Did you know that right now, there is €123 billion on deposit in Irish bank accounts?
Of that figure, €70 billion of it is from regular households.
Many people feel comfortable leaving money in the bank because they believe there is zero risk attached, and they like to be able to see their money.
But there is a risk. The risk is inflation!
If you have €1,000 in the bank with inflation at 3%, you lose €150 of over 5 years.
Which is riskier – a bear or a deer?
More people are killed by deer every year in road accidents than are killed by bears!
Risk is all about perception!
There is a correlation between return and risk. Higher return is derived from taking more risk, and vice versa.
Risk is managed by diversification, so don’t put all your investment eggs in one basket. And don’t fall for false diversification either!
For example, investing in only Irish companies through the stock exchange, having Irish government bonds, investing in Irish property and having a company based in Ireland is only diversification of asset class. This is false diversification!
If the Irish economy goes up in smoke, you’re in trouble.
Spreading assets out across multiple asset classes, across multiple countries is real diversification.
When considering investing, firstly explore…
– What are your future plans and what will they cost? Put a number on that, consider inflation, and determine what return you need from investments – before considering the risk.
– Look at the big picture of what you want your money to do for you.
Connect your money to its use. Money is a tool that allows you to live how you want to live.
– Compare what you will need with what you have and calculate the difference. If the gap is small, you only need a low return. If it is large, you may need a higher return.
To chat with us about investment, email info@ foundationstonefp.ie or call us on 087 609 3675.
