This is a subscriber-only article
Inheriting an amount of money, if properly managed and invested, will certainly strengthen your overall financial stability. However, the whole concept of investing can be complicated or even frightening, so my first piece of advice is to engage the services of a good financial adviser.
This is the first and most important move you can make, and it will be their job to provide you with the advice you need to help you achieve any investment goals you may have.
They will ascertain your requirements in detail and carefully assess your investment objectives and risk profile, while taking other factors like your age and the term of time involved.
In order for them to develop a clear understanding of your attitude to and tolerance of market risk, they will issue you with a risk questionnaire, which is designed to help you consider the various investment risks and understand how they impact on your personal circumstances.
Take time to answer these questions carefully, as your feedback will assist your financial adviser to develop the most appropriate investment strategy to meet your retirement objectives.
Investment bonds are the most popular and attractive option and are available through the main life and pension providers
Options exist
With interest rates at an all-time low, undoubtedly there are much better alternative investment options available to you than bank deposit accounts, most especially if you are looking at a time frame of around five years or longer. Investment bonds are the most popular and attractive option and are available through the main life and pension providers. They come with varying levels of investment risk attached and it’s your adviser’s job to measure your personal risk appetite and then match you to an appropriate portfolio.
Typically, investment bonds offer a solid return over time and invest in a diversified range of assets, including equities, bonds, alternative assets and property.
Multi-asset funds have been the most popular choice with our clients over the past number of years. Investing in a multi-asset fund means that you will be invested in a globally diversified portfolio and your capital will have the opportunity to generate higher returns over the longer term.
One of the most popular medium risk multi-asset funds available from one of Ireland’s market-leading life companies has achieved more than 48% growth in the five-year period up to July 2023, which is certainly not to be sniffed at.
The longer your investment term, the more likely it is that the capital will weather the inevitable ups and downs of the equities market. When it comes to investing, not having “all your eggs in one basket” is key to success.
Cautious or fearless?
Please also bear in mind that if the thought of “temporary losses” in your investment would keep you awake at night then you should concentrate on the lower-risk options available to you, like bonds.
The more you are willing to take on any interim market setbacks in the pursuit of long-term growth, the better your returns will be.
In my opinion, even the most cautious investor should mix in even a small amount of some blue-chip equities in the knowledge that the bonds in your portfolio will offset any losses, while even the most fearless investor should include a small number of bonds to cushion a precipitous drop. Inevitably all investments have some sort of cost involved. This is usually in the form of an annual management charge, which is on average 1% per annum, but watch out for any other ‘sneaky charges’.
Government levy
There is also a government levy of 1% but the good news is that some of the life companies cover this for you, so the only charge should really be the annual management charge. Growth on the bond will also be subject to exit tax of 41% on encashment or each eighth year anniversary of the policy while it is in force.
When it comes to your adviser, never be afraid to ask them questions – no matter how trivial you think they might be.
Understanding exactly how your capital is invested and having confidence in both them and the investment solution they recommend will help you make better decisions and certainly improve the financial outcome over time.
Carol Brick hails from a dairy farm in Kilmoyley, Co Kerry, and is managing director of CWM Wealth Management Ltd. An economics graduate and qualified financial adviser, she has a particular interest in financial planning for women in Ireland and launched HerMoney, a specialist service, in 2017 with an all-female team of advisers. Carol advocates for urgent legislative change when it comes to the qualifying criteria for a State pension.
SHARING OPTIONS: