Thinking of investing? It can be easier than you think…

I began my career in wealth management back in 2011 with the remnants of the Global financial crash still very much at the forefront of public discourse in Ireland. A.s the economy boomed through the noughties and the Celtic Tiger reigned supreme, the steadily increasing disposable income for households through that period brought a major influx of retail investors to the market for the first time.

As a financial planner, our investment philosophy is what could be coined as “vanilla”. Evidence based investing & aligning a family’s surplus income to passively managed index funds which are Globally diversified will generate fairly steady compound returns year on year in a very cost-efficient manner.

The phrase K.I.S.S is a motto we use regularly in our office. A bit tongue in cheek, but the acronym stands for “Keep it Simple Stupid”, and when it comes to investing money there is a tendency to be distracted (and attracted) to the shiny new complex thing with spectacular short-term returns promised and a life of luxury just around the corner. (Bitcoin anyone?? – maybe that’s for another day…)

If the recession taught investors anything, it is that if it sounds too good to be true, then generally it is. Over reliance on one direct equity (Anglo) or pensions loaded with heavily leveraged property debt (Estonian holiday apartments sounded good in 2006) brought unnecessary risk to investors when there may have been a far simpler approach to take, and one which didn’t put all the proverbial eggs in the one basket.

When it comes to investing funds, and these principles hold true whether it’s your €100 communion money or your €1,000,000 bonus (lucky you), remember to think of the below steps:

Time in the markets is more important than trying to time them – Don’t invest for the short term in volatile assets (e.g. picking stocks on the stock market and hoping to time your exit as the markets reach their height)

Be aware of the “Behavior Gap” (the brilliantly coined phrase and book by American Financial Planner Carl Richards from 2012) – Meddling in your investments and not having a personalized, structured, financial plan with a clear course of action leads to responding irrationally to outside noise (the doom squad in Global Media) and leads to bad financial decisions.

Expect volatility and embrace it – Really if you are investing your hard-earned cash then you should be planning to leave it invested for at least 5 + years. The evidence of over 100 years of market data supports this approach. Don’t hop in and out for a year running significant volatility risk. See below….

Diversify & Discuss – Balance your investment across regions/sectors/asset classes. Any index fund can track thousands of underlying stocks and ensure diversification in a cost-efficient way where hefty fees won’t erode your growth. But most importantly, don’t be afraid to discuss options with a professional you trust. There are hundreds of thousands of investment choices but finding one that is aligned to your specific needs and aligns with your personal goals can be simpler and cheaper than you think….