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How to get started with Irish Investments
By: Damien
14 Jun, 2022
If you want to make your money grow, then investing it can be an effective way to do it. But there are many pitfalls that need to be avoided.
For many people in recent years, low interest rates have meant that money saved in a bank or building society was only growing slowly. As a result, some of those with a nest egg for their future have decided to look at making investments to ensure their money grows faster.
Investments can come in many forms, as described below, and can be short- or longer-term, but the aim is always to provide a return, either regular or in a lump sum at the end of a period of time. However, it should always be considered that there are no ‘sure things’ wen making an investment and sometimes they do go down in value as well as up.
If you are thinking about making an investment, it can seem complicated, but our guide presents advice on how to make your way in investing and ensure any investments have the greatest opportunity to be successful.
First, let’s start with the basics: an investment is an asset which is acquired in the hope its value will go up and then, in time, it can be sold for a profit. Some assets, such as property that is rented out, can provide a regular income over time, before being sold. Investments can be more profitable than the passive income of cash that sits in a bank accruing interest.
Investments can take on many forms, such as shares, property (commercial and residential), bonds or investment funds.
When you are planning to make an investment, you should be clear from the outset what you want to achieve. For example, are you looking to invest in the long- or short-term? What sort of returns do you want to make? Are you making a one-off lump sum investment, or will you be regularly putting a sum of money in?
Do you want to invest to boost your retirement fund, or to have something in place for a rainy day, or pay for a future event such as a child’s education or a wedding.
Defining your goals will help you to decide what to invest in, when and how long for.
You should also decide how much you want to invest. Firstly, you should ensure that any expensive debts, such as credit cards and loans (but not a mortgage) are paid down. No investment guarantees a return which exceed the monthly costs of expensive debt.
As mentioned, investments can go down as well as up, so it is vital to consider how much risk you want to take. Investments with a higher risk profile can bring bigger rewards, but, by their nature, bigger risks too of providing a loss. Meanwhile investments with a lower risk have less chance of losing value, but it might not provide a substantial return.
One way to lower the risk is to diversify by investing in different asset classes or sectors. For example, making just one investment into a single business on a stock market is risky as markets and companies can be volatile. But investing in several companies in different industrial sectors spreads the risk, as while one may perform poorly, another may perform well and mitigate any losses from the other.
As mentioned, there are various options for investments. Below are some of the most popular:
One of the most popular forms of investment is the investment fund. Here, you, along with others, invest capital into a fund, which is then invested on your behalf. Funds can be actively or passively managed. In an active fund, there is a fund manager who buys and sells investments on behalf of the fund with the aim of maximising its gains and minimising any losses. Meanwhile a passive fund just tracks the market in which it sits.
When choosing a fund, your decision should, in part, be based on how much you want to invest and how much money you want as a return on that. Investing in investment funds is usually a medium- to long-term investment of at least seven years.
It is possible to invest into a fund monthly – usually a smaller, regular sum – or a one-off lump sum. A financial advisor, such as those at Malone & Co, can provide advice on how to invest most effectively in an investment fund.
Here, a stock or share – the terms are often used interchangeably – are purchased on a stock market, such as the Irish Stock Exchange. The value of the shares rises and falls daily, usually in line with the company’s financial performance, or the performance of the wider sector(s) it trades in.
Shareholders are also entitled to a dividend. This is a sum of money given to shareholders, usually a percentage of the company’s profits up to about 5-6%, given out on an annual or six-monthly basis.
Investing in shares can be a long- or short-term deal. Some investors buy when a company’s share price is low, then sell when it reaches a certain level. The gamble here is when to sell up. Others stick in for the long-term, especially if the company provides regular dividends.
Shares can be bought and sold online, or through a brokerage.
Bonds are a loan from an investor to a company or government, at a fixed rate of interest for a given period of time. Bonds are relatively low risk investments, and as a bondholder you receive regular interest payments on the money you invested, followed by the return of the sum you invested once the pre-agreed period has ended.
Property is traditionally seen as a ‘safe’ investment in the long- or short-term. Domestic or commercial properties can provide a regular rental income, or a lump sum payment if the property is sold on for a profit later. Many people buy houses or commercial properties cheaply, renovate them and then sell them on quickly for a profit.
With property, some people choose to build up portfolios of investments with a rental income, while others just have one as a nest egg to sell on during retirement.
Of course, the risk here is a fall in the property market, and a building won’t sell for as much as hoped, or the mortgage becomes worth more than the property. There hasn’t been a fall in the market in Ireland for some years, but it is a threat if a recession comes.
Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects of making an investment, including the risks involved, as well as anything from setting up a company and ensuring it is as tax efficient as possible to providing diligence services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset.
For many people in recent years, low interest rates have meant that money saved in a bank or building society was only growing slowly. As a result, some of those with a nest egg for their future have decided to look at making investments to ensure their money grows faster.
Investments can come in many forms, as described below, and can be short- or longer-term, but the aim is always to provide a return, either regular or in a lump sum at the end of a period of time. However, it should always be considered that there are no ‘sure things’ wen making an investment and sometimes they do go down in value as well as up.
If you are thinking about making an investment, it can seem complicated, but our guide presents advice on how to make your way in investing and ensure any investments have the greatest opportunity to be successful.
What is an investment?
First, let’s start with the basics: an investment is an asset which is acquired in the hope its value will go up and then, in time, it can be sold for a profit. Some assets, such as property that is rented out, can provide a regular income over time, before being sold. Investments can be more profitable than the passive income of cash that sits in a bank accruing interest.
Investments can take on many forms, such as shares, property (commercial and residential), bonds or investment funds.
Define your goals
When you are planning to make an investment, you should be clear from the outset what you want to achieve. For example, are you looking to invest in the long- or short-term? What sort of returns do you want to make? Are you making a one-off lump sum investment, or will you be regularly putting a sum of money in?
Do you want to invest to boost your retirement fund, or to have something in place for a rainy day, or pay for a future event such as a child’s education or a wedding.
Defining your goals will help you to decide what to invest in, when and how long for.
You should also decide how much you want to invest. Firstly, you should ensure that any expensive debts, such as credit cards and loans (but not a mortgage) are paid down. No investment guarantees a return which exceed the monthly costs of expensive debt.
Decide on your risk
As mentioned, investments can go down as well as up, so it is vital to consider how much risk you want to take. Investments with a higher risk profile can bring bigger rewards, but, by their nature, bigger risks too of providing a loss. Meanwhile investments with a lower risk have less chance of losing value, but it might not provide a substantial return.
One way to lower the risk is to diversify by investing in different asset classes or sectors. For example, making just one investment into a single business on a stock market is risky as markets and companies can be volatile. But investing in several companies in different industrial sectors spreads the risk, as while one may perform poorly, another may perform well and mitigate any losses from the other.
As mentioned, there are various options for investments. Below are some of the most popular:
Investment funds
One of the most popular forms of investment is the investment fund. Here, you, along with others, invest capital into a fund, which is then invested on your behalf. Funds can be actively or passively managed. In an active fund, there is a fund manager who buys and sells investments on behalf of the fund with the aim of maximising its gains and minimising any losses. Meanwhile a passive fund just tracks the market in which it sits.
When choosing a fund, your decision should, in part, be based on how much you want to invest and how much money you want as a return on that. Investing in investment funds is usually a medium- to long-term investment of at least seven years.
It is possible to invest into a fund monthly – usually a smaller, regular sum – or a one-off lump sum. A financial advisor, such as those at Malone & Co, can provide advice on how to invest most effectively in an investment fund.
Stocks and shares
Here, a stock or share – the terms are often used interchangeably – are purchased on a stock market, such as the Irish Stock Exchange. The value of the shares rises and falls daily, usually in line with the company’s financial performance, or the performance of the wider sector(s) it trades in.
Shareholders are also entitled to a dividend. This is a sum of money given to shareholders, usually a percentage of the company’s profits up to about 5-6%, given out on an annual or six-monthly basis.
Investing in shares can be a long- or short-term deal. Some investors buy when a company’s share price is low, then sell when it reaches a certain level. The gamble here is when to sell up. Others stick in for the long-term, especially if the company provides regular dividends.
Shares can be bought and sold online, or through a brokerage.
Bonds
Bonds are a loan from an investor to a company or government, at a fixed rate of interest for a given period of time. Bonds are relatively low risk investments, and as a bondholder you receive regular interest payments on the money you invested, followed by the return of the sum you invested once the pre-agreed period has ended.
Property
Property is traditionally seen as a ‘safe’ investment in the long- or short-term. Domestic or commercial properties can provide a regular rental income, or a lump sum payment if the property is sold on for a profit later. Many people buy houses or commercial properties cheaply, renovate them and then sell them on quickly for a profit.
With property, some people choose to build up portfolios of investments with a rental income, while others just have one as a nest egg to sell on during retirement.
Of course, the risk here is a fall in the property market, and a building won’t sell for as much as hoped, or the mortgage becomes worth more than the property. There hasn’t been a fall in the market in Ireland for some years, but it is a threat if a recession comes.
Seek advice
Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects of making an investment, including the risks involved, as well as anything from setting up a company and ensuring it is as tax efficient as possible to providing diligence services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset.
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