Sunday Times - Question of Money - January 23, 2011

Posted by Jill Kerby on January 23 2011 @ 09:00

Past performance is no guarantee of good funds


SG writes from Dublin: I was on RaboDirect’s website and I came across its 2011 investment top picks. I’m thinking about investing €10,000 I have in another savings account between the various top picks listed. Have you any advice for me regarding same? Looking at the last couple of years they have performed fairly well.

The attraction of an on-line investment website is that the fund information is very transparent and the fees and charges are usually lower than if you buy one through a life assurance company or via a broker.  Once you have an account in place, the purchase – and selling - process is also quite easy. Past performance is just one part of the story you need to check out when making an investment, however. Keep in mind that nearly all stock markets and the vast majority of investment funds have recovered since the financial collapse of 2008 but that markets are volatile, and quite irrational given the scale of the debt in western countries.

More important is knowing what you are buying and that you both understand, and are comfortable with, the risk you take in buying the assets under investment in your fund(s) of choice. You should also be careful about the fees and charges and keep in mind that there are even lower cost ETFs – exchange traded funds – available to buy, many of which mirror the shares and assets that can be found both on-line sites like Rabo or in the list of funds that life assurance companies sell.  You can buy ETFs from a stockbroker or your own lower cost share trading account. Check out the online brokers, www.tdwaterhouse.ie where direct, execution-only trades cost just €15.


Bank overseas 

NR writes from Co Tipperary: Do you have any advice on how to open a non-resident account in either France or Germany? Germany seems to need an address in that country. Do you have to go to either country to open the account or can you do it by post? I only need a savings account. I am a pensioner and am afraid of keeping my savings here.

I’m afraid that different rules or conditions apply in different countries and even with different banks. I’ve written here a few times before that the European Union/Commission itself sets no restrictions on the opening of accounts by EU citizens or residents in member countries.  However, individual banks have leeway when it comes to setting the conditions for opening non-resident bank accounts.  They all require that you fulfil strict anti money-laundering terms and conditions but some require that you attend in person to open your account or that you fulfil their residence requirements.  You will simply have to contact the bank to determine their rules. 

The easiest solution to this question of moving some of your savings out of this country (and even out of the euro) – though not to France or Germany - is to open a euro or sterling bank account (but not a building society account as they do not accommodate non-residents) in Northern Ireland.  You can follow a good askaboutmoney.com post on this subject here: http://www.askaboutmoney.com/showthread.php?t=147596


 Inherited house

HR writes from Limerick: I inherited my late father's house two years ago in March 2009) and it has depreciated in value since. It has been rented and income declared and all taxes paid on said rent and NPRP tax paid. At the time when I inherited it the value was at €230,000 and now I have it on the market at €160,000 euro. Do I have to pay capital gains tax as it has depreciated in value? Also do I have to use a solicitor when said property is sold and if not how do I go about transferring ownership?

When you inherited your father’s house, the transaction was tax-free because its value was below the tax-free threshold between a parent and child.  The property is not your principal private residence however, so any gain in value from its market value when you inherited it and when it is sold would be liable to 25% capital gains tax.  If, as you say, the house has lost value these past two years you will not have any tax to pay.  As for not using a solicitor to complete the transaction, I’m told it is possible to do the conveyance yourself if you understand what contracts and deeds need to be compiled and exchanged. However, the buyer – and their lender – may not be willing to proceed with the transaction unless they are satisfied that the legalities have been done properly. Self-conveyancing is relatively common in the UK. Check it out here for some background: http://www.diyconveyance.co.uk/ but a straight forward conveyance in Ireland shouldn’t cost a great deal of money and solicitors are more than willing these days to negotiate their fees.


 Emergency exit

GB writes to Navan: Surely if we were to pull out or are pushed out of the euro, it would not happen overnight, can you please advise if that is so, or is it possible it could happen without warning, it would I'm sure put a lot of people at ease including me.

Unfortunately, I don’t have a crystal ball, nor do the politicians or central bankers, and so no can accurately predict if and/or when Ireland will leave the euro, or if and when the eurozone will break up. Nevertheless, the euro’s future is high on the agenda of not just eurozone top finance officials, but also the Americans, Chinese and Japanese whose central banks are now all supporting the currency by purchasing Portuguese and Spanish bonds in an effort to keep the borrowing costs of these countries affordable.   If you are worried about the safety of your life savings, don’t leave it all in euro or the eurozone.  If the currency does collapse, you will have done your best to mitigate some of the worst effects.



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