The money doctor: stock market investment?
Q I have spare savings that I don't need for the next year or two. Friends are telling me to go into the stock market, or buy airline shares, or precious metals such as palladium. What's your view? I have €25,000.
A The stock market is a long-term investment. Be prepared to lose your savings if you are thinking in the short-term. But long-term, the stock market has probably the best return of any asset class.
Airline shares took a dip recently because of the volcanic ash, but long-term, airlines are here to stay so those geared for the long haul will find investors.
Palladium is one of those platinum metals used primarily for catalytic convertors and is enjoying a resurgence, particularly in America where the motor industry has come storming back.
Diversification is the key and I would look at a balanced, managed fund with a wide-ranging portfolio rather than individual stocks. Contact an authorised adviser or an independent authorised financial adviser for more advice.
q My late father left my three sisters and my brother the family home and an amount of cash. It works out about €150,000 each. My brother, who lived in the property with my dad, wants to buy us out. I don't think he has the ability to borrow the €480,000 he will need -- our house is valued at €600,000 and he earns €75,000 and his partner €35,000. Will he get a loan?
a The current Capital Acquisition Tax threshold is €414,799 from parent to child so there is no tax liability on the inheritance (over this amount, the tax is 25pc), but as the property is not being sold, there is stamp duty payable at 7pc over the first €125,000 -- that's €33,250! If your family had to sell, there would be no stamp duty, but there would be estate agent fees and legal costs so your brother is doing you a favour.
I would not worry whether your brother has the ability to find the money -- he and his partner have the ability to borrow €500,000 based on their incomes -- I would just be grateful to receive my inheritance so promptly and in ready cash!
If your brother cannot raise the money he can be forced to sell the property to meet the bequest from your late father.
Q I inherited €5,000 in Prize Bonds from my grandmother. Any point in keeping them?
A First of all, you do not have a tax liability as the CAT threshold from grandparent to grandchild is €41,481.
Do you know you have a 3.7-to-one chance of winning on Prize Bonds? I always recommend that you should have between three and six months' annual income in a Rainy Day Fund (RDF) for emergencies, sudden loss of income or that potential investment opportunity. This RDF could include Prize Bonds as they are so readily encashable. With prizes weekly and monthly of between €75 and €1m, plus their safety (they are a joint venture with State-owned An Post and Fexco in Co Kerry) and a minimum four bonds required to purchase (€25 or €6.25 each) they make an ideal diversified investment. Stick with them -- it could be you!
John Lowe, fellow of the Institute of Bankers, is founder and managing director of Money Doctor, regulated by the Financial Regulator, and author of the best-selling The Money Doctor Finance Annual 2010 and 50 Ways to Wealth (both Gill & Macmillan) now available for seminars and consultations: email email@example.com or firstname.lastname@example.org or call 01 278 5555