Bottom-line figures

[niallod]

My broker is recommending I invest 40,000 with Irish Life Public Service Cautious Fund. Here is a question that I have asked my broker and they are not able (or are maybe unwilling) to answer the question. If I invested the 40,000 say 5 years ago, how much money would be in my account today when all the charges (AMC, Taxes, Levies, etc.) are taken out. Irish Life factsheet tells me the performance over the last 5 years was 7.83%, 3.5%, 3.14%, 3.20% and -2.95%. Assume 1.5% AMC by Irish Life. I feel I would then be in a better position to gauge investing in the next 5 years in this product. My fear is that what I would have gained by investing in this product would not even match inflation

 

[noproblem]

You could look at it another way, like, what other options have you got? it won't be much different.

 

[Boyd]

For each year, subtract the fees from the gross return. So net return is 6.33, 2, 1.64, 1.7 and -4.45 respectively (don't forget they charge you when you make a loss. I'd also guess there's other hidden fees on top of the 1.5 but let's assume not).

Hence, very very rough calculation would be

Year 1 is 40k @ 6.33 = 42, 532
Year 2 is 42,532 @ 2 = 43,382
Year 3 is 43,382 @ 1.64 = 44,093
Year 4 is 44,093 @ 1.7 = 44,842
Year 5 is 44,842 @ -4.45 = 42,847

https://www.buyupside.com/calculators/annualizedreturn.htm reports this as 1.7 percent annualised return, before CGT or exit tax.

IMO if you have any non tracker mortgage you'd be better paying 40k off that instead.

 

[niallod]

Thank you for your reply. You say the annualised return is 1.7% using the calculator you suggest but it shows 1.38% when I do it. Am I missing something? I do believe there are other charges and if I want to withdraw my money at the end of 5 years and reinvest it I understand I will pay 41% tax on the gains. So 41% of 2,847 is 1167. So all I am left with is a gain of 1,680. The annualised return would be a lot less.