How I would invest 10k
I know it is not going to be a popular thing to say but in the grand scheme of the finance world 10k is not a lot of money.
1. Avoid traditional brokers
For this reason, I would avoid the traditional brokers. To be honest they do not particularly want you as a customer with €10k. The numbers just do not make sense for them.
Buying 10k of a share with a traditional broker may cost you up to €150 in commissions and FX charges but say you do the sensible thing and spread your risk over 4 shares, it’ll cost you €600, that means you are immediately down 6% before the stocks have done anything.
To put this into perspective if an investment manager is consistently generating a return of 12% annually, they are doing very well. Therefore, after tax you would be receiving a return of 6-7% and doing well.
Buying through a traditional broker you could be down 6% before you start.
2. Go Online to ensure more of your money is invested
For this reason, I would advise you to open an online account with a broker like De Giro which charges a fraction of these costs. Their charges are up to 91% lower than traditional Irish brokers. The more allocation of your capital that is being invested (i.e. amount invested less the costs) the more of your capital that will compound, the better return you will get.
3. Do your research, buy, and hold.
Which brings me to research. Before you make any decisions on what you invest in, I would advise educating yourself. I teach an investing fundamentals course looking at the principles of investing, how to maximise your returns, pensions in Ireland, screening a stock and more.
There are also lots of great books on investing you can pick up to get you started. Try and invest in what you understand. If you work in a particular area and know the market, I advise thinking strongly about investing in what you know provided the analysis is favourable.
Please, whatever you do, do not go buying based on a tip from a mate in the pub.
4. It is already priced in.
Do not think you can suddenly quit the 9-5, become a day trader and outwit the markets. If there is an announcement in the press that may influence a share price you can be sure it was factored into the price within a millisecond of the announcement if not before! Do your research, invest in an area you understand and hold for the long term.
5. Diversify:
Diversify, diversify, diversify, I cannot stress this enough. If you buy Tesla and then it crashes 50% in a day, you are down 50%. If you buy a basket of shares or have diversified exposure via an ETF you are far less at risk of the fall of one share.
For a lower risk, diversified investment, an ETF offers a great solution. You can find out more details about ETF’s here.
An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors such as IT, Financial, Healthcare, or use various strategies such as income, growth.
Some of the most popular examples include the SPDR S&P 500 ETF which tracks the S+P 500, i.e. with the ETF you are buying a basket of the 500 shares in the S + P.
Another example is the iShares MSCI Emerging Markets ETF which offers exposure to stock markets of emerging economies.
In summary, educate yourself, avoid transaction costs and management fees eroding your return and make sure you are diversified,
Peter Brown has over 35 years’ experience in the financial markets and has managed treasury operations in financial institutions including Barclays, BNP, Ulster Bank and ACCBank. As chief dealer and subsequently general manager of treasury, pensions and investments he became expert in structured finance, funding, trading, investments and risk management. He is the co-founder of Baggot Investments and formerly the Head of Education at the IIFT. Peter features regularly on RTE, TV3, BBC World, RTE Radio and NewsTalk.
His Investing Fundamentals course is available to book here.
Please note that investing involves risk of loss and that the above does not constitute advice. Please do your own independent research before making any investing decisions..