Consumers turn to investment funds as interest rates remain low on savings accounts
CONSUMERS are piling into investment funds in reaction to banks paying almost nothing in interest on savings accounts.
New figures from Irish Life show the appetite for investing has soared with the number of investors in its funds growing by 37pc from 46,000 to over 60,000 individual investors in the last 12 months.
Over half of people have an fund value of €30,000 or less, which Irish Life said meant the investments were not just been bought by high rollers.
Banks are paying little or nothing to savers in interest on deposits. Savers have €100bn in savings in banks alone.
There is another €20bn in An Post savings products, and member savings are around €14bn in credit unions.
The build-up of money in An Post savings is despite repeated cuts to the interest paid on the products.
Many credit unions are paying low dividends, and a number of banks paying 0pc on demand deposit accounts.
Irish Life said it has seen a surge in money going into its Maps (multi-asset portfolio) funds.
Over the last year, investors in Ireland have added an additional €31m a week in new investments on average into the funds.
This is an increase of almost 35pc on the previous 12 months, where the average value of new investments was €23m a week.
A combination of more investors putting money into Irish Life Maps products and the rise in the value of the investments has added €1.4bn to the value of the funds.
The value of Maps funds have gone from €2.6bn in April 2017 to over €4bn currently.
Maps funds have risen by 23pc in the last four years, after dipping into negative territory between 2013 and 2014.
Irish Life’s Anthony McGuinness said the Maps funds have performed well in the last five years.
“Despite economic crises in Greece, concerns for China’s growth and the market ripples created around the US presidential election and Brexit vote, the Irish Life Maps funds have gone from strength to strength, and the actual performance stayed within the range of expected returns.”
He said a third of Irish Life investors are under 50 years, with an overall average age of 54 years. Over half of people already invested in Irish Life Maps have an investment value of €30,000 or less, while 15pc have investments over €100,000.
The revelation of money pouring into investment funds comes in the week that RaboDirect.ie leaves the savings market here.
It had €3bn in savings from 90,000 consumers before it decided to close up here.
Anyone considering putting money into multi-asset funds should seek independent financial advice, according to Mark Whelan of price comparison site Bonkers.ie.
He said: “It isn't surprising to see an increasing number of Irish savers putting their hard-earned cash into investment funds these days.”
He said savers have been left with no choice but to take on a certain amount of risk with their savings since the returns being offered by the banks are so low.
Even savers with the best term deposit rates currently available are only seeing about €30 back after Dirt tax for every €10,000 they lock away for a year.
Mr Whelan said low-risk funds could be a good alternative to traditional savings accounts for many consumers, but they should speak to a qualified financial advisor before making any investment decisions.