Life is short: seize the day
THE factors which influence investment decisions change over time and vary according to your personal circumstances and what your goals are. It is never too early, nor too late, but today is the best day to begin if you haven't already done so.
Prudent students can become early investors, and quite often this comes by way of a legacy or gift from a family member. Rather than spending it all on instant gratification such as beers or a new wardrobe, look ahead to the next big life-stag such as e: moving out and buying your own place.
A deposit for a house can take a long time, so if you're young and wise, putting this large sum to work as early as possible will pay further down the line.
When you're young and relatively care-free financially, you may be able to take slightly riskier decisions. It's important to stress that you should only invest if you've got a suitable savings buffer, and no immediate debt repayments.
If you're in the right position, you may want to start with shares, either in a single company or in a fund. Investing in a single company is obviously dependent on the performance of that one company, so if the share price falls, it's not good news. Funds, on the other hand, offer greater diversification and hopefully reduced risk, by spreading your exposure across a variety of companies.
As your career gets going in your 20s, and once you get over the initial head-rush of earning your own money, starting an investment habit is one of the most visionary things you can do, no matter how small. Set it up to come out of your account as soon as your salary lands and you'll barely miss it. By investing a bit each month into a handful of funds, you will shortly start to see growth: it's a great feeling.
Now, let's touch upon one of the biggest fear-factors in investing – the reality that values do go down. With current digital technology, it's possible to view share prices 24/7 and to become utterly obsessed with observing fluctuations day by day. This is not a healthy way to invest.The key fact all investors need to hold on to, is that, generally speaking, shares recover over time. If you are in a diversified fund, the chance is that more shares will recover than go bust.
Having said all this, in our 30s, many of us simply don't have that little bit extra to squirrel away, as we pay a mortgage, utilities, commuting or car expenses, childcare and life in general. Our situation changes over time and this is all ok.
As we reach our 40s, we might look a bit more closely at our pension, as attention turns towards eventual retirement. As our goals take on a more specific, time-bound focus, now is the time to really save and invest wisely for the future.
An investment ISA can be a relatively stable way of growing your savings over time. It also offers the flexibility both to stop and start deposits and to have a pot you can dip into for bigger expenses like a special holiday, home renovation or wedding costs.
If you're approaching retirement and have a pension, remember that we're all living longer, so consider making your money work for you longer-term by maintaining some broad market exposure. You may wish to increase the proportion of your portfolio in bonds, to try to counter-balance the equities and the impact of any market volatility.
It's understandable that the more urgent your need to reach a savings goal, the more risk-averse you'll become.
A straightforward savings account might seem risk-free, however, be mindful that the impact of inflation means your spending power can reduce. With savings rates currently so low, investing has the potential for better longer-term growth.
If you're even thinking about saving and investing for the first time, turn the thought into action. As anyone training for a marathon will tell you, the hardest step is putting your running shoes on and getting out the door.
Starting the discipline of putting your money to work is the very best thing you can do, as soon as possible.
Investment should be an opportunity to be excited about rather than feared. Your investments shouldn't keep you awake at night, and if you're not confident making your own decisions, get financial advice.
Forget ‘get rich quick' schemes. Don't think you can time the market and get rich quick by buying in one day and selling out the next. Instead think: ‘get rich slow', invest a little as you go, sit back and forget about it keep focused on your long-term goals. This approach works for most people.
:: Cahir Gilheaney is a wealth manager with Barclays Wealth & Investment Management team in Belfast.