Deciding What Your Investment Strategy Will Be.

By: Joe Daly,
Daly Investment Planning Ltd,
Ballinrobe,
Co Mayo. ( 094 952-0921 or e-mail: info@dip.ie )

In previous articles we covered areas such as risk/reward, risk against inflation and risk to your capital.

In this article we will continue on the lines of what has gone before and bring you a step closer to deciding what type of investor you are and where you can invest.

First things first.
Always ensure that all your other financial defences are in place. You should do a complete financial "Health Check" i.e. your home/mortgage, your pension, your investments, emergency cash fund and that relevant life, serious illness, health and protection policies are adequate.

What are your investment objectives?
When all the above are in place it is time to for you to decide what you want your investments to do for you.

What time span are you considering?

Is it to supplement your income now or long term?

Is it for children's education?

Is it as a hobby?

To maximise the potential of your money...
There are factors that will determine what an investor does with their funds.
Factors such as an investors age, how much money they have, what risk they are willing to take, what the market climate is like, what stage in life they are at, tax etc.

Few people today fit a stereotype just like people's lives are less predictable than before. People can change jobs, move towns, get divorced or are made redundant. Can you safely predict where you will be in ten years?

The type of person you are will also influence your investment strategy. Some of us are naturally cautious while others are adventurous. If your natural bias is to be cautious it may mean that you end up with less of a return in the long term but that will be the price you pay for peace of mind.

How much money do you have?
If you do not have a lot of money this does not mean you cannot invest. It will however restrict the options available to you as you may not be able to invest in more than two asset types which is riskier than buying several. So a sensible solution is to invest in pooled funds for diversification. (A pooled fund is made up of a mix of shares/property/government bond/cash and managed by a fund manager.)

What is the market climate?
Stock market investment and any asset investment is a long-term business and trying to get out at the top and in at the bottom is virtually impossible. However this does not mean that you can afford to ignore market conditions. You can of course build up your portfolio over a period of time which reduces the load of trying to time the markets.

What about Tax?
It is sensible to look at taking advantage of all the standard tax concessions. Capital gains tax at 20%, taxes on Unit Linked funds at base rate plus 3% exit tax, relief on pension contributions, etc.

If you have to pay tax it means you are making money!

What part of your investment, if any, do you want to handle yourself?
Unless you wish to do so you do not need to handle your investments yourself. However, you do need to have an investment strategy. If you do not have the time or interest you should concentrate on choosing a good independent advisor or manager. Even if you do have the time and interest, perhaps, until you get comfortable with your own selection, some of your funds should be professionally managed.

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