The pandemic has curbed spending and left some with a little extra. Money Muse Lorraine Donegan offers some sound advice on where to go from here.
We’ve never lived through a pandemic before and the impact it is having on our emotional, physical and financial wellbeing is hugely significant.
As someone dealing with people’s financial wellbeing on a daily basis, I find that while some of my clients are in financial limbo ‘thanks’ to the virus, many others are finding that they have additional cash because their spending has been curbed since March. If you find yourself in that camp, if you have extra cash in your bank account because your spending has been curbed, then this is the blog for you.
If one (of the few) upsides to Coronavirus is a few extra quid in your bank account – what should you do with it? The answer is simple: Take the plunge and invest it!
Now, don’t make the mistake of thinking you have to try and channel Bobby Axelrod in Billions in order to invest, thankfully there are investment options to suit every appetite and attitude to risk.
Here are some tips for getting started:
1. If you have the time & inclination - educate yourself about investing. If you don’t, enlist the help of a good financial planner
If you want to educate yourself about investing, I’d recommend:
- Book: Secrets I Learned by Sleeping with My Financial Advisor: Personal finance, mindset, habits and strategies made fun! By Alison von Simson,
- Book: Mrs Moneypenny's Financial Advice for Independent Women. Paperback by Heather McGregor, &
- Podcast: ‘The Investing for Beginners Podcast’,
- Podcast: ‘Investing in shares for Dummies’.
If you’re investor savvy and want to do this alone, try trading212.com but be warned, you’ll need to treat this like a new hobby and check your account daily depending on what your strategy is ... it’s high risk if you don’t know what you are doing.
If you want to invest but don’t want the time to educate yourself, then use a financial planner. Just find one that has experience, earns your trust and most importantly, works with you to understand your attitude to risk. Which brings me on to tip 2!
2. Decide on the level of risk you are comfortable with.
We all have different attitudes to risk and reward when it comes to investing our hard earned cash. Anytime you invest money into something there is a risk, whether large or small, that you might not get your money back and for taking that risk, you expect a rate of return that compensates you for that potential loss. In theory, the higher the level of risk, the higher you expect your compensation to be. Determining what level of risk you are comfortable with, leads me neatly onto tip 3.
3. Decide on an investment timeline you are comfortable with.
You should always determine the amount of time you’re happy to keep your money invested because that will determine the type of investment you make. For example, if you have €5,000 to invest now, but know that you’ll want to add it to savings in 2 year’s time for the down payment on a house, then you can’t tie your money up in a 5 year, high risk investment option. But, perhaps you want to invest now for a big holiday when you hit a milestone age, or you want to retire earlier than 68 and travel the world. Whatever your plans are you need to consider the time frame involved.
4. Never invest all your eggs in one basket.
This is an old saying but a very valuable one. Investing in a diversified portfolio with proper risk management is essential and very effective. Have a mixed portfolio ensures some assets may dip in value while other assets may rise, so with mixed assets your whole portfolio will not go down in price.
And, if you’ve decided to take the plunge & invest, here are some additional tips:
Invest in Industries that thrive in a pandemic.
Technology, food & healthcare are among many of the industries that have performed beyond pre Covid-19 expectations. If you need specific advice then a good financial planner will help you find funds with less volatility.
Remember to check your emotions
Give your investment time and don’t give in to kneejerk reactions. The is only potential to lose on an investment when you sell, it might be tempting to sell or cash in when you see the markets nosediving but it’s the wrong move, the value right now for certain funds or shares is lower.
- Be Patient: one thing C-19 is teaching the world right now is patience, we are all waiting until we can go back to normal again, meet our friends and family, for weddings, holidays, investing is also a waiting game and when markets bounce back they really bounce back!
Until next time, take care,