Interest rates around the world are on the rise with the US Federal Reserve leading the way.. Europe will be the last to react but for many mortgage holders the dilemma of whether to stay in their variable interest rate mortgage or move to a fixed rate is the issue. For investors, it looks like at long last deposit interest rates will start to move upwards in the coming months. Many of those investors remained in cash over the last few years forgoing the juicy growth rates of the stock market and property. But what now… what is “safe” ?

One definition of the word safe in the Oxford English dictionary is free from risk. In light of asset performances in recent decades, there is not a single investor who could state their investment is risk-free. Between oil crises, earthquakes, floods, famines, credit crunches, Presidents Trump & Kim Jong-un, Brexit –  the world is a different place than it was even 12 years ago. Is anything safe ?

Staying positive is crucial or as those nice people in Made in Chelsea say Keep Calm and Stay Positive. Remember first of all, downturns do not stay down forever and neither do bull markets stay up. Everything is cyclical – here in Ireland, we have had a boom for over 15 years followed by a bust and now over the last ten years, markets have quietly gathered momentum. Who would have thought the US stockmarket would have grown by so much. We are now in the 9th year of the 26th  BULL (rising) market and while we have just had a correction ( 5% drop )`plus now with global interest rates set to rise, investors will be thinking about going back to the straight deposit account. If we have a crash ( 10% drop ) it still however won’t deter the vast majority of investors from leaving the stock market. Only a full blooded BEAR (falling) market may do that. Still, NO ONE knows when this 26th BEAR market will materialise so staying “liquid” and flexible is important. The average managed balanced ( on a scale of 1 to 7, a number 4 ) fund grew by between 5% and 8% last year.

Cash is currently king or queen as the case may be. Staying “liquid” or having a Rainy Day Fund imperative for three very good reasons

  1. Emergencies – your clutch goes (for the uninitiated, that’s part of your car !)
  2. Sudden income loss – no bonus this year
  3. Investment opportunity – next door becomes available at half price.

Therefore, savings are key to our next boom. Prudence would dictate that you have between 3 and 6 months net income per person for this Rainy Day Fund. The question then is where to invest in the meantime if you do have savings and what to do if you don’t.

The property market is still buoyant though one could argue that the “bottom” was about six years ago. A landlord’s lot is not a happy one sounds like an opus from a Gilbert & Sullivan opera…. But making a decent return on investment property is extremely difficult currently between all the costs and taxation plus the hassle of it all.

Aside from property, the other asset classes of cash, stocks, bonds and alternative investments should be examined and scrutinised for wealth preservation and growth. The buzz word is diversification and while, as I said, cash is king currently, consumers still want their cash guaranteed as per the Deposit Protection Scheme (€ 100,000 per person per institution  )

Cash – remember the three deposit categories

  1. Demand accounts ( make withdrawals at any time )
  2. Notice accounts ( you have to give notice – from 7 day, 30 day etc )
  3. Fixed interest rate accounts ( you MUST invest for the period agreed – no withdrawals are allowed. Periods from 1 month, 3 months, 6 months to 1,2,3, 5 and 10 year fixed )

Amounts vary from a minimum € 1 to € 100,000 and in some cases a maximum of     € 1,000,000 to no maximum. Rates can vary and you really do need to shop around. If you have the time and patience, you could open a myriad of accounts in different institutions availing in many cases of the € 100K threshold policies of these deposit-takers. For example, KBC Bank offer the best demand (available any time) account in the country – a whopping 0.3% up to € 100,000 per person. DIRT tax at 37% is applicable to the interest giving you at net 0.189%.

The REGULAR SAVER ACCOUNTS pay better rates if you can commit to a minimum of € 100 per month up to in some cases a maximum of € 1000 per month – the best rate in this category is with EBS at 1.75% ( 12 month savings ) while KBC Bank at 2.5% ( 12 month savings – 0.5% plus an extra 2% if you open an “extra” current account with them ) If you do not have a savings plan in place, I beg you to start one now.

Alternative investments might include art, rock n’ roll memorabilia – four years ago saw the 50th anniversary of The Beatles in America. One of their first performances was in Washington DC. A young 18 year old photographer was assigned to the gig back in February 1964 – he did nt even have colour film for his camera and packed the photos up in a London attic til 2008 when he sold them to save his Washington home from being repossessed. He did nt realise what they were worth – a cool $ 368,000 !

Art, diamonds, stamp (philately) and coin (numismatics) collecting, forestry, wine investment, first editions all make sense if you want to diversify and your security is good. For any of these alternatives, take professional advice.

While all investment is risk, Walt Disney summed it up in one sentence “All our dreams CAN come true if we have the courage to pursue them” – he never sat on his assets. Contact me if you want to discuss further.

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