Where to invest €500a month?

Shedite27

dxhound2005 wrote: »

A €200K mortgage, 30 years 3%, works out at €303,500, repayments €843 per month. Pay in €500 a month extra reduces the amount to €248,500 and pays off the mortgage in 15 years 5 months.

If someone has €500 a month to spare, I see this as the obvious way to go.

With interest rates at 3% and the average S&P index return at 10%......

Put your €500 a month to mortgage, and once that's paid off to savings/investments:
Year 15: €0 Savings, €0 mortgage
Year 30: €200k Savings, €0 mortgage

Put your €500 a month to savings/investments, leave mortgage at 30 years:
Year 15: €200k savings, €125k mortgage
Year 30: €1m savings, €0 mortgage

They're extreme examples and is obviously reliant on index return staying average and mortgage rates staying low. I'd probably advocate something of a middle ground, but the point is, at the moment I don't see the rush to get mortgage free. Having savings allows you a lot more flexibility for a rainy day, holiday fund, kids going to college etc.

dxhound2005

After 15 years 5 months you would have the €843 and the €500 available every month for investment. Plus a freehold property, which would probably have increased in value over the 15 years.

Spanish Eyes

Pension contributions is a no brainer with tax relief.

Prize bonds for leftovers..

Shares attract 33% CGT on a gain + stockbroking Fee.

I see sheep

ShlugMurphy wrote: »

Welllll...you're paying interest on a mortgage.

The way I see it, is I can pay interest or I can pay rent.

If I'm investing the "principal" while I'm renting, it can grow and then when it comes to buying a house I can withdraw the investment and use it as a massive deposit.

Slightly off topic sorry but this post interested me.
I almost bought a house right before Covid took off, cancelled it because of the uncertainty.
Now I am considering not buying if we can rent a place for a reasonable price, if (it is a big if) we can keep saving what we have for the last two years for the next 12 we'd have enough in cash to buy the house then. Or just keep the money and keep saving for retirement.
Which is a very attractive proposition.
Obviously if house prices go up a lot this will go against us. But they're pretty static here and I think there must be a bit of a crash coming.
If there's a major crash I'd be tempted to buy something cheap hoping to be like people who bought at the bottom of the last crash.

Water John

I see sheep wrote: »

Slightly off topic sorry but this post interested me.
I almost bought a house right before Covid took off, cancelled it because of the uncertainty.
Now I am considering not buying if we can rent a place for a reasonable price, if (it is a big if) we can keep saving what we have for the last two years for the next 12 we'd have enough in cash to buy the house then. Or just keep the money and keep saving for retirement.
Which is a very attractive proposition.
Obviously if house prices go up a lot this will go against us. But they're pretty static here and I think there must be a bit of a crash coming.
If there's a major crash I'd be tempted to buy something cheap hoping to be like people who bought at the bottom of the last crash.

Static house prices or close to it, is largely a good thing for society. There is no evidence of a property crash coming.
Whether to invest in a property depends on each person's personal circumstances. A single person doesn't need a 3/4 bedroom house. The choice in that case is between buying or renting an apt.
Rental needs to be well below mortgage cost to make any sense.

dxhound2005

The next Census has been postponed until 2022. The 2016 Census showed a considerable shift into renting compared to 2011, but also an increase in homes owned outright. To me this is the best position, no big lump of money going out every month for rent or mortgage repayments. I managed to pay off my mortgage a bit early, and it was a good decision.

We won't know for a couple of years, but no doubt renting will have increased even more in the next Census.

https://www.cso.ie/en/releasesandpublications/ep/p-cp1hii/cp1hii/tr/

I see sheep

Water John wrote: »

Rental needs to be well below mortgage cost to make any sense.

Does it though?

I'm still not sure. If I can save the price of a house while renting then I'm leaning that way.

When you get the mortgage offer and you see how much you've to pay the bank it's a kick in the teeth tbh.

I know the alternative is paying a landlord, it feels like choosing the lesser of two evils!

breadmonster

I see sheep wrote: »

Slightly off topic sorry but this post interested me.
I almost bought a house right before Covid took off, cancelled it because of the uncertainty.
Now I am considering not buying if we can rent a place for a reasonable price, if (it is a big if) we can keep saving what we have for the last two years for the next 12 we'd have enough in cash to buy the house then. Or just keep the money and keep saving for retirement.
Which is a very attractive proposition.
Obviously if house prices go up a lot this will go against us. But they're pretty static here and I think there must be a bit of a crash coming.
If there's a major crash I'd be tempted to buy something cheap hoping to be like people who bought at the bottom of the last crash.

Heres a compound calculator stick your numbers in there and see where you sit
https://www.thecalculatorsite.com/compound?a=60000&p=10&pp=yearly&y=12&rd=500&rt=deposit&rm=beginning&ci=monthly&c=2

lightspeed

I can see the benefits of a pension even though my employer does not contribute anything to the company pension scheme.

My only issue is that for most I believe it is 65 years before I could access the funds.

Im hoping to structure my investments in a way that can allow me to retire around 50 if possible.

All going to plan I should be around 50 when I have the mortgage cleared. Im hoping I have enough to buy a buy to let (preferably a multi unit property) that could pay around 40k a year.

Just so im aware of my options down the line and so I can better structure how soon to pay off the mortgage, can anyone answer the following?

1) Do you need to have all of your home mortgage cleared before a bank would give a mortgage on a buy to let property?
2) Would the bank take my salary into account when considering the application. I know this is the case for a home loan but I understand with a buy to let, that the income to cover the mortgage can be assumed to come from the rental income.
3) Is their an age restriction, such as at age 50 could I still get a buy to let mortgage over 20 years or more even though normal retirement age will probably be at least 68 or more by time at age 50?

ShlugMurphy

lightspeed wrote: »

I can see the benefits of a pension even though my employer does not contribute anything to the company pension scheme.

My only issue is that for most I believe it is 65 years before I could access the funds.

Im hoping to structure my investments in a way that can allow me to retire around 50 if possible.

All going to plan I should be around 50 when I have the mortgage cleared. Im hoping I have enough to buy a buy to let (preferably a multi unit property) that could pay around 40k a year.

Just so im aware of my options down the line and so I can better structure how soon to pay off the mortgage, can anyone answer the following?

1) Do you need to have all of your home mortgage cleared before a bank would give a mortgage on a buy to let property?
2) Would the bank take my salary into account when considering the application. I know this is the case for a home loan but I understand with a buy to let, that the income to cover the mortgage can be assumed to come from the rental income.
3) Is their an age restriction, such as at age 50 could I still get a buy to let mortgage over 20 years or more even though normal retirement age will probably be at least 68 or more by time at age 50?

I'm sure you're aware, but you need 30% deposit for BTL and your rate will be over twice as much.

thomasm

Invested similar monthly sum with my adviser recently. Went into Merrion 70 fund. I have a 5-7 year outlook. Got 101% allocation on premiums to counteract levies, 1% annual fee, no surrender penalties or minimum period.

cooperguy

I see sheep wrote: »

Does it though?

I'm still not sure. If I can save the price of a house while renting then I'm leaning that way.

When you get the mortgage offer and you see how much you've to pay the bank it's a kick in the teeth tbh.

I know the alternative is paying a landlord, it feels like choosing the lesser of two evils!

Why not save the cost of the mortgage, while living in the house you bought? You will be chipping away at the mortgage while pulling together the extra to pay it off, instead of handing the money to a landlord instead. You only pay the bank that much if you go the full term.

AndrewJRenko

lightspeed wrote: »

I can see the benefits of a pension even though my employer does not contribute anything to the company pension scheme.

My only issue is that for most I believe it is 65 years before I could access the funds.

Im hoping to structure my investments in a way that can allow me to retire around 50 if possible.

Many private pension funds will allow you to retire from 50 onwards, provided that you are not still working for that employer.

lightspeed

AndrewJRenko wrote: »

Many private pension funds will allow you to retire from 50 onwards, provided that you are not still working for that employer.

https://www.irishtimes.com/business/personal-finance/no-access-to-retirement-benefits-from-age-50-under-new-proposals-1.4411861

The above Irish times article posted just 17 hours suggests that is going to change to 55.

Also, maybe im misunderstanding how pensions work but is not just that you can take 25% tax free at 50 and have to reinvest the remainder in an ARF or annuity?

I can take all out at 50 the private pension fund I go with does have an age of 50?

The sponsored pension with my job is with Willis Towers and although it is quoted as a company sponsored pension scheme in a recent presentation they gave to us, ,my employer will not be contributed to my pension amounts. They had listed the retirement age as 65 but ive not queried anything regarding the company pension scheme as I want to get the mortgage all done with first.

namloc1980

lightspeed wrote: »

I can see the benefits of a pension even though my employer does not contribute anything to the company pension scheme.

My only issue is that for most I believe it is 65 years before I could access the funds.

Im hoping to structure my investments in a way that can allow me to retire around 50 if possible.

All going to plan I should be around 50 when I have the mortgage cleared. Im hoping I have enough to buy a buy to let (preferably a multi unit property) that could pay around 40k a year.

Just so im aware of my options down the line and so I can better structure how soon to pay off the mortgage, can anyone answer the following?

1) Do you need to have all of your home mortgage cleared before a bank would give a mortgage on a buy to let property?
2) Would the bank take my salary into account when considering the application. I know this is the case for a home loan but I understand with a buy to let, that the income to cover the mortgage can be assumed to come from the rental income.
3) Is their an age restriction, such as at age 50 could I still get a buy to let mortgage over 20 years or more even though normal retirement age will probably be at least 68 or more by time at age 50?

Taking gross rental yield of c.7%, (and totally depends on where you buy bust just as an example) to yield €40k a year the property would cost c.€570k and you'd need a 30% deposit (€171k). Interest rates on Buy to Lets are c.5% so over 20 years a mortgage of €400k would be c.€32k per annum. So your €40k gross rental would have to cover the mortgage of €32k, tax/charges and property maintenance.

1. No not necessarily but in any calculation the amount owning and due on you own mortgage would be taken into account.
2. Yes they will. Most banks will only take a portion of the rental income into account when doing calculations as they will assume downtime and also the location of the property. Take for example a property in Dublin 4 next to the DART line then the bank will likely assume close to 100% occupancy and allow for full rent versus a property in a secondary location they might assume 50% or even 0% rental income. If you are planning on retiring at 50 I'm not sure what other income streams you will have at that stage.
3. 20 - 25 years max for a BTL.

garbanzo

unplayable wrote: »

Do 400 pm in a mix of Zurich prisma 3 and 4 very good funds.

Maybe the other 100 into Bitcoin.

My advisor told me recently that you cannot drip feed money on a monthly basis into Zurich Prisma funds. Set up more for investing lump sums. I was thinking about doing this but wasn’t an option.

Anyone else have any insight into this...?

Shedite27

garbanzo wrote: »

My advisor told me recently that you cannot drip feed money on a monthly basis into Zurich Prisma funds. Set up more for investing lump sums. I was thinking about doing this but wasn’t an option.

Anyone else have any insight into this...?

Maybe ye're getting mixed up with the terminology. A Regular Saver Plan will alow you invest a set amount each month into the fund (minimum 75 euro per month). Were you looking to transfer a different amount each month (whatever you can afford or whatever)?

There's definitely no problem setting up a set amount each month to a Zurich Prisma Fund. Here's the brochure
https://www.zurichlife.ie/DocArchive/servlet/DocArchServlet?docId=DOC_15136&_ga=2.240378627.1807433540.1608588103-501843461.1608588103

99nsr125

lightspeed wrote: »

Hi all

I'm thinking of investing €500 a month in an investment fund but I'm not sure what would give decent and stable returns.

I'd like to aim for a return of 5% a year . I looked at the below and see there are good returns from several. One such that caught my eye was 5 star 5 America fund. However, when I click on it and scroll down to the factsheet the returns seem different from what calculator shows whether I pick annualised or calendar year.

https://www.zurich.ie/funds/fund-performance-calculator/

https://www.zurich.ie/funds/fund-products/equity-funds/american-equity-funds/5-star-5-americas/

I'm a bit lost but is the above fund decent? Is 5% a realistic return or not?

Do I have to pay income tax each year on profits made on the fund even if I dont make any withdrawals or sale of my shares in the fund?

Enbridge on Toronto Exchange

8% Dividend

Power and Utilities, think of it as a Canadian version of ESB Networks

garbanzo

Shedite27 wrote: »

Maybe ye're getting mixed up with the terminology. A Regular Saver Plan will alow you invest a set amount each month into the fund (minimum 75 euro per month). Were you looking to transfer a different amount each month (whatever you can afford or whatever)?

There's definitely no problem setting up a set amount each month to a Zurich Prisma Fund. Here's the brochure
https://www.zurichlife.ie/DocArchive/servlet/DocArchServlet?docId=DOC_15136&_ga=2.240378627.1807433540.1608588103-501843461.1608588103

Hey Shedite27

Thanks for that info. I think the issue they were mentioning to me was that the charging structure meant that making monthly payments in was less attractive compared to doing lump sums. The brochure doesn’t seem to be very clear (to me) on that. Not sure if you have any insights on that?

I hope to be in the market for something like this come February, hence my interest.

Not wanting to highjack the thread but is there anyone out there who would be willing to share their own experience of investing in these types of funds over the years. Would be interesting in hearing how it went and if you would recommend?

g

y0ssar1an22

if you're on trading 212, you can now just copy the portfolio of a pile of successful traders. it can be sorted by RoI, Frequency of dividends, things like that. I dont know how a trader ends up on that shortlist, so carry out your usual due diligence on the person and the portfolio.

i've not used it yet, but maybe something to look into.

Dividends if you're on the high rate of tax doesn't make financal sense.

Max your pension and pay off mortgage early.

Shedite27

garbanzo wrote: »

Hey Shedite27

Thanks for that info. I think the issue they were mentioning to me was that the charging structure meant that making monthly payments in was less attractive compared to doing lump sums. The brochure doesn’t seem to be very clear (to me) on that. Not sure if you have any insights on that?

Yeah lump sums are better if you can do it that way, needs to be a minimum €5k each time though, and you need to fill out an application form each time too.

Every €100 you put in as a regular contribution, the broker takes a % and there's a government levy of 1% so you're down to €98 into your savings fund.

Every €100 you put in as a lump sum, Zurich/Aviva top that up to €102, so then when the broker takes his % and the government takes their 1%, so then you end up with €100 in your savings fund.

Those figure are only indicative, may be a % higher or lower based on the broker

That said, by investing regularly, you're less likely to spend it, and the money invested is growing. Investing a lump sum once a year means everything gets invested at that price, which could be a bad day. I prefer to spread it out over 12 dates (by doing it regularly).

TL:DR - Yes, it's less attractive with regards to amount put in your account on the day you send Zurich/Aviva your money, but I prefer the benefits to putting money into the fund at regular intervals.

jams100

Shedite27 wrote: »

Yeah lump sums are better if you can do it that way, needs to be a minimum €5k each time though, and you need to fill out an application form each time too.

Every €100 you put in as a regular contribution, the broker takes a % and there's a government levy of 1% so you're down to €98 into your savings fund.

Every €100 you put in as a lump sum, Zurich/Aviva top that up to €102, so then when the broker takes his % and the government takes their 1%, so then you end up with €100 in your savings fund.

Those figure are only indicative, may be a % higher or lower based on the broker

That said, by investing regularly, you're less likely to spend it, and the money invested is growing. Investing a lump sum once a year means everything gets invested at that price, which could be a bad day. I prefer to spread it out over 12 dates (by doing it regularly).

TL:DR - Yes, it's less attractive with regards to amount put in your account on the day you send Zurich/Aviva your money, but I prefer the benefits to putting money into the fund at regular intervals.

Then when you do take money out whatever gains have accumulated are taxed at 41% (i think), someone else might be able to clarify this

Shedite27

jams100 wrote: »

Then when you do take money out whatever gains have accumulated are taxed at 41% (i think), someone else might be able to clarify this

The gain is taxed at 33% (less your €1,200 allowance for the year). That's calculated every 8 years to avoid it building up too much into a big tax bill.

Paying tax on a gain indicates you're making a gain tho. Only way to avoid the tax is to avoid making the gain

jams100

Shedite27 wrote: »

The gain is taxed at 33% (less your €1,200 allowance for the year). That's calculated every 8 years to avoid it building up too much into a big tax bill.

Paying tax on a gain indicates you're making a gain tho. Only way to avoid the tax is to avoid making the gain

Just got an email from Zurich to clarify that tax rate. It is infact a 41% exit charge and NOT a CGT of 33%
Then u have the management charge 1% - 1.25%.
U also have government levy when depositing funds of 1%

We're bloody taxed like f**k in this country. Bear in mind that management charge is applied regardless of the funds performance, although you wouldn't expect it to do badly especially over the medium to long term

Shedite27

jams100 wrote: »

Just got an email from Zurich to clarify that tax rate. It is infact a 41% exit charge and NOT a CGT of 33%
Then u have the management charge 1% - 1.25%.
U also have government levy when depositing funds of 1%

We're bloody taxed like f**k in this country. Bear in mind that management charge is applied regardless of the funds performance, although you wouldn't expect it to do badly especially over the medium to long term

Yeah it's mad. The alternative is to research some stocks and setup a stockbroking account for yourself. No management charge, no levy, 33% tax on exit (whenever that may be). Download the Learn app from MyWallSt if ya fancy teaching yourself a new skill and make some money

ETF's are a minefield when it comes to tax. Avoid like the plague if it's a regular saving.

Go for Investment Trusts maybe as an alternative. However, I'd be getting rid of a mortgage first and maxing pension. Too easy ways to build up wealth. Quicker than the stock market most likely. Also, avoid dividends if on higher tax.

The lads on AskAboutMoney will give you good advice, or a professional.

99nsr125

6 wrote: »

Dividends if you're on the high rate of tax doesn't make financal sense.

Max your pension and pay off mortgage early.

Which are both also subject to the high rate of tax. The first just deferred and then on the way out but also could be fee-d out of existence. The second paid from after tax income and into a balance with a low interest rate.

Whay your looking for is a return on investment. Capital gains are taxed at 33% almost everything else will attract the high rate sooner or later. Find something boring and essential, invest in that.

The J Stands for Jay

https://www.boards.ie/discussion/comment/115837405#Comment_115837405

Completely wrong. It's gross roll up @41%

joeguevara

Warren Buffet always stands by investing in the S&P 500 over the long term. It is subject to volatility in the short term but due to the diversification is a good investment in the long term. Since inception it has an average rate of return of 10% per annum. However, US ETFs as far as I’m aware are not available to EU investors, a UCITS ETF which invests in the same assets is an option.

Also, while usually a hedge long term investment gold has had a steady increase. For example the price of gold has increased 360% from 1990 to 2020 with the Dow Jones Industrial Average increased 990%. But the 15 years from 2005 to 2020 gold has increased 330% and the same Dow Jones Industrial average only 150. Silver, while a more volatile investment is outperforming gold due to its usage in things like IPhones.

spaced

An ETF is the safest way to invest in the markets long term - these have outperformed funds every year . However in Ireland ETFs are subject to a 41% tax (every 8 years whether you sell or not - this is their own special tax rate, different to CGT). A lot of the stock advice online seems to be geared toward the US and UK , where they have ISAs & 401Ks, which are tax exempt. I could live with the 41% tax at the end but every 8 years is very punitive. So in my opinion not suitable for Irish investors

Here, there very few options :

buy a big basket of 40+ shares to get the same level of diversification - you pay 33% capital gains tax when you sell the shares. If you die though the shares can pass without CGT. But you need a good bit of money for that. Some online brokers let you buy fractional shares (Trading 212s Pies function seems good for this)

Or a managed fund from Zurich/Irish Life/Aviva etc. They have some diversified products but you pay 1-2% management fee each year and over 20 years with compounding that changes the value significantly. But you might get 6% return after fees.

I am still early on my investing journey so I only found out about the ETF tax last month. I use Trading 212 and Etoro to buy shares, but only in companies I know something about. I had to sell all my ETFs because of the Tax thing (they were up a good bit from last year, so I might have a small tax bill)

I am, like every one here, also looking for where to invest spare cash. Doing your own stock portfolio seems the best option (I do not think I will outperform any of the major ETFs which is why I am mad I can't invest in them). But I am open to any good ideas people on here have.