Investing may seem like a complex and daunting venture, especially with terms like bear market, bull market, and dividends flying around. However, experts say that you don’t need to be a high earner or have a finance degree to begin investing.
According to David Quinn, Managing Director of Investwise Financial Planning, it’s possible to start with small amounts by using online brokerage accounts. He recommends that even parents introduce their teenagers to investing, noting that many young people don’t learn about financial markets in school. Starting early, Quinn says, can provide valuable lessons when investing larger sums later on.
Financial advisor Paul Merriman, founder of AskPaul.ie, agrees that investing is for everyone, regardless of salary. He suggests starting small—perhaps €100 a month—and watching those contributions grow over time thanks to compounding. Merriman emphasizes the importance of getting started early, rather than waiting until you’re earning more money.
While it’s not necessary to be an expert in the stock market before buying shares, having a basic understanding is important. Quinn advises investing in low-cost index funds, which track the performance of entire regions or global markets, as these tend to perform better in the long run than actively managed portfolios. Only a small percentage of professional fund managers manage to beat this simple strategy, making individual stock picking a risky proposition for beginners.
When deciding what to invest in, Merriman suggests understanding your financial goals and risk tolerance first. Are you investing for a long-term goal like retirement or for something short-term like buying a house? If you’re looking to invest in individual stocks, research the companies thoroughly, paying attention to their financial health, business model, and growth potential. It’s also important to consider costs, as some investment options charge hefty fees, which can have a significant impact on long-term returns.
Quinn highlights the importance of a diverse portfolio, advising against putting all your money into one stock or sector. A well-diversified portfolio should include stocks from various industries and regions. If this seems overwhelming, Quinn suggests opting for index funds, which offer instant diversification.
While the high cost of living may make investing seem difficult, Quinn encourages people to create a financial plan. This should include setting goals for housing, education, living expenses, and retirement, which can help determine how much you need to save and invest. Merriman advises investing 10-20% of your income, but he stresses that starting small and increasing your contributions over time is perfectly acceptable. Before diving into investments, he recommends having an emergency fund in place to cover 3-6 months of expenses.
In Ireland, investments are taxed on gains, with a rate of 41% on income and gains when units are sold. If you invest in stocks directly, the gains are taxed at 33%. For dividends, taxes are applied at the marginal rate annually. It’s important to stay informed about tax regulations and plan accordingly.
Finally, Quinn advises getting professional advice, especially for beginners. A financial advisor can help you avoid common mistakes and provide an impartial perspective on your investment decisions.
Investing is not without its risks, so it’s crucial to do thorough research and avoid scams. The Competition and Consumer Protection Commission (CCPC) warns that fraudulent investment schemes are becoming more sophisticated. Always check if the financial services firm is regulated by the Central Bank of Ireland before making any decisions.
If you make a bad investment and need advice, the Money Advice and Budgeting Service (MABS) is available to offer guidance and support.