Thinking of investing
What you need to know before you invest
Before you invest, it’s important to be clear about your goals, how long you plan to invest for and how much risk you are comfortable taking. All investments involve risk, and generally the higher the potential return, the greater the risk of losing some or all of your money. You should only choose investments that match your risk appetite and personal circumstances. If you are considering investing, think about getting financial advice from an adviser who is independent from the bank, stockbroker or other provider selling the investment.
Always check that both the adviser and the investment provider are regulated by the Central Bank of Ireland, as this affects access to complaints and compensation schemes if things go wrong. You should also understand any taxes and charges that apply, as these can significantly reduce returns, and consider whether ethical or sustainable investing is important to you before you commit your money. The goal is to earn more than you lose to charges, taxes or inflation. Inflation is when prices go up over time, so your money buys less than it used to.
What should you ask yourself before investing?
Before you invest, take a few minutes to consider these questions:
What are your investment goals?
Are you investing for retirement, your children’s future or to build an investment portfolio?
Do you want to receive:
- Capital growth (the fund grows in value over time)
- A regular income
- Both
What level of risk are you willing to take on?
Every investment has some risk, but you need to be comfortable with the amount you’re taking.
Ask yourself:
- Can you afford to lose money? How much could you afford to lose, and what would happen if you lost all or some of your investment? This depends on your personal circumstances.
- What is your attitude to risk? Your risk attitude is the level of risk you’re comfortable with. It can be influenced by your personality, past experiences and financial education. This is sometimes called your risk appetite.
When you meet a financial adviser, they should assess your attitude to risk and the importance of capital security to you. You should only be offered investment products that match your risk profile.
A question you may be asked is: What is your investment objective?
- To make high returns, regardless of risk?
- To make high returns, without too much risk to your capital?
- To make good returns, with little risk to your capital?
- To make returns which beat inflation, without significant risk to your capital?
- To protect your capital?
How long do you want to invest your money for?
Generally, the longer you invest, the greater the potential for higher returns. However, consider whether you’ll need access to your money during the term and how quickly you could access it if needed.
If you’re locking your money away, make sure you also have a rainy-day fund for emergencies.
Is your adviser or investment firm regulated by the Central Bank of Ireland?
It’s important to check if a financial adviser or investment firm is regulated. You can do this by typing going to the Central Bank of Ireland Register.
If the adviser or firm is not regulated and things go wrong, you are unlikely to have access to complaints procedures or compensation schemes. The Financial Services and Pensions Ombudsman cannot investigate complaints against an unauthorised firm or adviser.
When dealing with a regulated firm, also check if the product itself is regulated.
Unregulated products (such as crypto or property) can be sold by regulated entities, but these products are not covered by complaints procedures or compensation schemes, though you may be able to escalate complaints to the Financial Services and Pensions Ombudsman.
Do you want to consider sustainable and ethical investments?
Sustainable and ethical investment is a way of investing your money in companies which place a higher importance on Environmental, Social and Governance (ESG) issues when running their business. Discuss this with your adviser or investment company at the outset to ensure they are aware of your preferences.
Consider what issues matter to you and check that the investment product is transparent and accountable about its ethical or sustainable claims. Look for clear, verified information on how it meets environmental and social standards.
What taxes and charges will you have to pay?
Taxes and charges can significantly reduce the value of your investment.
Before you invest, you should be given a list of the taxes and charges you’ll be liable to pay. Check if the charges are once-off or ongoing.
Saving & investing – answering your questions
We brought the Money Clinic all around Ireland. You asked the questions, and financial planner and TV presenter Eoin McGee has the answers.
