I am a 44 and despite being aware of the basic importance of having a private pension in place and the tax relief involved, I have no experience at all on the investment side of things and have always been frightened off by the jargon around it. As time is now ticking, I am worried that I have left it too late. Can you offer any advice on the basics of choosing an investment portfolio please? – Joanna, Co Tipperary.
The whole concept of investing can be complicated and frightening, but it is certainly not too late to start as I hate to break it to you, you have more than twenty years of your working life remaining! Engaging the services of a good financial advisor is the first and most important move. It will be their job to provide you with the advice you need to help you achieve your retirement goals. I am under the presumption that you understand the basics of how pensions work so I am going to focus on the investment aspect.
It will be your financial advisors job to ascertain your monetary requirements in retirement, pension investment objectives, and .risk profile. For them to develop a clear understanding of your attitude to and tolerance of market risk, they will issue you with a risk questionnaire which is designed to help you consider the various investment risks and understand how they impact on your personal circumstances. Take time to answer these questions carefully as your feedback will assist your financial adviser to develop the most appropriate investment strategy to meet your retirement objectives.
After you have been assessed, you will be then advised on your “Risk Tolerance”. This is the amount of risk that you will be comfortable taking on or the degree of variability in investment returns that you will be willing to withstand. Proper assessment and advice in this regard is the most important component in investing.
Basic ‘Asset Classes’
An Investment Portfolio is normally divided into basic asset classes such as Equities (stocks), Bonds, Cash, Property and Alternatives. “Equities” are pieces of individual companies. “Bonds” refer to loans that are issued to companies or the government. “Cash” is literally money in a bank account. “Property” consists of physical property usually commercial. “Alternatives” would include commodities such as pre