Investing/saving

irishguy

i was wondering where would be the best place to save money i have about €2,000 in savings and i am saving a few quid every week [in college at the moment so i am only saving €10-20 per week] was thinking of getting savings bonds [from the post office] as i am getting FA interest in the credit union and i can setup it up that a certain amount of prize bonds are purchased every week [using there SO option]. any ideas anyone???

sceptre

Originally posted by irishguy
a certain amount of prize bonds

You did mean "savings bonds" rather than "prize bonds" right?

De Rebel

Originally posted by sceptre
You did mean "savings bonds" rather than "prize bonds" right?

Nothing wrong with prize bonds as part of a portfolio Sceptre. I have a monthly standing order for the purchase of 8 (€50 worth) of prize bonds. The have 100% capital guarantee, can be encashed anytime, and offer the opportunity of a return [sarcasm] somewhat higher [/sarcasm] than your average bank. I wouldn't advocate a portfolio with 100% prize bonds, but especially in this case they are a good savings mechanism, there are no admin charges, commissions or any of that crap, no exit charges, no tax, no bid/offer spread.

So i'd say the original poster could do a lot worse than put his €2k into a "high yield" term deposit, say Anglo Irish or Northern Rock and gets 3ish percent on that, and uses prize bonds to hoover up his weekly savings, he will accumulate capital during the year, with 100% capital guarantee, earn a little bit of interest, have the opportunity for a bonus from the prize bonds, and have his capital available to be withdrawn at any time in the event of an emergency (subject to the notice period for the deposit).

For the amounts involved that strikes me as a solid option.

hamster

i was wondering where would be the best place to save money i have about €2,000 in savings and i am saving a few quid every week [in college at the moment so i am only saving €10-20 per week] was thinking of getting savings bonds [from the post office] as i am getting FA interest in the credit union and i can setup it up that a certain amount of prize bonds are purchased every week [using there SO option]. any ideas anyone???

irishguy,

If you need the money in less than 5 years time then realistically all you can do is put in on deposit (low risk) but you should aim for the best rates all the time. eg go for either Northern Rock (Saver account) or Ulster Bank. Don't go near the other main banks AIB,BOI etc. Ideally the best you can get is 1.75%-2.25%.

If it were you longer term you could put 200 euro away per month (of the 2000 to spread the risk hitting a bad period) into an equity based product such as a low cost index tracker (eg Quinn Life - European based tracker). But of course this is medium to high risk. The risk becomes less and less as time goes on. But you would need 5+ years to be in the product.

Saving Bonds aren't particularly attractive but it's low risk deposit wth a slim chance of a win.

De Rebel

Originally posted by hamster
If it were you longer term you could put 200 euro away per month (of the 2000 to spread the risk hitting a bad period) into an equity based product such as a low cost index tracker (eg Quinn Life - European based tracker). But of course this is medium to high risk. The risk becomes less and less as time goes on. But you would need 5+ years to be in the product.

Given the amounts involved and "stage of life" = college, equities are almost certainly NOT an option.

De Rebel

Originally posted by hamster
irishguy,
Saving Bonds aren't particularly attractive but it's low risk deposit with a slim chance of a win.

Savings Bonds don't offer any chance of a win. Prize bonds do. An Post offers three different products: Savings Certificates, Savings Bonds and Prize Bonds.

The first two are intended as medium term investment products, 3-5 years. Interest is offered on the amount invested. Money can be taken out earlier but there are interest rate penalties for doing so. Returns are tax free.

Prize bonds offer no guaranteed return, other than return of capital. Instead there are weekly prize draws. So you may get a return, and you may not.

All 3 products are state guaranteed and 100% capital secure.

irishguy

so there is very little chance of winning on Prize bonds even if you have €2000 invested?? as for how long i am saving,hmm not sure the ultimate plan is to buy a house so about anoter 6years [if all goes to plan] but i could just decided to blow it all on a big screen tv or holls i was thinking about those high interest deposit accounts might look into that more

Cork

If you opened a SSIA - drip feed your savings into it. You'd get a 25% bonus.

Down side your money is tied up.

irishguy

sadly i dont have a SSIA, but my mother does and she isnt paying in the max amount i might give her some money every month to put into it

Big al

open a non res account in the uk

De Rebel

Originally posted by irishguy
so there is very little chance of winning on Prize bonds even if you have €2000 invested??

Prize Bond prize Details here

The chances of winning are slim enough, but unlike most draws/lottery your initial investment (Capital) is secure. The average rate of return (currently 2.75%) is as good as you will get from any of the banks.

There is nothing to stop you putting say €1,500 on deposit in one of those "high" interest deposit accounts and buying prize bonds with the balance.

irishguy

well most of the high interest deposit accounts require you to invest a min of about €2,000.Also i would have a better chance of winning somthing with prize bonds if i have all the money invested in them.

Victor

Originally posted by irishguy
well most of the high interest deposit accounts require you to invest a min of about €2,000.Also i would have a better chance of winning somthing with prize bonds if i have all the money invested in them.

No, the chances are always the same, they just increase proportionate with quantity of certs owned, so whether you own €2,000 (occassional small win) or €2,000,000 (regular small win) there is no material difference in your rate of return.

irishguy

No, the chances are always the same, they just increase proportionate with quantity of certs owned, so whether you own €2,000 (occassional small win) or €2,000,000 (regular small win) there is no material difference in your rate of return.

well there is, if you control 10% of the bonds you would naturaly have a better chance of winning money than if you only controled 1%

Bluehair

Originally posted by irishguy
well there is, if you control 10% of the bonds you would naturaly have a better chance of winning money than if you only controled 1%

Well thats true but I think what Victor is getting at is the fact that you'd have (in your example) 10 times more money invested in the bonds and would have to win 10 times as much just to get the same % return on the sum of money invested.

So your chances of a significantly greater % return on the money invested aren't really that much better.

There are millions of prize bonds participating in each draw so it's not the best investment but given normal deposit rates its not the worst either

Btw with 2K worth of bonds your odds of winning each week are approx
€75 1/100
€250 1/17500
€1000 1/35000
€20000 1/175000

Once a month the €20k prize becomes €150k.

Ok so better than lotto odds and you don't ever actually 'lose' the money but overall I think De Rebel has it right (shove the cash into a 'high' yeild account and save the rest in the prize bonds).

To be honest though it depends on your plans for the next number of years and what you need it for. In your shoes I might be inclined to invest in what I like to call a 'quality of life' portfolio (ie feck it and buy the big screen tv, xbox and broadband etc.. )

irishguy

if i was to invest the 2k into a high yeald deposit account [presuming that its the best option] wouldnt i be better to save the money every month into that account instead of investing it into prize bonds?? your 'quality of life portfolio' looks tempting but i want to save the money up for a deposit for a house [to rent out]i dont plan on working for others for the rest of my life. friend of mine just got his first house and is making a tidy profit off it renting it out

eclectichoney

I have to say I just imvested €2000 (im in a similar situation to yourself, college and all) in Anglo Irish a few months back and am really pleased with their customer service and everything, and then if you want to put an extra €50 in every few months you can do so no trouble. the 7 day notice thing also gives you the option of getting access to the cash in an emergency (you wouldn't know what could happen)

RainyDay

Prize Bonds are not an investment. You are losing value of your money to inflation every day in prize bonds. The average return of 2.75% is heavily weighted by the very small number of big prizes, of which you have a tiny, tiny chance of winning. Take these out of the picture and your average return is way below what you will get in a deposit account. If you like raffles, buy prize bonds. If you want to invest, look elsewhere.

Originally posted by De Rebel
Given the amounts involved and "stage of life" = college, equities are almost certainly NOT an option.

What has stage of life got to do with it, Rebel? Is there some unwritten rule that equities are only for oul crusties? Provided the money is not required for 5+ years and the risks are understood & accepted, equities are a sound option. And you can certainly get into low charging funds like Quinn Life or EBS with amounts of €2k.

If you are prepared to accept some risk of losing your money, I'd recommend a low charging equity fund. If not, stick it on deposit at the best rate you can find. Check out the best buys list on Askaboutmoney.com for the best rates available at present. Your credit union may offer good rates also, but you won't be sure of the rates until the end of each year.

De Rebel

Originally posted by RainyDay
What has stage of life got to do with it, Rebel? Is there some unwritten rule that equities are only for oul crusties? Provided the money is not required for 5+ years and the risks are understood & accepted, equities are a sound option.

Stage of life has everything to do with investment strategy. In the absence of a fact find, my response looked at the little information we had to go on…..

“in college at the moment”, probably (but necessarily) young rather than old, more importantly indicates a likelyhood of a change of circumstances in the next few years i.e. college->workforce and potentially more besides

“i am only saving €10-20 per week” indicates that there is some surplus income, but probably not a lot. Therefore emergencies are likely to need to be funded from these savings.

Then there is the information which subsequently came to light “the ultimate plan is to buy a house so about anoter 6years [if all goes to plan] but i could just decided to blow it all on a big screen tv or holls” tends to confirm my initial thoughts – the "house option" will need money to be available without the risk of having to wait for an upturn in the market to retrieve the capital and the "blow it all" option reflects potential changes in circumstances/attitude.

So in referring to stage of life I was looking at somebody who was likely to see changes in the short/medium term and likely to want flexibility in terms of availability of funds, and potentially the possibility of “early encashment” and “short notice withdrawal” I would regard equities as a totally unsuitable option in such circumstances. With a lot more information there are possible exceptions (e.g. a 25 year old owner of an unencumbered property with a reasonable disposable income who wants an opportunity for above average returns, a 25 year old who is earning and who wants to use part of his disposable income to start a pension – these would be candidates for equities as part of their overall portfolio). But a 22 year old who has €2000 + €10/20 per week to put away and who isn’t sure whether he wants a house or a telly or a holiday needs something with ready availability and capital security. Thats need is unlikely to be met by an equity based solution.

De Rebel

Originally posted by RainyDay
Provided the money is not required for 5+ years and the risks are understood & accepted, equities are a sound option.

I also disagree with this glib “5+ years” which appears to be tagged on when talking about equities. In my opinion, and it is only an opinion, if one wants a general rule about equities, its 10+ years, and on occasion earlier. Anything less is misleading. Qualifications about “investments going down as well as up, risks being accepted and understood etc are a cop out. The probability is that equities, and especially equity investment products which tend to have substantial overheads, (admin charges, commissions, early exit charges, bid/offer spread) will yield poor returns over a period of less than 10 years, and rarely return enough to justify the added risk. There are some exceptions, and in a large portfolio, where gradual encashment is an option, equities can certainly be included with the intent of early encashment if the returns are good, but in general equity products should be looked at as 10+ years.

De Rebel

Originally posted by RainyDay
Prize Bonds are not an investment. You are losing value of your money to inflation every day in prize bonds. The average return of 2.75% is heavily weighted by the very small number of big prizes, of which you have a tiny, tiny chance of winning. Take these out of the picture and your average return is way below what you will get in a deposit account. If you like raffles, buy prize bonds. If you want to invest, look elsewhere.

Might as well have a go at your remaining paragraph!

The statement “Prize Bonds are not an investment” is technically accurate. However the thread topic is about savings as well as investments. And prize bonds are a savings product. The average return is the average return, whatever way you look at it its better than the majority of the alternatives. And any short term return on the weekly savings amount proposed is hardly significant.

Supposing the original investor opens a 2% deposit account with his €2,000 capital and adds the weekly upper limit discussed (€20) into this account. Assuming that he has 2 years to go in college, the interest earned on the weekly savings will amount to a little over €40, assuming that he is allowed to do so – many high yield account have minimum transaction amounts, and some can only be accessed by (expensive) standing order which would wipe out any interest accumulated.

My advice to him, was put the capital in such a deposit account (he will earn €80+ on this) and save the balance in prize bonds by direct debit. He forgoes a maximum of €40 in interest, and has a upside of a potential win, has capital security and ready availability of funds. The other advantages are outlined in my previous posts.

RainyDay

Originally posted by De Rebel
I also disagree with this glib “5+ years” which appears to be tagged on when talking about equities. In my opinion, and it is only an opinion, if one wants a general rule about equities, its 10+ years, and on occasion earlier. Anything less is misleading.

5+ years is no more or less glib than 10+ years. Both are glib answers unsupported by any real data. IMHO, 5 years is a reasonable period for an equity investment, provided the investor understands the risks.

Originally posted by De Rebel
The probability is that equities, and especially equity investment products which tend to have substantial overheads, (admin charges, commissions, early exit charges, bid/offer spread) will yield poor returns over a period of less than 10 years, and rarely return enough to justify the added risk.

Your experience with equities seems quite different to mine. The two funds I mentioned have no commissions, no early exit charges and no bid/offer spreads - just straight admin fees of 1% (QL) plus a small per-transaction fee and 1.5% (EBS). So you don't end up making the middle-men & the brokers rich.

Originally posted by De Rebel
The average return is the average return, whatever way you look at it its better than the majority of the alternatives. And any short term return on the weekly savings amount proposed is hardly significant.

OK - Let me try it again. The average return statistic is heavily biased by the 'big win' amounts, whatever way you look at it. The vast majority of bond holders get nothing near the average return. Most of them will get 0%. Some will get a small kicker, and a tiny number will make a big win. Encouraging anyone to invest in prize bonds based on the 'average return' is highly misleading. You might as well encourage them to invest in the lotto because half the money is returned in prizes (which ignores the fact that the win is restricted to a small number of players), or 3.30 at Haydock.