Download By Noel Kelly, Business Manager, Standard Life Top ten investment

By Noel Kelly, Business Manager, Standard Life
Top ten investment tips:
I am regularly asked about ‘get-rich-quick’ schemes, sure-fire investments and so on.
Believe me, I would happily share this knowledge and make you a millionaire
overnight if it were that simple! Investment is an art not a science but thankfully, there
are some rules of thumb to adopt, and common mistakes to avoid. I can’t promise to
make you rich but hopefully, in time, you should be a bit better off!
If you are investing longer term, say 10 years or more the following tips might help:
1. Be honest, how much risk are you truly willing to take? Peace of mind is
priceless. If you can’t bear losing 25% of your money in a year or two, then
don't invest too much in shares. They can plummet – remember 2008!
2. How much should you save? Many people do not realise they need to save a
good chunk of money over a significant period of time to end up with a decent
nest egg. Magic shares that go up 50 or 100 fold are extremely rare! So,
compound interest is your best friend and will multiply your money over time,
preferably feeding it through regular savings or top ups if your income is
variable.
Saving €50 to €100 per month might feel virtuous but is unlikely to be enough
for many people’s investment goals. See table below to check out how much
you need to save. You need a fund of approximately €350,000 to give you an
income of €18,000 per annum or half the average industrial wage at 65.
Age
25
35
45
Premium per month to give €350k at age 65
Monthly premium (gross)
€238
€432
€864
Assume 1% AMC, 6% growth p.a. The above does not include any state benefits you may be entitled to.
3. Don’t forget if you’re a taxpayer, long term investment is a no brainer. Saving
via a pension allows a tax saving of 20% to 41% for standard rate and higher
rate taxpayers respectively. If you can afford to save. Why give the taxman 20%
or 41% of your hard-earned money.
4. Don't try and time the stockmarket, except when there’s panic on the streets,
no-one wants to buy and you have the means. Many people won’t have the
time or the money to seize these opportunities, so regular drip feeding your
money into stockmarkets aptly called ‘averaging in’ eliminates worries about
buying at market highs or selling at lows.
5. Read widely, money journalists tend to be very knowledgeable and bang up to
date for investors with insights on good value for money, charges latest trends,
hottest products, things to avoid etc.
6. Diversify, don’t have all your money invested in a handful of stocks, one
country, one sector etc. Many unfortunate Irish investors were heavily, if not
entirely, weighted in Irish banks with hazardous results. Don’t miss out on
exposure to different returns: small companies as well as large, emerging
markets in addition to Europe.
7. Don’t buy on the basis of cheap fees, or past performance. Charges are
definite – future performance is not. The most expensive investment provider
is not always the best. Active funds can out-perform or under-perform passive
funds, the issue is not choosing one approach or the other but using both.
8. Good professional advice is invaluable if you’re not financially literate enough
to make prudent investments decisions over the long term. Especially as you
get older and need to decide on the timing of moving out of shares into safer
assets like certain property and government bonds.
* Average industrial wage is approximately €36,000 per annum, according to
CSO, 2012… An annuity rate of 5% is assumed.