Irish Examiner
Grainne McGuinness
4th January 2022
Grainne McGuinness talks to a finance expert about how to educate yourself before you move your funds
Is starting to make some investments one of your New Year’s resolutions? Interest on savings is virtually non-existent at the moment, not to mention the possibility of negative interest rates meaning it could soon cost you to keep savings in a bank. Plus, inflation is rising, meaning the true value of money is being reduced as it sits on deposit.
With all that in mind, it makes sense for people with funds saved to consider whether investing makes financial sense for them. But it can be hard to know where to start.
Mark O’Sullivan, Managing Director of Cork-based financial services firm Provest, says it is important to educate yourself before taking the plunge.
“When you are starting out investing you should understand what investing is about,” he says. “Basically investing means buying an asset, which is something of value in the hope that the asset’s value will increase over time.
“At that point you can sell the asset and make a profit. A good way to start is by writing down your short, medium and long-term goals.” His second tip is to ask plenty of questions.
“You have to understand what you are investing in and don’t be afraid to ask questions. Remember assets can be all kinds of things from art or antiques to more traditional investments like shares, property, bonds or cash.”
Mr O’Sullivan says it is important to consider your current financial situation when deciding if this is the right time for you to start investing.
Investment might seem like a good idea but you have to ask yourself - are you ready to invest your money?
“Firstly, look at your current financial situation to make sure that you’re ready to get started. Things like how much savings you have and debt also should be a factor in your decision.
“You should also consider if there is a specific timeline that you had in mind for when you expect to get or need the money back.”
Before you put money away in an investment, you need to be confident that you will not need to access it in case of an emergency.
“Before you start investing you should consider if you have enough money saved already to cover the next 12 months of normal living costs,” Mr O’Sullivan says.
“You should also ensure that as part of your planning that you have an emergency fund."
His final piece of advice for fledgling investors is to consider diversification of your investment.
“Diversification is one strategy to manage risk,” he explains “The old saying of ‘don’t have your eggs in the one basket’ comes to mind.
“Some of the key points to keep in mind when it comes to diversification are to always invest with a regulated company and in regulated markets. These are controlled and monitored by the Central Bank of Ireland to ensure that they act in the best interests of consumers.
“You should also look to pick multiple types of assets. Spread your risk across several asset classes and sectors. It’s important too to factor in volatility which relates to the change in price or value of an asset, especially in the short term. Low volatility means less risk of large changes in value. High volatility means higher risk of drastic ups and downs."