After a lengthy and very strong investment run, the investment markets are under a lot of scrutiny currently due to the effect of the Coronavirus. This of course is not welcome news, either in the investment industry or for any one of us with monies invested by way of pension or investment.
So what should we do? As a client of Roban Financial, you will have had a discussion around investing. We will discussed your personal circumstances and identifed your objectives. Based on a combination of factors, we will ascertained your risk profile and made our recommendations to you.
For the most part, our model lends itself to life term investing ie. investing in the equity markets for example is for the long term. We will only recommend such an investment for you where you have the time and risk appetite to do just that.
Therefore we explain there will be blips along the way, no investment market will remain steady, either in a downward or upward direction. We explain that over time although stock prices can rise or fall, historical evidence shows that over the medium to long term, stock market returns have consistently outperformed bank and building society deposit accounts.
Overall I think we can always take heed of the below guidance points in relation to investing:
Investing all of your money in one investment for example bank shares, can be very risky. If the investment does not perform, then there is a significant risk of losing some or all of your money. Therefore spread your risk across different types of investments. This is called diversification and it is of utmost importance in any portfolio, little or large!
Understand the risk that comes with any recommended investment. Make sure that you understand the concept of your own risk profile and agree with your risk profile as assessed by your Financial Advisor. Ensure that the risk level of any proposed investment is explained simply in terms of low/medium/high and is related to the ESMA scale I mention above. If you know you are a cautious investor, then you should not be investing 100% of your money in a fund rated as a high risk fund.
Don’t invest in an investment that you don’t understand. There are obviously limitations here insofar as some investments can be relatively complex and combined with the fact that the jargon can be quite new to a lot of consumers, understanding investments can be daunting. However a good Financial Advisor should be able to explain in plain English the basic elements of the investment for example (but not limited to) what the asset class/(s) are, the geographical factors, any capital/part capital protection for example and so on.
Don’t invest in something you are not comfortable with. The possibility of making money is always attractive. None of us would say no to that possibility! However if there is a risk that you could lose some or all of your money and you absolutely cannot afford to do this even with a portion of your funds, then do not invest. Go with your gut feeling!
As long as you have sought the advices of a Financial Advisor and are happy that you have constructed your investment portfolio well, then do not panic at the first sign of trouble! Investments by the nature are volatile. There will be dips and spikes but as long as you are invested for the long term there should be no need to constantly change your portfolio.
If you have any questions on any element of the above, please do contact us on 053 9233640.