150k at 25 y/o

[craigb44]

Hello all

Looking for second opinions on what to do with my investment pot. Financial planner advises to leave it where it is and continue to gain compound interest..

I’ve been putting money away into S&P500 ETFs since I turned 18, I’m on a relatively high salary and my rent etc is quite low so I manage to put away almost half my earnings, in my teens and during the couple years of covid I invested the majority of what I made, and so now I have just shy of €150k invested - which will be significantly less next year thanks to exit tax. But this money plus some savings will still be north of the 100k mark.

Seems like the majority of folks recommend against buying to let from what I’ve read on this sub. Am I doing the right thing to just keep investing in the S&P500? Goal is to have 500k saved by mid 30s which seems doable through my current strategy alone, but I’m open to suggestions.

 

[goldensleather]

@craigb44 I'd advise:
- Maxing out pension 100% (as this is essentially a tax free investment bucket).
- Putting together a spread sheet for your ETF purchases.
- Next year you're going to hit the deemed disposal rule and you'll have to pay 41% exit tax on gains.
- Any liquid cash (emergency fund, house deposit, etc) into Trade republic (pu to 50k to get the 4% interest rate), any overflow into Lightyear (3.25% interest).

You have two equity investment options with the rest (which is the core of your question):
1. ETF (deemed disposal and exit tax reduce profit)
2. Investment fund stocks (UK Investment Trusts, Berkshire Hathaway).

Option 1:
S&P 500 or some global index that has some EU and other funds (but to be honest the S&P500 is usually a huge part of any global tracker, and the companies in the S&P500 are generally multi-nationals so you have a lot of global exposure there already).

Option two you could go for:
- SMT (Scottish Mortgage Investment Trust)
- JAM (JP Morgan American Investment Trust) - very close to S&P500
Some people don't like the risk that having a portfolio manager and gearing (borrowing to invest) entails.

Personally I like option 2, bit more risk but it's handier just have stocks.
I have SMT, JAM, and Berk B for my equity.

Buying a house:

You could also buy a new house using the help to buy scheme if you're happy to stay where you are for a minimum of five years.

You could then do rent a room for your friends/siblings/etc to avail of that tax benefit.

I think being 25 most people aren't sure where they'll be living so this might not be an option.

 

[craigb44]

@goldensleather Thank you for this

I can’t believe I never came across trade republic. I’m going to set up an account and probably move my savings to there. A guaranteed 4% every year beats the very little I’m getting in Irish banks.

 

[goldensleather]

@craigb44 Trade republic in a new enough.
The main thing is that they are covered with the Eu deposit guarantee up to 100k.
Light year is just 20k.

Also the interest rates change based on ecb interest rates so it’s variable.

Bunq (similar to Revolut) and Lightyear (great new trading platform) had the best interest at one point.

4% is the highest interest rate the ecb has ever had, they are trying to reduce inflation by curbing people buying stuff and instead incentivising us to save money and get interest.

You could also lock in anywhere from 2k upwards into an eu bank using raisin.ie.
Right now Younited, a newish small French bank offers around 4.10% for 3 years.
The ecb will very likely reduce its interest rate over the coming years, it was negative during covid (they paid you to borrow in order to stimulate the economy. Mad times).

I can give you referral links for any of the above mentioned platforms and either myself or both of us will get some free money. DM me if interested

Just remember you have to pay dirt tax on your tax return for interest gains (33% iirc), it’s simple to do.

 

[padi]

@goldensleather Why Trade Republic instead of Raisin?

 

[goldensleather]

@padi With TR you have instant access to the cash.

With raisin you are locking the cash away for a fixed term which could be between 3 months and 3 years.

If you have a small chunk of money you for sure know you won’t need for a year then you can of course lock it into raisin.

Current rate:

I found right now raisin has rates around 4% so the only benefit of using raisin is if you think the ecb will reduce its rate leading to lower interest rates on raisin, and you want to lock in 4% for a few years.

Right now you can invest in Younited via raisin and you can put as little as 2k in for 3 years and get 4.1%.
In 3 years the ecb rates should be lower than 4%.

 

[gardenlady]

@craigb44 What assets do you have outside of these investments? PPR? Pension?

 

[craigb44]

@gardenlady Began investing in a pension recently. Have about a years worth of salary in savings. Nothing other than that, open to suggestions.

 

[gardenlady]

@craigb44 I'd start off by maxing out my pension. Unfortunately it's a week too late to do so for last year, but you can still do it for this year if you haven't already done so. You'll get a tax refund on your contributions so it won't put too much of a dent in your pot.

After that I'd look at buying a property to live in.

 

[craigb44]

@gardenlady That’s alright I only started my pension this year anyway haha. Seems a pension is a great idea, just as a younger man felt like 60 is a lifetime away, only copped on recently.

Do you think buying a property to let out is a bad idea?

 

[gardenlady]

@craigb44

Do you think buying a property to let out is a bad idea?

I'm not a huge fan personally. Low liquidity, concentrated risk, changes to legislation, high tax burden, etc. That said if you found a good opportunity and managed it well then there may be an opportunity to be had. I would just personally much prefer assets that have higher liquidity, lower maintenance and higher diversity.

Is there a reason you're not considering a PPR? The advantage is you could save on rent, hopefully some tax free capital appreciation, tax free rental income through Rent a Room, plus the personal benefits to owning your own property.

 

[goldensleather]

@craigb44 There are ways to get access to the pension at age 50:

Yes, most people can cash in their pension early, usually from age 50. For this to be possible you must have a pension with an old employer, an executive pension or a PRSA.

https://nationalpensionhelpline.ie/pension-advice/can-i-cash-in-my-pension-early/

 

[michaelpinkston]

@craigb44 Why don't you just buy a place to live in it? You're then saving on rent. Same thing as earning the rent each month. Difference being the money you put into your own home is not wasted money like renting is.

If you have no mortgage, and a good job and savings/investments you're 20 years ahead of most people

 

[goldensleather]

@gardenlady I believe you can also max out the previous years pension contributions if you haven't done so already, definitely worth looking into.

 

[stefan612]

@craigb44 why on earth are you investing in ETFs in ireland outside of a pension? are you already maxed out on the pension?

 

[geeani]

@stefan612 Do you not have to wait until you’re 60 to draw your pension? That’s the biggest reason I don’t personally, I’d rather enjoy the money sooner in life.

If OP has €150k invested by 25 the chances are he’ll want to start drawing long before 60.

 

[abgchristian23]

@geeani Depends, often possible from 50

 

[teksoft]

@abgchristian23 How's that? Without losing tax breaks?