Many people nowadays are looking for ways to invest money. Leaving it in the bank is guaranteeing a loss as interest rates are virtually nil. Over time inflation will eat into the real value of your savings. With Investments Ireland we will look at some key issues and give you some food for thought.
So what are investments? How risky are they? How can I make a decent return?
Even thinking of investing can be scary so this week we are going to share some simple principles based on over 30 years of experience dealing with real people, just like you.
Investing Ireland Key Point One: Yes, investments can go down.
- Let’s be blunt! Investments in Ireland can go down (as well as up) and most are NOT Guaranteed.
- Once you leave the safety of a bank deposit you enter a world where things go up or down, this is the nature of investments.
- We can all see the fluctuations in house prices and with investments the same is almost always true.
- If you can’t accept this notion you should not invest.
- In summary: Investments have risk, it’s a fact.
Investments Ireland Key Point Two: No risk, little growth.
- Ok, in key point one we admit that there is risk with most investments in Ireland, so why invest?
- The truth is that without risk you have very little chance of making a reasonable return.
- Long term investments in bank deposits underperform compared to stock market returns or even property prices.
- Leaving your money in the bank guarantees a loss if you consider inflation.
- In summary: You need to take some risk to achieve growth.
So key points one and two result in a conundrum: Investments mean risk, but you need risk to make money. How do you manage that risk? On to point three…..
Investments Ireland Key Point Three: Diversification is vital!
- Yes, old Granny said it years ago; “Don’t put all your eggs in one basket”, and Gran, you were right! (And about lots of other stuff too!)
- Ireland inc. nearly went bust when we went on a property buying bender, remember?
- “Bank shares are as safe as houses!” Did you ever hear that one? And we all know people who’s financial houses fell in on their heads because of that little ditty. Mixing my metaphors, with shares and houses, sorry!
- If you want to invest and reduce risk you need to spread your investment, or let someone else spread it for you.
- Most investment companies have “Multi-Asset Portfolios” which in English means they spread the money around. There is still risk, of course, but spreading your investment greatly reduces your exposure.
- In summary: You need to invest in a wide range of things (assets). Property, Shares, Bonds, Cash, Commodities etc.
Investments… Key Point Four: Time is important in the long run…
- Here is a really simple point; The shorter the timeframe the greater the risk. Or let’s put that another way, if you have a short timeframe you should not take much risk.
- In the short term investments will fluctuate greatly in value, sometimes alarmingly. Over the long term these peaks and troughs are less noticeable.
- So, for any investment containing assets like shares we recommend a minimum of five years, or preferably even longer.
- In summary: Investment is a marathon, not a sprint. Give yourself, and your nest egg, time.
Key Point Five (& Six!): Keep an emergency fund!
- Because there is an element of risk with all investment, you need to ride out the short term fluctuations. (Point 5)
- If (When) markets fall, you need to stay in. Those who panic or who have to cash in are the big losers.
- So keep an emergency fund to allow you to leave your investment recover from the latest blip. (Point 6)
- In summary: Don’t invest every penny you have; save some money for that rainy day, or in case there are bumps in the road.
What do I do next?
Talk to your local Financial Broker. He or she can help you to find an investment that suits you and your attitude to risk.
- If you don’t have one feel free to email: http://Donal O’Sullivan <firstname.lastname@example.org>
- Or just call Donal on 087 2617495…
For more information visit our knowledge base and view a short video about how funds work: https://osullivanfinancial.ie/knowledge-base/
# Remember: Investments can go down as well as up and, in general, are not guaranteed
McCann Financial Consultants Ltd t/a O’Sullivan Financial Solutions is regulated by the Central Bank of Ireland