Where to invest lump sum for a young adult?

[Positively]

My son is to recieve an inheritance of about €70,000 and I'm hoping to get some advice on the best place to invest it for him. He will not need to access the funds for at least 5 - 10 years so its okay if it will be locked away for that time.

I hope this is the right forum for this, apologies if not.

Thank you.

 

[Sarenco]

Maybe the 10-year National Solidarity Bond?

22% total return (tax-free) if held to term.

 

[Corola]

2.01% AER is poor to lock up funds for ten years. There are better rates here with instant access:

Best Buy - Savings Best Buys

Savings Best Buys: There are 3 savings best buy threads on AskAboutMoney that are updated frequently. Instant Access and Notice Accounts - Lump sum variable rate savings. Fixed Term Deposits - Fixed Lump Sum Term Deposits from a few months to a few years. Regular Savings - Smaller sum...

www.askaboutmoney.com

 

[Brendan Burgess]

I think it's a very good opportunity to educate people about the stockmarket.

Some of it should be invested in stocks so that he sees that it goes up and down.

Brendan

 

[Sarenco]

2.01% AER is poor to lock up funds for ten years. There are better rates here with instant access:

Which is subject to reinvestment risk (ie the rates on the instant access deposits might fall).

Some of it should be invested in stocks so that he sees that it goes up and down.

I don’t think anybody should invest in stocks with an investment horizon of just 5-10 years.

Plus you would have all the hassle of filing tax returns, etc.

 

[Corola]

€70,000 is the deposit for a house. Locking it up for explicitly ten years as a young adult is also a risk, what if they need it sooner?

 

[ClubMan]

Plus you would have all the hassle of filing tax returns, etc.

Select companies/shares that don't pay dividends and you don't have any tax filing issues until you sell and have to deal with CGT. That's one reason that I hold a chunk of Berkshire Hathaway. Another is that it's an already diversified conglomerate - I didn't want the hassle of selecting and managing a diversified basket of shares.

 

[Sarenco]

Well, a CGT return is still a tax filing.

TBH, I don’t think the OP should be taking any real risks with her son’s inheritance over such a short holding period. At the end of the day, it’s not her money.

 

[ClubMan]

TBH, I don’t think the OP should be taking any real risks with her son’s inheritance over such a short holding period. At the end of the day, it’s not her money.

Every investment option involves risks.

 

[Sarenco]

Every investment option involves risks.

Profound.

Investing in a single stock is not remotely comparable with investing in a State issued fixed-income instrument over a 5-10 year time horizon from a risk perspective.

 

[fayf]

€70,000 is the deposit for a house. Locking it up for explicitly ten years as a young adult is also a risk, what if they need it sooner?

It is not locked up for 10 years, you can exit at any stage, and a get a full refund in a matter of a week or two, they come with near zero risk, usual government guarantee, and zero charges,

Everyone knows interest rates are dropping, so those 3 and 6 month higher rates will drop, and they are all subject to 33% DIRT tax, the 10 year bond has zero DIRT, no tax returns,
so its 22 % nett, which is comparable to a gross rate of circa 30 % (some compound interest involved).

If he is young and won’t need the money, its definitely worthy of consideration. It might be wise to invest in a number of 10 year bonds seperately, so one can cash in one or more of them if required, while leaving the rest invested for the full term.

 

[Corola]

It is not locked up for 10 years, you can exit at any stage, and a get a full refund in a matter of a week or two, they come with near zero risk, usual government guarantee, and zero charges,

Sure, but you forgo all the interest so you may as well have stuffed it under the mattress.

 

[fayf]

Sure, but you forgo all the interest so you may as well have stuffed it under the mattress.

not accurate, interest is mainly accrued from year 5 onwards, but it is a sliding scale, based on what year you withdraw, explained in full in table 1, part 2.4:

Product Terms & Conditions | Ireland State Savings

Ireland State Savings Product Terms & Conditions

www.statesavings.ie

This is why, it is better to invest in a number of seperate 10 year bonds, so one can take one, and leave the others intact, investing all in one bond means, if your circumstances change, you forego more interest, as the whole amount is subject to the early withdrawal.

 

[Des Pondent]

This is why, it is better to invest in a number of seperate 10 year bonds, so one can take one, and leave the others intact, investing all in one bond means, if your circumstances change, you forego more interest, as the whole amount is subject to the early withdrawal.

On the application form, you have place an x in one box only. Either for the full Value or Partial Repayment of €xxx xxx xxx.

https://www.statesavings.ie/getmedia/494a563c-ffc1-4719-9845-9a28478e5cb8/nsbrepaymentformissue5.pdf

If cashing in Online you are asked to;

• Enter the amount you wish to repay. To allocate the full amount select ‘Allocate full amount’.

https://www.statesavings.ie/help-su...o-i-cash-in-one-of-my-products-in-state-savin

I have never done it, but the above suggests you can partially cash in and leave the balance invested for the full term.

 

[fayf]

On the application form, you have place an x in one box only. Either for the full Value or Partial Repayment of €xxx xxx xxx.

https://www.statesavings.ie/getmedia/494a563c-ffc1-4719-9845-9a28478e5cb8/nsbrepaymentformissue5.pdf

If cashing in Online you are asked to;

• Enter the amount you wish to repay. To allocate the full amount select ‘Allocate full amount’.

https://www.statesavings.ie/help-su...o-i-cash-in-one-of-my-products-in-state-savin

I have never done it, but the above suggests you can partially cash in and leave the balance invested for the full term.

Good to hear, that option is available.
We are all learning here !

I use the online service since it became available, and while it can be clunky at times, have gotten withdrawals after about 7 working days.

 

[Brendan Burgess]

@Positively

Every investment does involve risk. Sure you can invest in the Solidarity Bond and you will almost definitely get your money back, but it could easily lose money in real terms due to inflation. Anyone in such certs over the last two or three years lost money in real terms.

You have not told us the age of your son. I presume a young adult is about 20.

It has to be a flexible investment which you can access at any time without penalty. If you don't keep the Solidarity Bond for the full 10 years, the interest rate will be significantly lower than 2%.

If he invests in the stockmarket, it could well fall in value over 5 years or even 10 years. But this risk is easily balanced by the likelihood that it will rise in value over the term. It would be completely different if you said that he was planning to buy a house in two years. In that event, he would have to buy some low yielding deposit.

And, as I have already mentioned, the educational value is huge from investing in shares.

 

[Brendan Burgess]

Take a practical example.

He is 20 and won't want the money until he is ready to buy a house in 10 years.
He can put the money in the Solidarity Bond and the €70k will be worth €85k after 10 years.
If he invests in shares, it might be worth €35k or it might be worth €140k after ten years.

But if he is ready to buy earlier, then he can sell the shares without the penalty. If he buys the Bond and cashes it early, he will lose quite a bit of interest.

This is not highlighted on the website. You have to click on Show Yearly Returns to twig it.

 

[GSheehy]

Does yiur son have an opinion/idea on what he wants to invest in? Does he have any plan in his head for what he might need it for? Has he any financial knowledge at all?

 

[misemoi]

Is the 70k the after tax balance, if applicable, depending on the relationship with the giver?

 

[24&Counting]

I think it's a very good opportunity to educate people about the stockmarket.

Some of it should be invested in stocks so that he sees that it goes up and down.

Brendan

Agree, very good opportunity to learn and grow!

What % would you recommend allocating towards a stockmarket portfolio and what would you suggest doing with the remaining as there in no point leaving money in the bank where it generates 0 growth.

What are your thoughts on investing on AIB fusion 5 or 6 plans instead? Or should a fixed-term deposit approach be considered for more safety?

Let me know what you think!