What big Life Goals do you want to support in the future? Any marriages, expensive schooling or retirements on the horizon? Of course, there are!! There are always reasons to invest – but be sure at the outset you know what your targets are.
2. Save money and know how much to invest
Without saving money in the first place you will have nothing to invest. Whether you’re saving for a deposit on a property or squirrelling surplus cash for a rainy day, saving is the starting point of any investment journey. The trick is to assess if your money is working hard enough for you and knowing when to do something about it. Having a clear sense of what you can afford to invest and how often will help complete the picture. And remember to ask yourself two very important questions that are often overlooked:
- How much of this money might you need back at short notice?
- What’s your exit strategy?
Knowing the answers to these questions can help you assess what type of investment will work for you.
3. Assess your attitude to risk
This term of “Risk” is bandied around a lot in investment conversations, but what does it mean to you? Figuring out what type of investment works for you (and an important conversation for you to have with your advisor) is about how much risk you want to take with your money. Understanding yourself, and your own priorities, is critical as you venture into the world of investing.
4. Spread your investments – diversify!
Investors are always talking about diversifying, but this is more than just a buzz word; it is an approach to investing that reflects many people’s attitude toward risk. Would you, like the old saying goes, put all your eggs in one basket? Spreading your investments across a range of asset classes can be advantageous especially if you want the security of knowing your money isn’t dependent on the performance of one asset class, business sector, or indeed country. Diversified portfolios may well underperform in a bull equity market, but on the whole, they are a good choice for those who prefer a smoother investment ride over the long-term.
5. Spend time thinking about your future finances
How much time do you spend thinking about your finances (especially making provisions for the future)? A poll conducted by Psychology Today suggests that finances are within the top 3 list of things that people worry about in life (along with relationships and work). With the average person watching around 24 hours of TV a week, let’s put this into perspective. Investing your money soundly and having a strategy for your future finances can help to eliminate a large chunk of stress in life. Spending some time reading about and researching your investment options is time well spent.
6. Consider how “active” you want to be
Without doubt, some people get bitten b the investing bug. With handy apps on your smart phone that allow you to check the performance of your investments on a minute-by-minute basis, investing can become an addictive pastime. You may get a real thrill following the news and predicting how the markets will respond or following the stock prices of a hot tip you’ve heard, in which case being actively involved in you portfolio and investment choices will be important to you. However, you may want to invest your money in a passive fund, and sit back, relax and think about it again in the future when your looking to cash in. Or perhaps you could manage a bit of both. Knowing how involved you want to be in your investments is an important conversation to have with your advisor.
7. Keep it Simple
Investing doesn’t have to be complicated or terribly risky, though it can be easy to be tempted outside of your levels of competence and comfort by the promise of high returns. Know the limits of your knowledge and competence and try to remain within them. You can always set aside a small portion of your portfolio for “dabbling” purposes – that way you can satisfy those urges to be bolder and more adventurous without risking your serious money. Remember, a good investment is one you can understand.
8. Remember that you are in control
While the fluctuations of the stock market and housing market are beyond the control of most of us mere mortals, it is important to remember that as a private investor you can assemble your portfolio however you want. You have the control over where you invest, how much you invest, and when you invest – even if exercising this control means handing over the burden of responsibility and “active” management to a trusted advisor. You have the control to make sensible decisions about your financial future.
9. Familiarise yourself with investment terminology
Do you know the difference between open and closed investment structures? Do you know what a bull and a bear market are? It’s not that you need to become an investment expert in order to venture into the world of investing but acquainting yourself with the language of investing can help demystify it and increase your confidence and understanding. There are some great investment guides available, so take the time to learn a little – it could go a long way.
10. Think about long-term gain over short-term reward
We encourage a sensible approach to investing that looks at the bigger picture: a long-term successful strategy that is unflinching in the face of short-term underperformance. Investing when markets are falling is a good time to build a strong portfolio at great prices, but the result can be short-term loss and underperformance. Patience and discipline really pay-off.
If you would like discuss any details in this blog please contact either Adrian or Tracy on adrian@oaktreefinancial.ie / tracy@oaktreefinancial.ie or call on 025 30588
Adrian Godwin is a Senior Financial Consultant and the co-founder and managing director of Oaktree Financial Services. With a background in accounting and tax advising, Adrian specialises in estate planning and wealth management.Adrian offers clients reassurance through best practice solutions. His unique skill set and qualifications enable clients to develop comprehensive life plans that align with their goals.
