David McCarthy, Galway Talks Blog, 1st November 2011

Question:  I am 50 years of age and have a number of investment properties which are heavily borrowed.  I do not have any life cover attached to these loans and I am concerned about what the position would be in the event of my death.  Have you any advice?

Answer:  Unfortunately it would appear that you are in substantial negative equity.  It is extremely important that you consider taking out some life cover to bridge the shortfall between the value of your properties and the sum owed on same.

Whilst I know that this will be an extra burden on you financially, the consequences in the event of your death, while these mortgages are still in place, could have a substantial impact on your family.  Obviously taking out a new life policy also makes the assumption that you are in good health.

Question:  I am considering investing some money in the stock market but never bought shares before.  What would your advice be?

Answer:  If you have an interest in the stockmarket and are a ‘novice’ investor then I would suggest that you conduct some research online before investing.  There are a considerable number of websites available which provide information on how to trade the market, all of which are free.  If you do proceed with an investment I would recommend that you only invest a small sum initially.

Question:  I have a Serious Illness Policy which I took out 10 years ago.  I am considering canceling this cover but I am wondering what implications there would be for me if I did this?

Answer:  Unless you are in a financially difficult position I would recommend that you keep up the payments on this policy.  Not alone would you receive the benefits of policy, if you fall into ill health but also it is likely that the premiums you are paying are highly competitive.  This is due to the fact that the cost of serious illness policies has risen substantially since you took out that policy.

Question:  I have heard you mention a number of times about investing in Capital Guaranteed Bonds.  Can you please explain how these operate?

Answer:  Capital Guaranteed Bonds essentially are an attractive alternative to leaving funds on deposit.  They operate over periods ranging from 3½ to 5 years.  The guarantee applies at maturity.

There are a wide range of bonds available at any given time some of which are quite creative in their structure.  For example a number of bonds offer the feature of returning a portion of your monies after 1 or 2 years at attractive fixed interest rates.  The balance then remains invested for the remainder of the term.  The return that you will receive on the latter sum will be dependent on how the bond performs and what it is linked to in the investment markets.

For an investor seeking an alternative to deposits, without exposing themselves to risks I believe that Capital Guaranteed Bonds are an attractive option.