Suspend reality for a minute and imagine you are leaving your house, and going on an exciting journey somewhere. I know it’s 2020 and no-one ever goes anywhere but it could happen!
Should you take a boat? Should you cycle? Should you fly?
Investing’s a journey too. So start by asking yourself some questions you’d consider before you embark on any trip.
Where are you trying to go? How long have you got to get there?
Would it matter if you ended up somewhere a little different than originally planned? Or have you got a very specific destination in mind? How serious would it be if travelled for years but ended up back where you started?!
Is the destination all that matters? Or does the nature of the voyage count for something?
Depending on your answers to these questions, you’re going to reach some very different conclusions on how to invest €10k.
Around now, some people will be looking at the performance of Bitcoin and thinking – here’s a quick way to turn €10k into €20k, maybe €100k. They might be right (although a lot of BTC investors spent 2018, 2019 and much of 2020 nursing serious losses as the chart shows).
What’s certain is that they have chosen to ride a rollercoaster on their journey. And there’s nothing wrong with that, provided you’ve got other modes of transport if you start to feel ill.
At the other end of the scale, there’s the cash-only saver. In a world of zero or negative interest rates, their money will never go anywhere.
In fact, far too much money in Ireland is stuck where it is, while others whizz past on the motorway.
So where lies the middle ground?
For me, if I were investing €10k, without question I’d put it in investment funds.
€10k is too small to create a portfolio of shares. And betting the farm on the performance of a single asset is an unnecessary risk.
Funds, on the other hand, pool your money with that of many investors, so that they are collectively invested in tens, hundreds, or even thousands of underlying assets.
It’s nice to have company when you’re travelling. A fund offer similar benefits for your money. You can invest more widely as part of a team, benefit from the wisdom of others, and share the costs of the journey.
There are funds of all kinds out there – from pure equity ones investing in company shares, to bond funds investing in government and corporate debt, to precious metal and commodity funds, and much more exotic kinds.
There are cannabis funds and crypto funds, blockchain funds and biotech funds.
What they have in common is that they spread your risk, and scope for reward, among many assets.
The next big decision you’ll have to take is who should sit in the driving seat. We find that investors fall into three broad groups here.
Are you happy to take the wheel: decide which road to take and steer the vehicle along the way? In practice, that might mean choosing your own funds, monitoring their performance from time to time, and handling the tax reporting yourself. If that sounds like you, then it’s not hard to find online platforms offer low cost market access.
Alternatively, you might be a busy person who wants to feel like their money is working according to a plan. Maybe with automated regular investments in addition to your initial €10k, into a professionally managed fund which you don’t feel the need to check every Friday night, and tax all handled at source.
f that’s the case, then a life assurance-based investment could work well – Moneycube.ie has several to choose from.
Thirdly, this €10k might be just the start of your investment journey, building to something much greater.
If you are serious about growing your wealth, then set off as you mean to continue.
Look beyond the current leg of the journey. As well as looking for today’s winners, think about optimising for tax, how you’ll manage your investment, and the team you’ll need to build a well-run and diverse portfolio. You’ll stand a greater chance of reaching your destination as planned, and minimise the diversions along the way.
Whichever kind of traveller you are, the most important decision is to take your first step. After that, your investment journey has begun, whichever route you take.
Ralph Benson is co-founder and head of financial advice at online pensions and investments advisor Moneycube.ie.