The Orca Financial Guide to understanding Saving and Investment
In Ireland, savers and investors are faced with a myriad of options. It can be difficult to know which one is right for you. So it’s important to get advice from someone who fully understands all the savings and investment products on the market. At Orca Financial, we provide impartial advice that can help you get the most out of the money you save and invest.
We start by understanding exactly what you want
Before we make an investment recommendation, there are some things we need to know about your requirements and expectations.
Access: It’s important to determine the level of access you will want to your funds. Most of the investments we offer have a recommended term of five to seven years, or even longer. While some of these investments allow you access to a portion of your money, with most of them the maximum benefit is only achieved by locking the funds in for the whole investment period.
Security: Safer, more secure investments offer lower potential returns. Higher risk investments offer the potential of higher gains. Our recommendations will be based on your attitude to and tolerance for risk and volatility.
Growth: Whatever level of risk you choose, it’s important that investment returns stay ahead of current inflation levels, otherwise you will find that the actual purchasing power of your money is reducing on an annual basis.
What should I invest in?
These are the five main areas (or asset classes) for investment.
- Shares - company shares or equities.
- Property – commercial, retail, industrial and residential.
- Bonds – Government bonds, corporate bonds, fixed interest securities and gilts.
- Cash – bank or building society accounts.
- Alternative Assets – financial derivatives, commodities, alternative energy, etc.
Most investors choose some of each of these asset classes, as no single one of them can be described as ‘best’ for all situations.
Your investment advisor will help you build a robust investment portfolio by spreading your investments across these asset classes, while keeping in mind your medium to long-term objectives and risk profile.
Rules of thumb
It is generally accepted that the higher the Share or Equity content of an investment, the higher the potential for return, but this also comes with higher potential volatility or risk.
At the other end of the spectrum, the higher the Cash element of an investment, the lower the potential return, but this offers a higher degree of security.
Tell me about leveraging or gearing
Leverage or gearing on investments is a situation where the exposure to certain assets within a portfolio is increased through borrowing. This offers the opportunity of higher returns, but due to the gearing also brings increased risk.
Yes. You should note that income generation from unit-linked funds is achieved through growth in the underlying assets of the fund. While most of our funds allow for a percentage income deduction on an annual basis without penalty, we must point out that if the growth in an investment is less than the required income amount in any one year, you may find that your income is being drawn down from your initial capital. This would then mean that you are not ensuring preservation of capital into the future.