If you are new to investing, there are lots of things you need to consider. So we have covered the basics in this handy Introduction to Investing guide.
There is one very important thing you need to know about investing. It is all about you. Your circumstances, your attitude to risk, your personality and your financial goals will help you decide what is best for you.
And there are plenty of different types of investment funds available to suit your needs.
So how do you decide? Let’s take it step by step.
Identify your goals
Investment may not be your best option if you are working towards a short-term goal such as a holiday. But if you are planning for the long-term, for example, your children’s education, then investment is likely to give you a better financial return than a deposit account.
You can use our Investment Suitability Tool to help you figure out if investing is the best way to achieve your goals but we suggest you also talk to an expert.
A Financial Broker can talk you through the risks associated with investing your money so you can decide if it is the right option for you.
Work out a plan for your money
You will generally get better returns on lump sum investments (you will need a minimum of €10,000) over a medium to long term (at least 5-7 years).
Don’t invest money you think you are going to need in the near future. You need to have enough savings to put money away comfortably, cover your basic living expenses and still have an “emergency fund” you can access, just in case.
Understand your risk profile
Your attitude to risk will be a major factor in how you choose to invest. If you are cautious about your money, then maybe you need to consider alternatives to investment, or at least choose low-risk investment options.
But if you are prepared to take on some risk, you may be willing to speculate if there is a possibility of a good return on your investment.
Choose a fund
Once you decide to invest and you figure out what level of risk you are comfortable with, you can start to work with your Financial Broker to see which funds you should invest in.
Risk and return
Different types of investments grow at different rates but every investment carries some risk. The higher the risk, the greater the potential rewards AND the potential losses.
Fortunately, you can spread your risk to protect your money. Invest in different assets that will not have their ups and downs at the same time. It is called diversification. We like to think of it as “not putting all your eggs in one basket”.
At Friends First, we offer over 40 investment funds. We rate each one using the European Securities and Markets Authority (ESMA) risk scale where a score of 1 indicates the lowest risk and 7 indicates the highest risk.
You can select a readymade portfolio fund that suits the level of risk you want to take. Or you can take more control of your investment and work with your Financial Broker to build your own portfolio. The choice is yours.