Questions to ask before investing – with Carey Corbett

Some people are lucky enough to have more money in their bank account as a result of the lack of spending opportunities over the last 18+ months. Just the other day a friend asked me where do you think would be a good place to invest €10,000 today?

Well, everyone seemingly has an opinion on this question and will give you a quick answer to it!

Well, that is anyone with the exception, of a Financial Broker, who is unlikely to give you a quick answer to such an important question. This is the case whether you have 10K or 100K because what to invest in, is not about going with fads or trying to pick a winner as you might in a horse race (anyone make any money at the Galway Races?).

Instead finding the best investment opportunities needs to be based on a very systematic approach and on your own circumstances. And that is where a Financial Broker will help you.

1. What are my financial goals?
Before you make any financial decisions, it is important to decide what your financial goals are and what you are trying to achieve.
Maybe you have not thought about it yet, but you probably have some goal that will require financing at some stage.
So, think about it – are you hoping that you will be able to afford a deposit on a house, or holiday home, in a few years? Are you toying with the idea of further education? Are you hoping to retire early? Do you have children to fund through third level education?
Establishing your goals is an important task; writing them down or discussing them with a financial adviser will help you work out how to achieve them and put everything in context for you. If it scares you, do not run from it. Make the tough decisions and be proactive in making plans for your future. It is the first step towards financial control.

2. Why should I consider investing?
There are two reasonable ways to make money – by working for it and by making your money work for you. While saving your money in a regular savings or deposit account might seem like a sensible decision, if interest rates do not keep pace with inflation your money is in fact losing value. This is currently the case.
Investing, on the other hand, aims to build wealth and gives you the opportunity to achieve growth and a potential higher return over time than you might get from a deposit account. So just like saving in a deposit account, you can start small, invest a lump sum or regular amounts, but one of the big differences is you are making your money work for you.

3. How much risk am I willing to take?
An important question to ask yourself and one which only you can decide is the amount of risk you are willing to take. This is often referred to as your attitude to risk or investor profile. Essentially, the less risk you take, the lower the potential return on your investments. The more risk you take, the higher the potential return over the long-term.
Naturally, there is also a higher potential for loss the more risk you take so it is something you need to weigh up.

4. How long am I willing to invest for?
Or in other words, when will I need the money? If you have a short-term financial goal, you might consider putting some money on deposit rather than investing. Low deposit interest rates could however mean that you lose value on your money in the long run.
Having some money on deposit is always sensible for short-term needs but, if time is on your side, investing your money is a smart option. Investing works best when it is over the long-term.
Investment returns can fluctuate more in the short-term whereas long-term returns tend tobe more stable. 
So, if you are willing to sacrifice access to your money for a few years, your reward will hopefully be worth the wait.

5. What do I want to invest in?
There are several different investment options such as cash, bonds, property, shares, and commodities. Cash and bonds can be lower risk options, but this comes with lower expected returns. Property and shares are the more popular choices for investors as they have greater potential for return. Commodities such as oil, gas, and gold are a much more specialised area but some investment in commodities can often be very effective. There are alternative options and there are ways of combining all the above (for example multi-asset funds). Do not worry about knowing everything about the different investment options – financial advisers can help you with this.

6. When should I invest?
Time impacts investments in a number of ways.
First of all, the earlier you can start investing allows the magic of compounding of investment returns to get to work.
The longer you then invest allows this compounding to really deliver over time. This is one of the big reasons why we encourage people to take a medium to long timeframe with their investments.
Also markets can be quite volatile over short periods of time, so investments held for longer periods tend to exhibit lower volatility than those held for shorter periods – another advantage of longer term investing.
Finally, you will often hear us say that trying to guess the best time to either enter or exit markets is folly – none of us have a crystal ball. The key is to have a
structured plan for your investments, and to then stick to the plan.
Make the most of professional expertise and advice. There is no substitute for talking to a financial adviser who can bring you through everything you need to consider and help you to decide the best option for you.

Carey Corbett Financial Solutions are Independent Financial Brokers based in Ennis, specialising in pensions, mortgages, investments and retirement planning and can be contacted on 065-6893540