‘Firsts’, they’re so nerve-wracking, especially when it comes to parting with money and going for your first financial investment. But no matter where you are in the world, the concept of ‘investing’ is the same. It starts out with the same questions:
- What is your attitude to risk?
- What is your long-term financial goal for this money?
- What is your timeframe for this financial investment?
- What is your current financial position? I.e. How much are you looking to invest? Have you a ‘rainy-day’ fund? Have you began pension planning etc.?
The answers to these questions form the basis for any decision made thereafter. It is an impossible to give accurate guidance and advice to anyone without knowing those answers. Some things to consider include:
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Financial Investment Risk Levels
Risk is broken up into a scale of 1 to 7. ‘1’ being so low that you may actually use a small amount of money over the long term and ‘7’ being so high that you could potentially lose all your money. The majority of people fall into a middle-of-the-road category – circa 3 to 5.
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Financial Investment Goals
What is it that you are hoping to achieve with this cash? Is there something you are planning for in the immediate or distant future? It’s important to have a goal in mind so that there is a target to aim for. This also allows the advisor to guide on a home for that cash in a more precise manner.
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Financial Investment Timeframe
How long somebody is willing to invest for is a key factor in making recommendations and giving advice. For example, if a person wanted to invest in a medium risk rated fund for a home extension in 2 years, the general advice is to keep that money in the bank.
Minimum financial investment periods should be between 3 to 5 years, with the latter being among the strongest recommendation. Time is the single most important attribute to any financial investment. There is a very well known saying in this industry, ‘its not timing of the markets, it’s time IN the markets’ that will serve you best. Equities (a fund made up of majority stocks and share assets) have proven to be the best performing asset, over the long term, time and time again. Note the important phrase in that sentence – ‘over the long term’ reiterating that concept of time once again.
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How much do you want to invest?
Surprisingly this is probably the least important information required when looking to speak with an advisor about investing. Not to say that it is unimportant as, the more you invest, the greater the potential for return and potentially a more favourable set of charges in the long run. However, in the main, it comes down the list in terms of priority when ascertaining a client’s financial situation in relation to investing.
The two investment questions we hear most frequently are answered below:
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My bank has often suggested that I sit down to discuss investment and saving options with them? Should I avail of this offer?
By all means yes! Knowledge is power and the more information one has about their own money, the better.
However, doing business with an independent financial broker can open up a larger world of options and opportunities. You can be given a view on funds, charges and products from all the major Life Companies currently open for business in Ireland. A few examples include New Ireland, Aviva, Irish Life, Zurich, Standard Life, Royal London, etc. The competition between all these companies has given way to some very favourable charging structures and performance figures in previous years. With a bank, they will be more than likely be tied to just one Life Company so you get one set of ‘options’ from them.
The service you get from an independent broker tends to outperform (excuse the pun) that of your local bank as it is a personalised and tailored offering based on all of your financial circumstances as opposed to a point-in-time transaction at your local bank.
2. When is a good time to invest?
As previously mentioned, timing the markets is not advised. Time in the markets is what is important. Undoubtedly, there can be better times to invest than others, but what moves market sentiment can still be somewhat of a mystery from time to time. For example, during the Covid-19 crisis, by 23rd March 2020, we witnessed a 33.8% drop in world equities from 20th February. On 24th March the world markets rallied to improve those ratings by 14.3% in the space of 3 days.*
Were there any signs on the eve of 23rd March that this racing rebound rally was coming? No, none. None whatsoever.
To summarise
A trustworthy advisor should lay out all these options for you in an easy-to-understand manner. If you’d like to speak to someone about your financial planning and investments, please email info@trustmatters.ie today or call 01 563 4300.
*Source – New Ireland Fund Centre showing fund performance of MSCI The World Index (Euro)
