If you've got it, protect it

PERSONAL FINANCE:THERE'S a radio ad Pricewatch keeps hearing which never fails to annoy. A man we're pretty sure we'd hate, tells a joke with the punchline "and then he fell into the pool". His, we're guessing, horrible friends all laugh except for one. He's asked what's wrong and says he's got money troubles, so the joker offers to bail him out but, in a Sixth Sense-like twist, it turns out that it's not a lack of cash, but a surplus, that's troubling him.

It raises an interesting question: what should people with a few bob (or loads of bobs) to spare do to maximise their returns, now that the old cash cows of bank shares and shoe-box apartments on the M50 have fallen into the pool?

THE NAME IS BOND

1GOVERNMENT BONDS offer better returns than most banks. A three-year Government bond will get you a return of 10 per cent tax free, if it is held for the full term, which works out at an annual equivalent rate (AER) of 3.23 per cent. The investment is free of the 27 per cent Dirt, so for a bank to match it, it would have to offer a gross rate of 4.42 per cent on a 12-month savings product. The money is – and will always be – State guaranteed. There is also the National Solidarity Bond launched last year. It is a 10-year investment, offering a gross return of 50 per cent, including 10 annual payments of one per cent. While the annual payments are liable for Dirt, the 40 per cent lump-sum bonus at the end is not. If you are prepared to lock your funds away for five and a half years, An Post savings certificate are well worth considering. They offer a 21 per cent return which is equivalent to 3.53 per cent AER, or 4.82 per cent gross if you factor in Dirt.

WOOD FROM THE TREES

2MONEY DOESN'T GROW ON TREES but trees can make you money. Irish forestry has proved to be quite recession-proof with asset management company IFS saying it delivered an 83 per cent return to investors after the first of its 10-year funds matured last year. That works out at an annual return of 6.2 per cent. The average investment in the fund in 2000 was €9,400 and that generated a payout of over €17,000. Increased demand for environmentally-friendly sources of fuel continues to make forestry an attractive option and the Eleventh Forestry Growth Plan has an offering document which has a projected rate of return of 6.5 per cent per year over the next 12 years. The minimum investment is €750 and the closing date is April 29th.

KEEP A CORK IN IT

3SADLY, THIS IS NOT for drinking but for converting into cash. If we have learned nothing else from Chris de Burgh in recent days, and we haven't, we have learned that wine can make you money, a whole lot of money - he auctioned his cellar for nearly €400,000 last week . To invest in wine, you need a minimum €1,000 and a trusted agent. The best advice suggests you store the wine in special warehouses in the UK so as to avoid VAT or duty. Wine is also exempt from capital gains tax. The storage is secure and you'll not be tempted to drink your Château Latour at the tail-end of a boozy dinner party either. There are around 100 top investment wines listed on the Liv-Ex index of fine wines (live-ex.com) and the average annual growth in the sector has been 15 per cent over the past 25 years, which is not too shabby, nor is the fact that the index is up more than 40 per cent year-on-year.

ALL THAT GLITTERS

4GOLD CAN YIELD significant returns, if the investment is timed right. Last week it was hovering around $1,433.90 an ounce, up three per cent since Pricewatch last discussed its value in December, and is set for its 10th consecutive quarterly gain. It may be too late to buy, as speculation rather than heightened demand has fuelled price increases for nearly two years. Gold certificates and exchange traded funds (ETFs) are two ways to fold gold into an investment portfolio. GoldCore is an approved dealer for the Perth Mint Certificate and allows investors buy certificates backed by physical gold bullion. There is an entry charge of 3.9 per cent and an exit cost of 1 per cent. The minimum investment is €8,000. Another Goldcore product allows individuals to invest as little as €150 a month for a 12-month period. Websites such as US-based BullionVault.com allow people to buy gold online. The site charges a commission of 0.8 per cent on transactions and 0.12 per cent storage.

MONEY MAKES MONEY

5TRADING IN CURRENCY has for a long time been the preserve of institutional investors or the super-rich, but the Friends First Insight Currency Fund is open to retail investors. The fund has a similar risk profile to equities and when combined with them may lower overall portfolio risk – as when equities rise, currencies tend to fall. During the fourth quarter of last year, the euro weakened thanks to, um, us mostly, and there was money to be made buying currencies such as the Australian dollar. The charges attached to the fund are pricey compared with traditional funds, but Friends First says it adds value for investors and has seen a rate of return over the past decade of 8.18 per cent AER. There is a 2 per cent annual charge and if it exceeds a growth rate of 7 per cent there is a performance charge of 20 per cent on earnings above the seven per cent. For a standalone investment the minimum is €12,000 while monthly savers needs €250 a month.

POWER TO THE UNION

6AS ANYONE WITH A credit union account will testify, they come into their own when you need to "do home improvements" – a handy euphemism for borrowing cash to jet off somewhere sunny or to clear your credit card bill. They offer investment benefits too, particularly if you want to reduce your Dirt bill. Many credit unions offer special term accounts. With a three-year special term account you can earn a dividend of up to €480 a year without having to pay any tax. Tax-free dividends of up to €635 a year can be earned on five-year accounts. Once dividends exceed these limits, Dirt is applied at 27 per cent. To avail of the tax benefits, your can't touch your money until the full term has elapsed.

WATER, WATER EVERYWHERE

7THE THIRST FOR water is set to increase as the global population multiplies and the demand from the farming sector and industry proves unquenchable. With the population set to increase from six billion to nine billion by 2050, water supply is going to be a major issue. The World Health Organisation has estimated that $1 trillion per year needs to be invested to improve water conservation, water infrastructure and sanitation. A fund available through Bank of Ireland Life and New Ireland Assurance gives investors the opportunity to invest in companies which generate a significant portion of their revenue from producing, supplying and managing clean water supplies. The fund is run by Kleinwort Benson Investors, formerly KBC Asset Management, and is the third-largest actively-managed water fund in the world. Over the past five years, it has delivered a return of 5 per cent a year but it is rated as high risk.

KEEPING IT OLD SCHOOL

8BANKS ARE STILL an option. EBS offers savers with a minimum of €20,000 a fixed rate of 3.7 per cent over 12 months. Once Dirt is stripped out, that 20 grand will yield €541.68 over the term. The same building society's Family Savings account offers 4 per cent AER for the first year. Bank of Ireland's new "double your interest" product offers 3 per cent for a one-year fixed term, but that interest rate doubles to 6 per cent AER fixed, if customers opt to save for a second one-year term. Account holders can withdraw some savings at the end of year one. The minimum single lodgement is €20,000. KBC has a 12-month deposit account offering a 3.65 per cent AER. Customers can access up to 25 per cent of their funds during the term. The minimum deposit is €10,000 and the max is €1,500,000.