am I correct in comparing my possible fund value in 10 years time being
€64K v €61K
In terms of risk/reward you are really comparing apples with oranges here when comparing a unit linked fund with state savings.
Obviously I know there is risk with Investing versus State bonds being guaranteed so I want to check I am understanding the bond investment correctly.
Mortgage free and zero debt. Pension is a good public sector pension and already have a top up AVC in place. Thank you for your replyIn terms of risk/reward you are really comparing apples with oranges here when comparing a unit linked fund with state savings.
If you have don't own your own home, the mortgage isn't down to a comfortable level, you have other debts or you lack adequate pension cover then you should look at these before a 10 year non pension investment.
I don't know how I didn't notice that ! (Long week haha)Your State Savings figure of €61k is accurate.
Your forecasted return on the Zurich Fund is not.
The 49.7% is the cumulative performance of the Zurich fund over 5 years, not 10.
If you wish to compare like-with-like (i.e. determine what the fund value of both investment options is like after 10 years), you will need to allow for another 5 years of returns on the Zurich Fund in order to compare with the total return on the 10-yr State Savings option.
The Zurich Fund has had an annualised performance of 8.4%. The cumulative performance of this rate of return over 5 years is 49.7%*.
Assuming this rate of return was to continue, the forecasted cumulative return after 10 years would be 124%**
Therefore, the fund value of the Zurich Fund after 10 years (ignoring taxes etc.) would be €112k*** approx.
So, in this scenario, the fund values (before tax) of both options after 10 years is:
State Savings €61k
Zurich Fund €112k
Tax will obviously knock a chunk off the Zurich Fund but the above is just to establish the principle of making sure returns are put on the same footing.
* (1 + 0.084)^5 - 1 = 49.7%
** (1 + 0.084)^10 - 1 = 124%
*** €50,000 x (1 + 0.084)^10 = €112,000
Don't forget the 41% tax on gains plus levies plus annual mgmt chargesI don't know how I didn't notice that ! (Long week haha)
Thank you so much....this makes is PLAINLY obvious to me what I need to do
What is ending of the story on the example Maps 4 3% ?Forget entirely what this fund or any fund did in the past. What it will achieve in the future is a "gamble" which Irish Life well illustrates below. (Irish Life, Zurich Life...they're all the same ex ante except for maybe their charges.)
They illustrate for their MAP 4 that "very bad" would be 5% p.a. loss over 7 years and "very good" would be 11% p.a. gain. Knocking off extra product charges that is a range from c.6% p.a. loss to 10% p.a. gain. Now 41% tax applies to the gain but there is no tax relief for the loss. So a bit of math shows this is an almost symmetrical range from 6% p.a. loss to 6.5% p.a. gain. Personally, I can't understand why anybody wants to roll those dice. State Savings are a disgraceful rip off versus their UK counterparts but they are a "no brainer" superior to your typical unit linked investment.
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Forget entirely what this fund or any fund did in the past. What it will achieve in the future is a "gamble" which Irish Life well illustrates below. (Irish Life, Zurich Life...they're all the same ex ante except for maybe their charges.)
They illustrate for their MAP 4 that "very bad" would be 5% p.a. loss over 7 years and "very good" would be 11% p.a. gain. Knocking off extra product charges that is a range from c.6% p.a. loss to 10% p.a. gain. Now 41% tax applies to the gain but there is no tax relief for the loss. So a bit of math shows this is an almost symmetrical range from 6% p.a. loss to 6.5% p.a. gain. Personally, I can't understand why anybody wants to roll those dice. State Savings are a disgraceful rip off versus their UK counterparts but they are a "no brainer" superior to your typical unit linked investment.
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You're missing my point.Speculating is a gamble but investing really isn’t..
Ok .I did miss your point.You're missing my point.
Irish Life highlighted their MAP 4 over its recommended 7 year investment period.
It showed a range from 5% p.a. loss to 11% p.a. gain (before product charges and tax). This is indeed what characterises an investment over a gamble - the infamous Equity Risk Premium. The ERP is determined in the wholesale markets where tax acts symmetrically.
But, here is the crucial point. the Exit Tax regime is totally asymmetrical. After product charges and Exit Tax the range becomes 6% p.a. loss to 6.5% p.a. gain. There are very few for whom this would be a satisfactory ERP, ergo it is pure gamble.
The Central Bank are currently banging on about people languishing in Cash Funds but don't see the elephant in the room which is that unit linked investment with 41% exit tax makes no sense to anybody.
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