Paying too much on your mortgage

Paying too much on your mortgage?

  • Review your rate options regularly.
  • Consider change of rate based on reducing Loan to Value (LTV) and shop around.
  • A recent review of a 25year loan of €250,000 reduced repayments from €1,277 to €1,102 per month. – saving €175 per month.

You could continue to repay at the same rate and pay off the loan early 4.5 years earlier or

Re-invest the saving which would give you a future sum of €78,246.

It’s YOUR choice

A little extra every year adds up!

Personal pension holders who consult a financial advisor at least once a year, have pension values 75% higher than those who do not.

The average pension value for those who were regularly advised was

€87,563 (excluding company contributions) compared to €49,819 for those who did not seek regular reviews.

Personal pension holders who consult a financial advisor at least once a year, have pension values 75% higher than those who do not.

The average pension value for those who were regularly advised was

€87,563 (excluding company contributions) compared to €49,819 for those who did not seek regular reviews.

Source: The Value of Advice Ireland 2013 PIBA/Standard Life.

5 Savings Tips

1. Why are you saving?

This will determine your next steps. Are you saving for a mortgage, a trip, a change in career, to buy a car, go hack to college, start a business, early retirement………Each needs a different spending plan and strategy.

Prepare a plan – decide your goals/objectives for your money?

2. Have a rainy day fund

3 to 6 months of net income

3. Save at least 10% each month of your net income

 If you can do more, do more! If you’ve a specific goal in mind this will be easier to achieve.

4. Set up a standing order

Saving every payday – Once they’re gone, they’re out of sight.

5. Have mixture of savings & investments

Short term (savings such as rainy day funds) Medium term (Investments with a time horizon of 7 years + and Long term (Pensions and Investment Portfolios). Each should consider your risk profile, costs, taxation and accessibility.

Health and Wellbeing

Are you leaving your finances to chance?

Take control with a Financial Plan

We’re all different…..

    …. but advice should always fit !

Our services

We provide a comprehensive financial advisory and taxation service to Facebook staff members in Ireland. A sample menu of services available to Facebook staff are:

  • A comprehensive 1:1 financial and tax advisory service (1 hour).

Providing answers “on the spot” to any financial and taxation queries raised by the Facebook staff member.

  • Preparation of Irish Taxation Return to include RSU’s, dividend income, exercise of stock options (1 hour).
  • Budgeting – Making your money work harder for you (1 hour).
  • Rent or Buy? What are your options and how can you get onto the property ladder? (1 Hour)
  • Financial Plan – Preparing a comprehensive financial plan complete with budgeting analysis, summary report and cash flow forecast (3 Hours)

 Why work with us ?


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Impact of Covid19 on Financial Markets

Covid-19 Update On Its Impact On Financial Markets 30 March 2020

What’s Happened on Markets in the Last Week?

The Roller Coaster continued and on foot of the governmental stimulus packages, especially the expected sign off by President Trump of the US package, markets recovered some of the falls by Friday’s close. Despite this individual stock markets are still significantly down on their opening values of 1st January.

In Local Currency LastWeek Year toDate
UK Equities6.5 %-28.0 %
US Equities10.3 %-21.3 %
European Equities7.1 %-27.1 %
Japanese Equities13.7 %-15.2 %
Hong Kong Equities3.0 %-16.7 %
Emerging Market Equities4.9 %-24.4 %

As I write this update at 5.30 pm Irish time, the  US  Markets  have added  another  2% gain  by  this  stage having  been followed, somewhat meekly, by Europe. Australia has had its rebound today which was just mimicking that of the US and Europe on Friday which happened after hours for them. In the meantime, South Africa has finished in positive territory.

An Update on the Medical Situation

As the infection and mortality rates gather considerable pace, each country’s population has a heightened awareness of its own statistics. Nevertheless it’s   worth thinking about the possible projected figures for the US by Dr Tony   Fauci, especially in the light of its importance in the global economy. Dr Fauci is a leading American immunologist  who, amongst other roles, serves as a member of the White House Coronavirus Task Force, and has been the one      to correct many of President Trump’s “mis-statements” on Covid-19. In his estimate issued over the past weekend,  the US could experience as many as 200,000 deaths due to the virus. The UK for its part, based on its similar lack of initial urgency in dealing with the problem, could possibly see over 40,000 deaths on a proportionate population calculation.

To put that into perspective the number of “Winter Flu” deaths in the US over a 6 month period would normally be circa 62,000 while the total deaths of US military in its 17 year involvement in the Vietnam conflict came to 58,318 (with over 150,000 wounded that required hospital care).

In terms of managing the impact of the virus  if a large percentage of your population hasn’t had the virus, but you  still have people who are infected that aren’t identified or isolated, then the virus will continue to  spread.  In the short term, lockdown measures will most likely increase in severity in most countries and even when the worst may have appeared to have passed in terms of infections and deaths, the need for social distancing will restrict the broad economy, especially in tourism and hospitality. All this means is that a “back to work” strategy is probably going to have to co-exist with distancing measures for far longer than anyone and any country might want.

What’s The Economic Impact, Now And Going Forward?

Oil has now fallen to $20 a barrel (partly due to a disagreement between OPEC and Russia about reducing production) and there is now a genuine concern that oil producers will run out of storage space for oil which cannot now be put to direct use due to closures of factories as well as global travel restrictions. The price of copper has fallen 27% year to date underlining, if it was ever needed, the major slowdown in global economic activity which is becoming more obvious as each day passes.

The US economy is now entering recession and with it all the other economies in the world. Initial jobless claims (a measure of the number of new filings to receive unemployment benefits) rose to 3.283 million for the week ending   21 March. The speed and magnitude of the move higher highlights how US businesses have had to let staff go in the face of the sudden coronavirus shutdown. There were, up to recently, 29 million people employed in travel, leisure and hospitality in the US, so the jobless numbers are going to soar in the next few days and weeks. Similar statistics are also appearing globally with similar proportionate numbers for each country. As a point of reference, the US unemployment rate in the 1930s Depression period was 25% of the workforce.

In recognising the gravity of the situation, the world’s central banks have been full-on in their support of liquidity and borrowing. This is, as was the case in the Global Financial Crisis, a knee jerk reaction to keep economies afloat where the cost of providing business supports and “helicopter money” has stored up problems for the long term as far as each country’s debt is concerned. The reality is that the cost of servicing all these debts is being handed down to several generations to come.

One of the major impacts from Covid-19 is likely to be in the area of globalisation. Goods made cheaply in the Far East may be re-categorised in terms of their importance to each country’s economy. It is likely that we will see less reliance on, in particular, the Chinese supply of goods as products are sourced closer to home or even made at home. This will bring, over the long term, changes in product innovation and employment as well as investment opportunities.

What Should Investors And Pension Holders Do Now?

Nobody knows  how the economic situation will play  out  in the coming year and, by extension, we  don’t  know  how stock markets will play out. The likely scenario of a major death rate in the US, while already known, is most likely  not fully  priced into markets. I expect that the fear and uncertainty  of health at an individual level will      most   likely spill over, in the short term, to further falls in stockmarkets in the coming weeks. This, in itself, will    lead to a major investing opportunity for  those who  have cash  holdings  or  new monies  awaiting investment either personally or in their pension funds.

Of course, some people who might have switched out a few weeks ago at the start of this recent problem may decide to wait for a lot longer before they dip their toe back in. In my experience when people switch into cash they often stay in cash for years afraid to come back into the market and therefore miss the upswing.

And finally, I repeat my previous advice :

  • If you are invested already, keep the faith even riding out a likely further downward movement of the next month. If you are considering selling out with a view to coming back in at a lower price, don’t! These markets move far too fast to be certain of not missing the upside when it comes.
  • If you are continuing to make, say, monthly contributions to your pension fund then the next few months will be an opportunity to invest at cheaper fund prices than in the past.
  • Clients who are nearing retirement, but who intend to avail of an Approved Retirement Fund option upon retirement, should remember that your investment horizon is not time limited to the date of your retirement. Rather it extends to the length of your lifespan and most  likely that of your partner also, in which case maintaining equity exposure to achieve real returns above inflation over time continues to be as important as ever.
  • If you have funds held in cash or “new money” pending investment then prepare for an opportunity to invest at a heavy discount to the January 2020 market.

Block B, Maynooth Business Campus Maynooth, Co Kildare

Tel 01-541 3702

Colm Nolan & Associates Limited is a private company limited by shares registered in Ireland 653843

The Impact of Covid-19 on Financial Markets

The impact of COVID-19 on Financial Markets

The impact of COVID-19 on Financial Markets (and how to make the right decisions with your pensions and investments)

Colm Nolan Managing Director, Colm Nolan and Associates

15 March 2020

Firstly, the health issues

Much has been written on the medical and health issues of COVID-19 in recent weeks by people far more knowledgeable than I am, and much more will follow in the weeks to come. Nonetheless, there is no doubt we are going to see a huge increase in the number of cases of the virus in the coming days and weeks. This is not due to any new pattern in the spread of the disease but most likely to a major change in the requirements to be tested. Until recently, if you had a flu-like illness but had not recently travelled to affected areas of high contagion such as China or Italy, you would not be tested.

With the spread into communities from individuals who had travelled to those countries, anybody who might be suspected to have contracted the virus will now get tested. This is due to the way in which the global health care systems work; you get tested if you meet the case definition, and the case definition included travel only up to the last few days. So, expect to see hundreds if not thousands of new cases being announced on a daily basis especially in the US as testing increases and with it a raised level of panic. The amount of panic buying internationally of sanitising and basic food stuffs in supermarkets over the last few days is testament to the current irrationality of the moment.

Despite the growing hysteria, this is not the Zombie apocalypse, albeit if you are in the elderly age group or a newborn child (both groups having lower immunity rates), have a pre-existing medical condition affecting your respiratory or circulatory system or other conditions such as Diabetes, you really do need to take care.

 Health Services worldwide are focusing on slowing down the spread of this disease not because they don’t want to eradicate it entirely (there is no vaccine yet available), but because health care staff are over-stretched tending to those that present to hospitals or phone services with possible symptoms.

Despite promises from governments in recent days to throw money at this global emergency, the fact remains that all national health services have been constrained by the lack of sufficient physical staffing which existed almost globally before the outbreak started.

Realistically speaking, it is one thing to expound on financial injections now being made available to health services and another to actually put experienced and qualified staff in sufficient numbers on round the clock shifts to deal with the problems on the ground.

Why is slowing the spread important?

Put simply, the more that cases are stretched out over a longer period, the more that health care systems have time to prepare with less chance of being overwhelmed. Spreading out the infection rate means a more measured response, less chaos and less fearmongering as well as providing better care to those who have contracted the virus.

Most people might be surprised to hear that this type of “Black Swan” virus was actually anticipated by virologists and epidemiologists – minus the very useful information on what, when, where and how big. After the last COVID-19 case is gone, there will be pandemics in the future, they have always been in our past.

Also expected by these medical specialists was the degree of initial apathy and inertia due to mental framing in how little respect was given to the effects of the virus. There is often an inability to correctly appreciate risks that you have no experience of or where one over-relies on historical data. In a nutshell, humans (politicians, investment analysts and doctors alike) have initially behaved as expected but are now learning quickly. We expect this of humans.

So what are the global economic issues?

It is uncertain when economic activity will resume to a consistent level worldwide as monetary policy support is needed to mitigate the credit crunch risk, while a fiscal push is required to support the shock on the supply side. In the short term, there will most likely be business failures, especially those in local communities such as coffee shops, pubs and restaurants as well as larger national operations such as hotels, airlines and tour operators. Most of the bigger economies have learned the lessons of the Great Recession from 11 years ago and have started to take appropriate action in this regard. More central bank interventions, after the recent Federal Reserve’s interest rate cut, and more fiscal policy, on top on what has already been announced in various countries, will gradually kick-start economies from the lethargy that will result from mass self-isolation and social distancing. These measures will most likely cause economies to stabilise and avoid a global recession. Indeed, encouraging signals are already coming from China, where the activity is gradually resuming.

Of the Developed Economies, Italy with its high level of elderly citizens is most at risk due to its extremely large Government Debt, which is almost 135 per cent of GDP before the slowdown in economic activity due to the virus. This may well have a major long term impact on the overall Eurozone project. In the US, the declaration of a National Emergency by Trump last Friday as well as the Food and Drug Administration’s acquiesce to fast track COVID-19 test approval might be more telling than one might suspect. Despite last Friday’s 8% rebound, the US public reaction to the likely large number of infections that will evolve in the coming weeks will lead to a continuation of the stockmarket roller coaster.

The provision by many governments of financial support to those, hopefully, temporarily laid off work as well as the likely postponement of tax collection will have serious impacts on those countries’ current accounts as well as the likely deferral of many capital based projects which would also have brought future cashflow benefits to economies. The best-laid plans of governmental budgets of recent years have now been blown wide open and will most likely result in future sovereign bond issuance and or further quantitative easing.

In addition, the current and possible future cancellation of many cultural and sporting events will have a direct impact on regional economies. Speaking of regional economies, let us not forget that the BREXIT issue has not disappeared and with the interruption of face to face negotiation by way of social distancing and clampdowns on travel this will make an already difficult situation even more challenging. It could force the hands of all negotiating parties to be either more considerate or more belligerent. Time will tell. It will also delay the other international trade negotiations of Britain with the US, Canada and Australia to name a few.

Ironically, there may be some benefits to be got from the COVID-19 situation. A key aspect of preventing the spread has been to highlight (if it was ever needed) the importance of handwashing which has been taken seriously onboard and may actually stop or reduce the more “normal” Winter Flu season in its tracks. In addition, the use of video conferencing by offsite doctors to review more common ailments has not only worked towards containing contamination by COVID-19 but also may become a formalised working practice going forward.

On the climate-based issues, the short term fall in travel is reducing global footprints and substantially impacting on global pollution, especially in China. Economically, the widescale use of video conferencing and home working will change the dynamic on the need for large office spaces most likely resulting in a negative impact on commercial property rentals and valuations.

How do investors keep a financial perspective?

Maintaining composure in stressful times is not easy, whether it’s dealing with the knee jerk reaction to stocking up on home goods or dealing with turbulent stock markets. Such events usually take us into unchartered territory and test us all a little more. However, “unforeseeable” events happen more often than we anticipate, but the principles for navigating them remain familiar.

 The coronavirus outbreak has been described as a “Black Swan” event. Coined by scholar and former Options trader Nassim Nicholas Taleb, a “Black Swan” is an event that comes as a surprise, has a major effect, and is often inappropriately rationalised after the fact with the benefit of hindsight. The term is based on an ancient saying that presumed black swans did not exist – a saying that became reinterpreted to teach a different lesson after black swans were discovered in the wild.

The simplest way to start to understand the financial issues is to think about the price of a share quoted on a stock market. Put simply, it is an amount of money that seems fair for the earnings of a company, paid out in dividends (or which experiences a price appreciation), in perpetuity. If the same share traded on a price-earnings ratio of say, 20, what this means is that you are paying twenty times the current year’s earnings to buy the share.

If so, what’s the problem with one bad year? Unfortunately, it is not as simple as that, otherwise, markets would not have reacted as negatively as they have. The other key ingredient in assessing shares is uncertainty, which drives prices downwards. In the current environment investors simply don’t know which specific companies will survive or how accurate their financial projections are likely to be. But overwhelmingly, companies will survive, but not without pain. It does not take a massive return to profitability to get stock markets to rebound, just a little less uncertainty and a bit more clarity.

The key thing for investors to remember is that markets are forward-looking. There is no obvious correct response to the news – it has already been incorporated into market prices by people with access to the same news information. Responding “after the fact” to falling or soaring markets is the whole reason why investors tend to do worse than they should. Perfect hindsight is great, and some people get lucky with timing, but studies consistently show that composure and resisting the impulse to react or overreact is the key ingredient to successful long-term investing.

The challenge with being tempted to get out of markets when they have sold off is that it imposes another very awkward decision – when do you get back in? If you got out in the first place because of real concerns, you are unlikely to get back in when things are at their most dire (i.e. the bottom of the market). More likely, composure returns only after a sustained rebound, and risking missing a large part of the recovery carries consequences. Sitting it out by staying invested is tough, and the next few months will be particularly hard emotionally for some people depending on their own aversion to risk. Nonetheless, it’s exactly what existing investors need to do.

What history teaches us – Part 1

At the time of writing and as someone who has been a professional financial advisor for 35 years, I can firmly say that markets have gone from being overly complacent to being overly pessimistic, discounting a prolonged period of stagnant growth. This is nothing new. Any examination of past stock markets over any rolling 15 year period will actually show short sharp shocks followed by longer term gradual recoveries which very much compensate for the interim falls. The most recent example before the COVID-19 related fall was President Trump’s berating of China in the trade negotiations in the last quarter of 2018 which resulted in a gradual 15% fall over a two week period. This was then followed by a full reversal in the first

Source: FE Analytics

6 weeks of 2019. What we are currently experiencing is a temporary setback, albeit more likely to be prolonged compared to what was expected a month ago, but it will be followed by a recovery.

For many months, perhaps many years, markets have been itching for a big sell-off. This is now the end of the largest bull market in history. Widespread stock market corrections are inevitable and it’s a matter of when not if, so investors are always on the lookout for a reason to sell. Many have been ready with their fingers on the button, waiting for a reason to push it. The virus outbreak gave them that reason. Stock market falls and crashes are, whilst very uncomfortable, normal.

They are the rule, not the exception, and are part of the journey. Stock market history shows us time and again that this happens. Just like the weather changes throughout the seasons, markets go through cycles of good and bad periods. Any investor with a long-term time horizon should expect to see this happen. To fully appreciate these cycles it is worth reviewing some of the more notable and momentous falls in living memory and how investors would have fared over the long-term had they remained composed. The chart above shows a euro investor with 100% of their money in global equities just before the market crash in September 2008 to the weekend just gone.

The message here is that investors who stayed the course were rewarded. Similarly, if you invested the day before the Dot Com crash in 2000 (the NASDAQ peaked on March 10th 2000):

Source: FE Analytics

And finally, if you had invested before Black Monday in October 1987.

Source: FE Analytics

The key thing is to expect market corrections – and many of them over the long term. There has been at least 13 corrections (a correction is defined as a decline of 10% or more) and eight bear markets (a decline of 20% of more) since 1980 (using the dollar performance of the MSCI World All Country Index as a proxy for the stock market). Equity markets give a positive expected return above less risky assets such as cash deposits because of this volatility. It is the long-term price that investors must pay in order to reap the rewards of positive expected growth over time. Stepping back from short-term thinking, and instead considering the recent turbulence in the context of any person’s long-term financial plan, the correct question shifts from ‘Should one sell?’ to “Is now a good time to buy given that equity markets are cheaper now than they were?’

What history teaches us – Part 2

No amount of watching the news will provide you with the clarity you are seeking with regard to stock market movements in the short term. Steve Forbes, the founder of “Forbes” magazine, once famously said “You make more money selling advice than following it. It’s one of the things we count on in the magazine business – along with the short memory of our readers.”

As humans, we are hard-wired to seek out information that may represent a threat to us and then act quickly to preserve ourselves and live to fight another day. Is it any wonder therefore that many of us remain glued to the media at times like this? Regardless of what any latest crisis is about (this time it is COVID-19), we have experienced market falls and then market recoveries as economies themselves recovered. Here are a few headlines over the last 40 years or so from some of the biggest and most well- respected global publications like Time magazine, The Economist and others:

  • Aug 1979 – “The Death of Equities is a near-permanent condition”
  • Aug 1997 – “Don’t just sit there sell stock now!”
  • Sep 1998 – “A World Meltdown?”
  • Sep 2008: “Wild Day Caps Worst week ever for stocks”
  • 2010: “Fear Returns”
  • Oct 2011: “Nowhere to hide – Investing during a time of crisis”
  • July 2014: “Americas lost oomph”
  • December 2018: “Ugliest Christmas Eve plunge – ever”

Who would have ever invested having listened to or read all of this? Yet the press hardly ever reports stories of gradual and solid growth, perhaps because such growth is the norm whilst falls are the exception. Markets have always delivered over the long term. Yes, some investors have been luckier than others depending on when they invested, but that is just luck – and luck permeates every aspect of our lives, not just investing.

Turn off the radio, go for a walk and remind yourself about what is important – tune out the noise. As humans we use a mental heuristic or shortcut of over weighting recent information – look beyond the recent headlines. Focus on what you can control – your own investment risk level versus your need and willingness to take risk, diversification, controlling costs, managing taxes, rebalancing appropriately and keeping a long-term view.

Nevermind all that, how does all of this impact on my pension and investment funds?

This depends on how your funds are invested. If you are invested 100% in equity funds then most likely your funds will experience a parallel downward movement in line with the falls of the major stock market indices such as the FT100, Eurostoxx 600, the Dow Jones and S&P 500. On the other hand, if you are in a mixed fund, normally referred to as a Managed Fund, the percentage reduction will broadly depend on your holding of equities. If your equity position is circa 60% of your portfolio then you will most likely have seen a fall of circa 60% of whatever these global equity indices have experienced. It is really important to understand that these are falls in value and not outright losses.

A good analogy to understand these falls is to look at them in the same context as to how you might value a family home. If the price of a nearby house is sold for less than what it was originally quoted then that fall in value only impacts the house that was sold. Your own house has not lost any value as you have not sold it. So when, over time, local property prices increase, so will the relative financial value of your own home. Losses or gains on homes are of no consequence unless the house itself is sold. This is the same with stock market investments.

Irrespective of the issues surrounding COVID-19 and the economic and investment impact, our advice has not changed. This can be summarised as follows:

  • If your targeted retirement age is more than 10 years away (and many of our clients retirement dates are at least 20 years away) then the recent volatility is no real concern as these falls in value are broadly regular occurrences, albeit that most such falls don’t have the dramatic background of the current health problem!
  • If you are continuing to make, say, monthly contributions to your pension fund then the next few months will be an opportunity to invest at cheaper fund prices than in the past.
  • Similarly, if you are not likely to need access to investments in the next 7 or 8 years then hold tight and the market will recover – see our explainer notes above.
  • For our clients who are looking to retire in the next few years we have always advocated that you have sufficient cash either in your pension account or on hand in a personal account to smooth over downturns such as those experienced in the last few weeks.
  • Similarly, if you have retired, we have always made it a priority that our clients hold at least three years’

expenditure in cash so as to provide personal liquidity for emergencies and not need to cash out from their post retirement funds.

  • Finally, if you have cash deposits that are not needed for liquidity or emergency funds then the next few months will be an opportunity to consider making long term investments, all for the historical reasons set out.

10 Rockfield Square Maynooth

Co Kildare W23 X2X5

Block B, Maynooth Business Campus Maynooth

Co Kildare W23 W5X7

Tel 01-541 3702

Colm Nolan & Associates Limited is a private company limited by shares registered in Ireland 653843

In producing this document I would like to acknowledge the permission of our discretionary fund manager partner, PortfolioMetrix, to use some of their own commentary as part of this document.