top 5 tips for Beginner investors
Find out what options you have for your savings and unexpected lump sums. Interest rates are low at the moment, but take some time to research, and invest your money sensibly.
We’ve listed out our 5 Top Tips for Beginner Investors to help you take your first steps to investing, and investing wisely.
Can you afford it?
Investments are a risk by their nature. Whether you have €5,000 or €50,000, you worked for that money, and it could help you achieve a dream, or save you from a disaster in the future.
If you want to invest because interest rates for deposits are low in banks, you might receive higher growth by investing. The downside is that you might lose some or all of your money if your investment doesn’t perform.
Suddenly, your hard earned money has dropped, or in the worst case vanished completely due to market fluctuations, etc.
If you had a fixed future purpose for this money, like a house deposit, this may stop your plans in their tracks.
Never invest money you can’t afford to lose.
Don’t put all your eggs in one basket
You can invest in multiple ways, but if you want to invest your money wisely, you’ll invest in a few different places (investment asset classes)
Investment Asset Classes are the different types of investments. The main classes are Cash; Bonds, issued by governments or public bodies; Equities, which are shares quoted on a stock exchange, and Property, either through direct or collective investment in commercial properties.
Alex wants to invest her money in green energy, and spends all of it on shares in a wind farm. Unfortunately, this wind farm does very badly, and the value of Alex’s shares drops significantly. Alex has lost most of the value of her investment.
Dave wants to invest his money in property, and uses all of his money to directly purchase an investment property. A few years later, Dave needs to release his equity by selling his property. Unfortunately, the property market has crashed, and he doesn’t make back what he bought the property for. It also takes him a long time to sell the property, which adds to his stress.
In Alex’s case, we’d discuss whether she’s secure in other areas, such as her pension & property ownership, and we’d advise her to spread her investment across several areas, rather than direct ownership of shares. We’d also keep in mind that green & responsible investing is important to her.
In Dave’s example, direct ownership of property makes it difficult to release cash. As a landlord, there are also other costs and work involved. Dave can invest in property if he wishes, but we can also work on a plan with him to address these future costs, and look at investment products that are easier to encash in times of financial need.
Personal Finance Quiz
Take our free personal finance quiz now.
15 questions, 5 minutes, find any financial weak spots.
Know your attitude to investment
It’s important to examine how you really feel about risk. Then you look for an investment that suits you. Some investments are far riskier than others, and with more information, you may find that the possible reward isn’t worth how stressful you find the risk.
You can examine your own attitude to risk using online questionnaires, such as this one provided by Irish Life. Brokers are required to record your attitude to risk, to make sure you’re getting the right advice.
The right risk for you is affected by several factors, not just how much of a risk you want to take with your money. If you’re in your 20s, you can take more risks with pension investments, for example, because you have more time to build up your investments.
On the other hand, if you have very little experience with investing, you should take fewer risks, and only invest when you’re confident that you’ve been given all the information you need.
There is no question too basic when you are considering investing some or all of your money. Investment is fraught with risks, and you are entitled to have every question answered to your satisfaction.
You should be able to ask for and receive clear explanations, and if an investment seems too good to be true, it probably is. You also shouldn’t feel under any pressure to purchase anything.
There are very clear rules to protect your interests as a consumer of financial products and advice. You can read more about them at the Competition and Consumer Protection Commission.
To invest money wisely, you should look at all your options. The best way to do that is to get advice from regulated Financial Advisors. It can be difficult to get face-to-face advice during Lockdowns, but you can check that your advisor is regulated with the Central Bank here.
A Financial Advisor can answer all your questions about risk and charges with an investment, and most Financial Advisors deal with several product providers. They’ll do the research for you, on your behalf, which can take the stress out for a beginner investor.
Greenway Financial Advisors can help you to look at your financial situation in total, and advise you on the type of investment that will fit your long term needs, and meet your goals.