Whether it’s converting your self administered pension to an Approved Retirement Fund, buying a property for your daughter to live in while she attends Trinity, or what to do with the proceeds of the inheritance you received from your Dad, here are a few tips to make the most of the situation you find yourself in.
I don’t know that much about the markets
Our lack of knowledge makes us feel vulnerable.
If you don’t know much about investing, you have to put your trust in someone who claims they do. So there’s a powerful reason not to engage with investment – you don’t know enough about it to feel comfortable doing it and the whole thing makes you feel vulnerable.
There’s a way to get over this of course, and it is to educate yourself on the subject.
Knowledge is power, as they say. The person or company you engage to advise you should have their interests linked to yours. My advice here is avoid commission driven advisers. If they get paid by the insurance company, they work for them, not you.
I’m afraid I’ll feel stupid
This is different to feeling ignorant.
Feeling stupid comes from making a poor decision, or perhaps more specifically being seen to have made a poor decision.
The fear of feeling or looking stupid is one of the most powerful factors in decision-making and not making decisions – because it holds people back from doing things that could be of benefit to them.
How do you overcome that fear?
Stay away from the speculation side of investment and stick to evidence-based approaches where data from decades and decades is used to show a potential return rather than just the previous year or two.
My advice here is to in the first instance understand how many parties are getting paid out of your fund – trustees, administrators, advisers, fund managers. The longer the list, the worse an outcome for you long term.
I’m afraid of losing all my money
It has to be said that Hollywood has not done much for the financial services industry.
So powerful were the portrayals of Gordon Gekko and his protégé Bud Fox in the 1987 movie Wall Street, and more recently Jordan Belfort, the Wolf of Wall Street, that we have a strong suspicion that everyone in the industry is playing dangerous games with our money.
Our recent experience of the banking crisis here shows this suspicion to be well founded.
People much closer to home have been playing dangerous games with our actual money.
They lost the game, and it cost Mr & Mrs Taxpayer €64 billion.
The antidote to this (real) fear is that you follow a long-term investment strategy that does not over expose you to certain sectors or asset classes.
I lost a good chunk of change in the past
The most powerful of all is the first-hand experience.
Perhaps you dabbled in investments before and it didn’t go so well for you.
There could be many reasons for this: poor advice, no advice (you decided to do it yourself), you put all your available funds into one asset class, or even one stock – if it was AIB or Anglo-Irish Bank, I am sorry for your trouble.
But you’re older and wiser now (and you have a capital loss to carry forward)
Instead of chasing a return perhaps you could turn things on its head and focus on an approach to investment that is driven by the achievement of your goals, as opposed to the highest return.
I sleep easy at night knowing that my clients best interests are represented when they engage me as their adviser. That being said, some clients take on high risk in the full knowledge that if they investment fails, they lose money. I will only facilitate this if they have the capacity to lose what they invest. Think about that one – how much can you afford to lose?
I hate taking risks
Maybe you don’t have to.
In fact maybe you can’t afford to, given your financial objectives.
And that’s OK; investment does not always have to be risky.
The risk is high where the approach can be speculative or the full material facts are not disclosed in advance. Many of the portfolios and structured products available on the Irish market are either overburdened with fees and charges, or simply overly complex. Consider taking on risk that is linked to the return you require to fulfil your objectives.
Finally, before you can pursue a successful investment strategy, you need to be able to answer these three questions:
- What is my investment time horizon?
- What is my risk tolerance?
- What is the return I require to meet my objectives?
If you are struggling to answer any or all of these questions, maybe it’s time to seek out professional advice.
You can contact me on +353 45 881200 or email@example.com
Ps: The three amigos were cowboys. Maybe it’s time we started using different language if we want to be taken seriously.