1. Prepare for uncertainty

Several unexpected political and economic events caught many by surprise in the last year or two. Markets respond to surprises with volatility, and we expect more of this in 2019. Trump’s presidency will continue as uncompromising and unpredictable. Brexit may very well unravel next week. Expect a turbulent time in investment markets.

“Short-term investors beware – volatility will destroy your desired outcome; long-term investors need to ensure their portfolios are diversified and that they remain seated”.

2. Save more

Short-term volatility is one thing but there is an expectation that stock and bond markets are likely to produce lower returns in the next decade than they have in the previous one. This will place a burden on investors to save more to offset the lower returns. Another potential way to make up for lower returns is to channel funds into tax-efficient products such as pensions and EII schemes (Employment and Investment Incentive Scheme). The deadline for investing in an EII scheme is 31st December.

3. Identify the risks

Inflation, institutional default, cybercrime, death or illness, unemployment or divorce: while it may not be possible to plan for all eventualities, identifying and reducing risks to your financial well-being at your earliest opportunity is important.

The financial risk of death or illness is easily managed through insurance contracts. The creation of a rainy day fund goes towards softening the blow of unexpected unemployment. In my book, that old saying of hope for the best and plan for the worst should be operate as a mantra.

4. Diversify, diversify, diversify

The Wall Street crash of 2008 proved that counter-party risk should never be ignored. What is the outcome for you if your bank or investment house collapses in the future? Lifelong savings can be obliterated overnight, as we saw with the collapse of Anglo Irish Bank.

“It’s the age old cliché of don’t put all your eggs in one basket. Similarly, do not rely 100% on property to provide your income in retirement”.

Grasp the nettle in 2019

In my experience, the vast majority of my clients need a single issue to present itself before engaging a professional. It may be a letter from the bank about your mortgage, or an annual pension statement on your 50th birthday. Whatever the touch paper is, use it as an opportunity to reposition your finances based on your stage in life and the risks associated with it.

Bob Quinn of The Money Advisers in Naas

Hi, I am Bob Quinn, a fee-only independent financial adviser in Naas, Co. Kildare.

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