AIMS target return fund?

Discussion in 'Investments' started by gavmcg92, Nov 1, 2016.

  1. gavmcg92

    gavmcg92 New Member

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    Hi all,
    I just wanted to see if you had any opinions on the AIMS fund from Aviva. I am looking for a regular saver now that I have my emergency fund of 10k built up.

    I am 24 years old, on 28k a year and looking to put away 300/400 euro a month (increasing further over time) to hopefully be able to make a dent at a deposit in 5-7 years time.

    Am I better off going with a regular saver from the likes of KBC or EBS or is there anything else you may recommend. As I have an emergency fund built up and I am still quite young, I am willing to take on more risk with these funds.

    Any ideas or if you need more info just let me know.

    G
     
  2. cremeegg

    cremeegg Frequent Poster

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    As interest rates are so low there is little difference between savings products.

    There may become value in saving with an institution that might give you a mortgage in the future. A savings track record with BofI for example may help toward a BofI mortgage more than a saving record with a different company.
     
  3. SBarrett

    SBarrett Frequent Poster

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    For a starters, it's 0.35% higher AMC than the standard charge under Aviva's funds and doesn't have much of a history (started in October 2014). The returns have been negligible over the last year. If you aren't planning on taking much risk, why don't you open a regular saver account with EBS at 3% fixed for the year?

    Steven
    www.bluewaterfp.ie
     
  4. Rory T Gillen

    Rory T Gillen Registered User

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    If you are in a position to save regularly, and just 24 years of age, equities are most likely the best option. And equities do include property (i.e. diversified property funds and REITs). Investing in Absolute return funds is a more conservative route and consequently you should expect returns to be lower over time. There's a Free booklet you can access at another thread on AAM, but it's only free until end November. There's a useful example of the pluses of regular investing in the booklet.

    Rory Gillen
     
  5. Sarenco

    Sarenco Frequent Poster

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    Sorry Rory but I have to disagree with that advice.

    The OP is saving for a house deposit and has a 5-7 year investment horizon.

    I would strongly suggest that a regular savings account - not an equity fund - is the prudent product to use in these circumstances.
     
  6. Rory T Gillen

    Rory T Gillen Registered User

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    Ah yes indeed, speed reading no good. Quite right, I overlooked the likely home purchase!
     
    Sarenco likes this.
  7. Brendan Burgess

    Brendan Burgess Founder

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    So you have two broad options.

    A savings account
    • Very little interest
    • Very low risk
    • You know what you will have after 5 years: €28,000 (€10k + 60 months @€300)
    An equity fund
    • A risk that after 5 years, you will have less than €28,000
    • A greater likelihood that you will have more than €28,000
    • Uncertainty
    I think you should invest your lump sum and ongoing savings in an ETF.
    • If stock prices fall, you will have to wait longer to have the deposit
    • If stock prices rise, you may be able to buy sooner or have a bigger deposit so you would be borrowing less.
    When you are within a year or two of having saved the deposit, then you should switch out of the stock market.

    Brendan
     
  8. Sarenco

    Sarenco Frequent Poster

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    Hi Brendan

    Earlier this year Paul Lewis, who presents BBC Radio 4's Money Box show, published some research comparing the returns on a FTSE100 tracker fund with the returns on cash moved each year into a best-buy one-year deposit account with a bank or building society in the UK. The research assumed dividends were reinvested, and that the cash was reinvested each year along with interest earned.

    He found that the return on the deposits beat the total returns on the tracker in 57% of the 192 five-year investment periods beginning each month from 1 January 1995. The tracker won in just 43% of periods.

    Here's a link to a Guardian article on the research:-

    https://www.theguardian.com/money/2016/jun/18/cash-trumps-shares-for-top-returns

    Now there's plenty of scope to poke holes in the research but it does challenge the conventional wisdom that an equity investment has a greater chance of outperforming cash deposits over 5-year holding periods. Also, bear in mind that the majority of the savings will not actually be invested for as long as 5 years in the OP's case.

    Perhaps more importantly, for all practical purposes, there is zero chance of a capital loss with a government guaranteed deposit.
     
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  9. Jim2007

    Jim2007 Frequent Poster

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    The FT100 is anything but representative of the typical portfolio, which is why I total ignore an research based on it, but that is just me.
     
  10. Sarenco

    Sarenco Frequent Poster

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    Yep, that's one of the obvious criticisms of the Paul Lewis research.

    Interestingly, apparently actively managed cash deposits still beat a balanced, global portfolio (hedged back to sterling) more often than not over the same roling 5-year holding periods according to this analysis.

    http://www.finalytiq.co.uk/paul-lewis-got-active-cash-beat-equities/
     
  11. Brendan Burgess

    Brendan Burgess Founder

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    Hi Sarenco

    I wouldn't really rely on that research to disprove any conventional wisdom. It's not as if there are 192 independent 5 year periods.

    By all means challenge conventional wisdom, but I think that the study would have to be far more extensive than that.

    By the way, I don't agree that there is a zero chance of a capital loss with a government guaranteed deposit. The world is a funny place and we are going through a funny time. The Irish government has totally unsustainable debt. I think that the risk is small, but it's a real risk that deposits might disappear and the government guarantee might be worthless. Admittedly, we would have far bigger problems to worry about then, but I would not classify it as zero risk.

    Brendan
     
  12. gavmcg92

    gavmcg92 New Member

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    Hi Brendan,

    Thank you for that. Do you have any suggestions for providers that I can look into? After posting the original post I went ahead and started a pathway 4 regular saver with Zurich. I'll be keeping a close eye on how it performs and might adjust the amount I put away if a more suitable solution arises. I have 10,000 on deposit as an emergency fund and the aim is to invest in lump sums of 5,000 from spare funds that are put aside each month and built up.
     
  13. PMU

    PMU Frequent Poster

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    792
    The results of Mr Lewis's research are probably not portable to Ireland. His original article http://paullewismoney.blogspot.ie/2016/06/cash-beat-shares-from-1995-to-2015.html states that his returns on cash do not take account income tax, as in the UK cash ISAs are not liable to income tax. It's a bit different here with DIRT on cash returns.