Welcome to The Money Coach, a new Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com.

Dear Luca,

I am a 78-year-old about to inherit €100,000, and I’m torn between investing in real estate by buying and letting two garages or putting my money into bonds offering between 5.5 to 6.0% interest.

I have no pressing need for liquidity and no major upcoming expenses. While I am not dependent on this investment for my daily living expenses, I am undecided if I should aim for regular monthly income—which I could reinvest—or capital growth. I have no prior experience in managing property and I’m comfortable with some level of investment variability.

Both options apparently come with a 15% tax implication. I plan on holding onto this investment until I might need to move into a retirement home, and I have no specific inheritance plans for it.

Aside from this inheritance, my current portfolio is worth €444,000, allocated as 64% in bonds, 21% in funds (which have not performed well, leading me to prefer not to increase this percentage), 12% in shares, and 3% in cash. I am open to changing the ratios, especially to reduce the funds and increase shares, reflecting my preference for more direct equity exposure.

I'm also unfamiliar with cryptocurrencies and, given their complexity, I'd rather not venture into that territory.

I am open to exploring other investment avenues. What’s the wisest move for me?

Looking forward to your financial wisdom.

Sincerely,

Aspiring Wise Investor

Luca responds:

Your inheritance presents a valuable opportunity to enhance your financial landscape, particularly at a juncture where stability and ease of management are paramount. Given your current portfolio distribution and your desire to shift away from funds towards more direct equity, the inheritance offers a chance for strategic reallocation.

The real estate option, while tangible, brings management obligations that may become burdensome. On the other hand, additional bonds would complement your income-centric approach but could overly concentrate your portfolio in fixed-income securities, which may not be desirable given your existing 64% bond allocation.

Considering your comfort with some investment variability and preference for equity, you might consider a two-pronged approach with your new inheritance. First, balance your portfolio by reallocating a part of your existing bond investments into more growth-oriented assets, like dividend-paying stocks or equity ETFs, to increase your exposure to shares as you've indicated.

With the €100,000 inheritance, invest a portion in high-quality bonds to secure the regular income you are accustomed to. With the remainder, you might explore a conservative, yet diversified equity investment—like a blue-chip stock fund or a diversified low-cost index fund. This would provide you with potential capital growth while keeping in line with your risk tolerance and desire for a hassle-free investment.

Your move away from funds does not have to be absolute — funds can still play a role in offering diversification, especially if they are low-cost index funds that track a broad market index. They can provide a balance between bonds and direct equities, aligning with your wish to increase your share ratio.

Before making any decisions, I recommend discussing these options with your financial advisor, ensuring that any portfolio adjustments are made in a tax-efficient manner that aligns with your overall financial goals and the specific circumstances of the Maltese investment landscape.

Investment is not just about growing wealth; it’s about shaping it to fit the life you lead and the future you envision. May this inheritance serve not just as a financial asset, but as a tool for achieving lasting peace of mind.

Luca is the founder of the Money Coaching Hub. Email him your financial questions at moneycoach@timesofmalta.com

Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.