There are various types of investment – some will be right for you and some won't. It all depends on your attitude to risk (how much risk you are prepared to take) and what you are trying to achieve with your investments.Think about why you want to invest. Perhaps you are looking for an investment to provide money for a specific purpose in the future. Alternatively, you might want an investment to provide extra income.
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Things to think about before investing
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Making the most of your money
You've built up some savings or you've had a windfall and you're looking to invest. What do you do now? There's a list as long as your arm of options open to you, and here are some of the most common choices:
- Deposit Accounts
- An Post
- Government & Corporate Bonds
- Capital Guaranteed Funds
- Property
- Commodities
- Shares
- Derivatives
Risk
When deciding whether to invest, it's key to ask yourself how comfortable you would be facing a short-term loss in order to have the opportunity to make long-term gains. Risk is a very personal thing – what may be a small amount of risk to one person may be huge to another.The important thing to remember is that with investments, even if your investment goes down, you will only actually make a loss if you cash it in at that time. When you see your investment value fall, this is known as a paper loss as it is not a real loss until you sell.
Firms have to give you clear risk warnings about the products they sell or advise on and have to explain these risks to you fully. They also have to make sure the product is suitable for you. Some products carry a higher level of risk than others.
Currency risk
You should also be aware of currency risk. If you are putting your money into investments in another country then their value will move up and down in line with currency changes as well as the normal share-price movements.
Inflation risk
Inflation means that you will need more money in the future to buy the same things as now. When investing, therefore, beating inflation is an important aim. Investing in cash is unlikely to beat inflation in the long term. Even a low level of inflation can have a very significant effect over time. Did you know that just 5% inflation reduces the true purchasing power of €1,000 to circa €600 after 10 years?
Spreading Risk
If the amount you have to invest is big enough, the best way to make sure you don't end up taking too much of a risk is to avoid putting all your money in one investment. A useful investment strategy to pursue is to put part of the money into low-risk deposits that does not tie the money up excessively, and put the rest into an investment with a level of risk that you are happy to accept.
CFS is available to discuss the investment options available to you, focusing on the solutions that satisfy your needs.