Is now a good time to build an investment portfolio?

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MMon13

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Hopefully this is the right subforum for this question....

Each year I max out my pension contributions and also overpay my mortgage to the maximum 10% allowed. I am fortunate to then be in a position where I have additional capital to save/ invest. Whilst I could build a larger cash pile (I already have a rainy day fund) I would much prefer to put this money to work.

I suppose my options are some combination of shares/ ETFs/ Investment Trusts? I am 36 so comfortable taking equity risk given my time horizon.

Thanks a million for any pointers. I have been familiarizing myself with the various permutations through this forum, but sometimes wonder if I should shell out for professional advice.
 
Overpaying your mortgage further probably makes sense, even taking into account the partial break fee, since I assume you're in a fixed rate mortgage.
 
Yes, fixed for 7yrs at 1.95%. I haven't looked into the partial break fee but will do so. I thought I could pair cash savings to clear it at the 7yr mark (or before) with equity market investment for some capital growth
 
My take on the advice elsewhere on AAM is to clear your mortgage before investing, and also that the savings in interest from overpaying (almost?) always outweighs the partial break funding fee. Paying into the mortgage gives a risk-free return.
 
To answer the question properly really needs more info about the original poster's overall financial and personal circumstances. E.g. Married/single? Children? Debts? Plans? Etc. Probably better to post a money makeover thread.

Money makeover

Budgeting and dealing with debt moved to Mortgage Arrears and Debt Forum .
www.askaboutmoney.com
 
I'll go ahead and do this now. I had previously used that thread for advice re a property sale but wasn't sure if it applied for this new query. Thanks for the steer.
ClubMan said:
To answer the question properly really needs more info about the original poster's overall financial and personal circumstances. E.g. Married/single? Children? Debts? Plans? Etc. Probably better to post a money makeover thread.

Money makeover

Budgeting and dealing with debt moved to Mortgage Arrears and Debt Forum .
www.askaboutmoney.com
Click to expand...
 
I posted on another sub-thread re building an investment portfolio but was advised to bring my query here.

I suppose things have gone full circle as I first posted on the money makeover forum to get advice on selling a London property to fund a purchase here in Ireland! Fast forward to today and we now own a home that is suitable for our growing family, and are very comfortable that we made the right decision. We were certainly well informed by those on this forum and I'm grateful for that advice. So I thought I'd go back to the well.....

I hoped to get advice based upon our current situation and my desire to build a liquid investment portfolio for capital growth. Having just taken out a 7yr mortgage with Avant, we plan to make the 10% overpayments permitted every year. But we're also fortunate to have additional capital that we can put to work once we've done this.

I thought about creating a regular savings account for my son that we would pay into monthly which would be directly invested into a broad Global Equity index. But I would also like to build a portfolio for my wife and I.

In summary, I suppose my goals are as follows:
-Overpay mortgage by 10% ever year and have cash balance at end of term to clear it in 7yrs
-Save for my sons future. I think regular savings into a broad equity market would be the best course here
-In addition to my pension I'd like to put some of the extra capital we're fortunate to have to work for us. I'm conscious of tax treatment of ETFs, Shares, Unit Trusts etc.

Input on how best to proceed would be hugely appreciated. Do the 3 goals I have laid out above make sense? Should I adjust or is there anything else we could be doing? I am competent with regards to investment markets, but am also aware of the tough tax treatment/ extremely penal investment here in Ireland- I'd like to avoid pitfalls.

Thanks in advance.

Personal details
Age: 36
Spouse’s/Partner's age: 36

Number and age of children: 1 child, 6 months old

Income and expenditure
Annual gross income from employment or profession: Total comp of EUR 322K (EUR125k basic salary/ EUR197K bonus)
Annual gross income of spouse: Has taken some time out but will return to work next month at EUR60K

Monthly take-home pay: EUR7,500

Type of employment: Private sector

In general are you:
(b) saving? 2k per month out of my salary. Save the bulk of my bonuses.

Summary of Assets and Liabilities
Family home worth €1.15k with a €600k mortgage
Cash of €75k
Defined Contribution pension fund: €300k. I max my AVC & company match. Currently with Irish Life and in the MAPS range but looking to move provider as I don't think they offer value for money or optionality

Family home mortgage information
Lender: Avant
Interest rate: 1.95%
If fixed, what is the term remaining of the fixed rate? 7yrs

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? N/A
EUR500pm car loan. Planning to clear this soon.

Other information which might be relevant

Life insurance: 4x salary provided by my company
Have mortgage protection insurance in place, and contents cover as required by mortgage lender
 
I take the view that our tax code means that it rarely makes sense to invest outside a pension while carrying a mortgage.

So, in your shoes, I would use your excess cash to pay down the mortgage ahead of schedule. Either break the fixed term or wait until the end of the fixed term and make a lump sum payment.

And pay off the car loan ASAP.
 
To avoid duplication, the original thread is here (and perhaps the moderators could/should merge them?).
 
Sarenco said:
So, in your shoes, I would use your excess cash to pay down the mortgage ahead of schedule. Either break the fixed term or wait until the end of the fixed term and make a lump sum payment.
Click to expand...
I understand this line of thinking, but it just seems like a poor use of money to have it sitting there doing nothing. I thought by paying it down and then investing along side that I would have the best of both worlds. I’d also have cash there that I can access, which isn’t something I could do if I put all money into the property?
 
Bear in mind that you are already investing on an ongoing basis through your pension and at your stage of life this should be 100% invested in a global equity fund, with the cheapest provided you can find.

It makes sense to keep a modest cash reserve on hand to address any unanticipated expenses that might arise.

However, it makes no sense to have €75k on deposit earning 0% interest, while carrying a mortgage @1.95%.

And it makes even less sense to have a car loan outstanding when you have that much cash on deposit.
 
MMon13 said:
Hopefully this is the right subforum for this question....

Each year I max out my pension contributions and also overpay my mortgage to the maximum 10% allowed. I am fortunate to then be in a position where I have additional capital to save/ invest. Whilst I could build a larger cash pile (I already have a rainy day fund) I would much prefer to put this money to work.

I suppose my options are some combination of shares/ ETFs/ Investment Trusts? I am 36 so comfortable taking equity risk given my time horizon.

Thanks a million for any pointers. I have been familiarizing myself with the various permutations through this forum, but sometimes wonder if I should shell out for professional advice.
Click to expand...
Off topic but I'm curious how you find making a 10% overpaying on an Avant mortgage. I understand they only allow two overpayment lump sum transactions a year, which I'd assume means you can't use online banking as that's usually limited to 5k / transaction?
 
mojoask said:
Off topic but I'm curious how you find making a 10% overpaying on an Avant mortgage. I understand they only allow two overpayment lump sum transactions a year, which I'd assume means you can't use online banking as that's usually limited to 5k / transaction?
Click to expand...
I have made one payment p/a, and have done so via wire transfer. Pretty straightforward so far.
 
You need to talk Avant about the ability to overpay by more than the 10%. I know Bank of Ireland allowed greater ongoing overpayment but that was at the start of a new fixed term.

Unlike a lot of posters here, I don't go with the all in on paying down your mortgage, but to do a combination of a few things.

1. Cashflow fund - keep a decent amount of cash on hand for cashflow.
2. Emergency fund - stick this in An Post
3. Investment portfolio - build up an investment portfolio
4. Mortgage - start paying this down with overpayments

Your income is such that you can do all of these things. The investment portfolio can be built up at bonus time as can mortgage payments.

You also need to look at life cover for you and your wife. You get 4 times basic. You wife would need more than that. I assume if you earn over €300k a year, your job can be quite demanding at times. If your wife wasn't there to look after your child, would you be able to give the same devotion to your job? Would you want to or move to another job? Life cover isn't that expensive. You probably won't claim in it, but it is important. I am presuming you have income protection too. If not, get it.


Steven
www.bluewaterfp.ie
 
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