Its easier just to invest in a fund. Zurich have a very good track record. Make sure your allocation is 100%. Dont know much about the goodbody account.
Click to expand...
Out of interest, do you know how Zurich funds perform against Vanguard Global Stock Index? Just wondering why picking out Zurich in particular.
 
Isn't Vanguard supposed to be entering the Irish pension market with very low annual fees and their offering of ETFs
 
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