B
What do you mean by this - conservative, low appetite for risk/volatility?Id usually have a neutral to defensive outlook on money matters
What do you mean by this - conservative, low appetite for risk/volatility?
Rabo Direct Website said:Your risk profile: Neutral
You are a good in judging the risks you are willing to take. The concept of investing is not new to you and you aim for a good return in the long run. Your portfolio reflects this by containing a balanced mix of bonds and shares.
General opinion is that for any form of equity-based investment, five years is a minimum realistic timeframe
It (5 years being the minimum term for equity investments) is a catch all general rule of thumb so not necessarily applicable in all cases. Don't forget that (a) many equity SSIA holders seem to have rolled their investment over so their overall investment term is still ongoing and (b) by investing in equities for less that 5 years you are undertaking more risk and potential volatility than someone who invests longer.Whose opinion?
What about, for example, all the equity-based SSIA accounts which in general did much better than their deposit-based equivalents? Although the accounts had a life of five years, since the investment was being made monthly over that time, the average investment period was only 2.5 years.
Of course. But don't forget that some equity SSIA holders - especially those who started early and cashed in after 5 years - did not earn great returns either!I see this minimum five year time being cited very often on AAM, but the SSIA experience is a very clear example that it's perfectly possible to successfully invest in equities over shorter timeframes without actually getting into day-trading.
Don't forget that (a) many equity SSIA holders seem to have rolled their investment over so their overall investment term is still ongoing
Hi Gonk,
Brian says he may need access to the money in three years. In three years' time, the value of an equity-based investment may have dropped and so he'd either have to sell the investment at a loss or defer selling until the value had recovered.
But I take your point - the five year rule of thumb is not based in any real scientific reasoning, to the best of my knowledge. I guess it's primary role is to be long enough to discourage inexperienced investors from attempting to "get rich quick" in a rising market, without being aware of the potential downsides. There's a minor point also that many equity-based managed fund products contain early encashment penalties in the first fve years, but they exist for commercial reasons.
I think the important part of the advice for anyone considering equity investment is that they muct have flexibility as to their exit date. If there is a definite need to access the cash after three years, I'd still hold that equity investment is not suitable.
Regards, Liam
Don't forget that the original poster seems, by his own admission, to have a relatively low appetite for risk/volatility.
brianb8802 said:I wouldn't mind taking a bit of a risk, but nothing too flashy.
Hi Brian
If you invest in a deposit account, you will get your own money back after 3 to 5 years. It will probably lose a little bit of real value if inflation is higher than the interest rate.
If you invest in the stockmarket, it is likely that in 3 years time, that your investment will be worth more as the return in most cases will exceed inflation. There is a low chance - probably 20% that your investment will fall or rise by less than the rate of inflation. Can you handle such a fall? That's up to you, but if a fall won't hurt you too badly, then you should invest in equities.
The best way to do so would be though a fund which has no exit charges and no initial charges. This means that you could cash it in whole or in part at any time should you need it.
Following on from Brendan's advice, also consider mixing your exposure:
e.g.:
With €20k of the €27k: Stick €10k in Rabo, €10 k into Northern Rock, Feed €1k a month into the High Interest Savings account from Anglo Irish, €300 into AIB, (and whatever into Bank of Ireland and Halifax - check the sub-forum for the exact details).
With the remaining €7k: Invest in stock
Hi Gonk,
Brian says he may need access to the money in three years. In three years' time, the value of an equity-based investment may have dropped and so he'd either have to sell the investment at a loss or defer selling until the value had recovered.
But I take your point - the five year rule of thumb is not based in any real scientific reasoning, to the best of my knowledge. I guess it's primary role is to be long enough to discourage inexperienced investors from attempting to "get rich quick" in a rising market, without being aware of the potential downsides. There's a minor point also that many equity-based managed fund products contain early encashment penalties in the first fve years, but they exist for commercial reasons.
I think the important part of the advice for anyone considering equity investment is that they muct have flexibility as to their exit date. If there is a definite need to access the cash after three years, I'd still hold that equity investment is not suitable.
Regards, Liam
Brian says he has €27k to invest for min 3 years, max 5, so he has the flexibility which you suggest is required in which to pick his exit point if he goes for equities. He will not be forced to exit at a low point in the market. (Unless that low persists for two years, which I grant is possible.)
In my view a perfectly reasonable option would be to split between deposit and equity-based investments - say 50/50 between a deposit account and an ETF like the ISEQ 20 ETF.
ETFs have none of the drawbacks with regard to early encashment you mention and have very low management charges.
Don't forget that the original poster seems, by his own admission, to have a relatively low appetite for risk/volatility.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?