My wife and were blessed with twins last year and the boys have got about 10k euros from godparents and family. I would like to put the money for their future education fund, now since we are not residents in Ireland anymore the BOI were we have our account was not really helpful in terms of advice on investment.
Does anyone have any advice where to invest and how?
State savings are offering a 25% return after 10 years - statesavings.ie/products/Pag … yBond.aspx You will not get a better return than that for a savings product at the moment.
Personally, that kind of investment is not for me as I fear future inflation will leave your with a negative real return.
I don’t know how straightforward it is to transact (buy,sell,manage) in the child’s name for these purposes. I know I tried gifting investments to godchildren before and Anti Money Laundering legislation made it too much of a pain in the ass. Hence the advice to invest it as if it were your own money and owe the children. It’s a decent sum of money but not really big enough to start a trust fund or anything like that.
thats the whole point its a nice sum but still small to buy anything (was thinking of a parking space in the center)
no mortgage but also no experience in investments so i would prefer to play safe was thinking of buying gold coins for each
German/British bonds will provide even worse returns.
You really don’t have many options at the moment. Precious metals are really a scary investment and it’s impossible to predict their value in ten years times. Stocks as a whole are not cheap, although some markets are cheaper than others. If it was me, I would invest the money in an index that looks cheap (Canada/UK currently look the cheapest of the primary markets). If that kind of thing isn’t open to you, then paying off the mortgage may not be the silliest suggestion in the world. Plug your mortgage numbers into the calculator below, might make more sense to borrow your babies cash and hand over the equivalent sum of interest to them, then to a bank.
What about prize bonds, should return something and you could get lucky, if it’s not performing after a year you could move it something else.
By the way we have twin too, it gets easier about 2 and 3/4 ours will be 3 on Sunday and are great craic right now. Just get used to being broke, tired and your house being destroyed. Get black out lining for their curtains it makes such a difference in the summer.
Prize bonds are a bad idea for that sort of amount. You might get away with it if your time horizon is genuinely twenty years, but in general you need to be investing €100k or more to get the average return within a reasonable time horizon.
Any evidence for that? I hear it all the time from people who don’t understand the way the prize bond odds work against the small investor, with anecdotes about how “they had ten prize bonds for forty years and never won anything” (which is exactly what you’d expect), or “won twice the first year and never again since” (usually a fine example of confirmation bias).
As an aside; what is the minimum purchase value for which prize bonds do start to make sense, compared with the current lousy deposit return? I ask this, not investing for a child, but as someone who has several tens of thousands in cash on deposit (but substantially under a million), who is risk-averse and has become steadily less impressed with the current combination of nugatory interest and confiscatory tax.
I think you might have done this analysis in the past, but I’m either too lazy or too incompetent to find it when I look it up , so a link to your previous post will be just fine.
I’m pretty sure you’re able to do a few sums, so rather than give you my opinion, let me give you the wherewithal to work it out yourself. No doubt you know the gist of the argument is that the number of prizes won by all investors is a discrete distribution – you can’t win a fraction of a prize. So although you should win, on average, the fixed payout rate for Prize Bonds, the lower your investment the lumpier the distribution, and the more likely you will go long periods without hitting the average. Here it is visually : the distribution of number of €50 wins gets closer to a Gaussian with increasing investment amount, and the chance of diverging wildly from the average gets lower.
For a given investment in the first column, the percentage chance of the number of €50 wins in the top row is shown. For any given investment, the cell with the highest percentage is the most likely result (obviously). You will find that the most likely number multiplied by €50 is about 0.8% of the investment – 0.81% is the current payout on the Prize Bond fund if you count only €50 prizes. Prize Bonds prizes are not subject to tax, so gross up by DIRT amount to get comparable deposit account rate of approx. 1.4% to 1.6% (depending on whether you are liable for 4% PRSI on unearned income, and on whether you include €100 prizes, see below)
To take an example, the ‘16’ column at 9.91% is the highest for a €100k investment. 16 x €50 = €800 ~ 0.8% x €100k. To demonstrate the lumpiness problem, observe that the most likely number of wins for €30k invested is ‘4’ (and the average is 4.8 ) but the chances of winning less than half the most likely (the sum of the 0-2 columns) is nearly one in seven. Whereas the most likely for €100k is 16, but the chances of winning half that or lower are less than 2%.
The odds shown are all based on a single year timeframe. The longer you leave your money invested, the more likely you are to achieve the average return (including fractional prizes per year that you could not get in a single year). I haven’t shown the odds, but clearly leaving €30k for ten years makes the returns much less lumpy than for one year.
Caveats:
The spreadsheet values are rounded to the nearest 0.01%
Prizes of €100 and greater are ignored as being too unlikely to win. There is a whole separate distribution for each denomination of these. When you get to €100k investment you do become likely to win a €100 prize every two years, but these are best treated as a bonus (which add only 0.05% to your average return).
The extreme unlikelihood of winning large prizes is the reason that I say the likely return is 0.81% – based on the number of €50 prizes only – rather than the 1.25% which is what the NTMA tells you is actually payed out but includes €1m prizes etc. which you are never going to win.
The expected return gets a (very) tiny bit better as the total Prize Bond fund grows. That’s because there is a fixed prize structure for higher prizes, after which the rest of the 1.25% payout is made in €50 prizes which are better for the savvy investor. The values used are accurate as of end September 2015.
The shared Google sheet doesn’t contain any calculations, just values. I have a more accurate (i.e. unrounded) Excel spreadsheet with the calculations that anyone is welcome to, but it uses macros (to implement [*Stirling’s approximation * (Stirling's approximation - Wikipedia) for logs of very large factorials which Excel can’t otherwise handle).
For anyone who wants to implement it themselves, the calculation used for each ‘percentage odds’ cell of the sheet is:
… where:
n is the number of annual prizes of €50 denomination. The Prize Bonds FAQ tells you how to work it out: as of Sep 2015 it was 372,600.
r is the number of discrete wins from the top row of the spreadsheet.
b is the inverse of your fractional chance of winning any prize, equal to the total Prize Bond fund value divided by the total value of your own holding, e.g. €2.3bn / €100k = 23,000.
There is a negligibly small inaccuracy in the above calculation: it assumes every one of your Prize Bonds is entered for every one of the 372,600 annual €50 draws. In fact, each Prize Bond can only win once per week, which makes the odds microscopically longer.