I have €20,000 that I want to invest, with the hope of making some return – or at least not having it depreciate in a bank account. I have an emergency fund, no mortgage, and am paying regularly into a pension so this is money that I can put to work. Should I pick my own stocks, or get investment advice?
– AW, Waterford
It’s clear that bank interest rates are going to be grounded for the foreseeable future. And given pent-up consumer demand from lockdowns, inflation looks likely to take off.
This means that if you leave your money in the bank over the next few years, it’s likely to lose value.
So for many people in Ireland, it’s time to charge of your cash and invest it for growth. But how best to get moving?
There’s been an explosion in ways to invest online, from DIY to advice-based services like Moneycube. Which is for you?
What’s your aim?
First, ask yourself why you’re investing. There’s a huge spectrum out there.
Are you looking for the thrill of the chase, following Reddit board rumours in the hopes of striking it big?
Are you a first-time investor, looking for an element of return, without taking excessive risk?
Or are you financially savvy, and prefer to have a navigator at your side while you invest your lump sum, and maybe a regular monthly amount too?
If you’re chasing Reddit rumours to find the next big thing, Moneycube’s probably not for you. Otherwise, we can probably help.
Understand the true costs
Before you commit to one route or another, it’s worth taking three basic steps.
Firstly, take a broad view of the costs. What is superficially cheap may be deeply expensive.
For example, will your new investment bring you into the self-assessed tax net? That might be fine if you already file a tax return. If you don’t, make sure you won’t burn through any cost savings by paying an accountant €500 every October.
You can read the detail on Moneycube’s costs here.
How do you want to manage your investments?
Think also about the value of your time. If managing investments is a hobby you enjoy, great.
If not, it might be better to delegate the task than neglect it altogether – and risk panic in a downturn.
Lastly, how will you choose your investments?
Too many self-directed investors buy what is flavour of the month – think Tesla, GameStop, silver over recent weeks. There may be some room for a flutter on such positions, but the bulk of your money should be spread more widely.
The natural starting point is to use investment funds, which pool your money with other investors, and spread the pot among many underlying assets.
This article is adapted from a piece we recently wrote for the Sunday Times. You can read the original article here.