12th August 2020

Did we wake one morning with a desire to invest? Maybe!

Perhaps the following day we saw something, heard something that made us begin to think about it for the first time, or to revisit the idea again, who knows?

The following questions often arise when someone begins to consider an investment:

  • Why do we do it?
  • What motivates us to want to do it?
  • What does it mean, investment?
  • How to invest
  • Where to invest
  • How to get Started

By way of definition; it’s a noun. The act of putting money, effort, time, etc. into something to make a profit or get an advantage, or the money, effort, time, etc. used to do this:

Examples of this crop up all the time in our day-to-day life, for example:

  • The government wanted an inflow of foreign investment.
  • Stocks are regarded as good long-term investments.
  • The account requires a minimum investment of €1,000.
  • There’s been a significant investment of time and energy in order to make the project a success

I highlighted the word advantage not money to highlight a key distinction, between money, the tool and to get or gain an advantage, a source of motivation.

So what motivates us, more importantly what motivates you?

For many, it is the desire to make a better life for themselves and those they care about, i.e. Children, family, worthy causes etc. For others, it’s about making them feel good. I believe investment works best when it is done with purpose, in other words a goal or an objective. For example financial independence.

When we have defined why we want invest, for example, in 10 years to have enough to continue to cover living costs of £35,000 per annum, which includes holidays to Europe twice a year and changing the car every 4 years; we have a pound specific, time bound objective. What we then need to do is determine how much this is going to cost to achieve this over the next 120 months: The resources currently available, future resources that will become available, and an expected rate of return.

If that rate of return is 7 or 8 per cent, then our solution is to identify which asset class or more realistically which group of assets provide the greatest likelihood of achieving a sustainable return consistently over time. For example if cash is yielding 1 per cent and global equities are assumed to deliver 7 per cent. Then in this example global equities provide the obvious solution; assuming the assumptions are reasonable and you can handle the turbulence the equity markets throw at you from time to time; and the method of capturing those returns is efficient in terms of tax and cost

Where to start? Well it’s easy to say “start with end in mind;” you have articulated what you want to achieve and the reasons for wanting it; you have identified the basis of a method/strategy to achieve it (see previous paragraph). However, as with most things in life, what will get you there aren’t a set of assumptions; they will help! What will get you there, will be your ability to stick to the plan when all around forces internal and external are telling you to do something else. They – lets call them marketing forces –  have the capacity to derail all your plans, and most of the time, you won’t even recognise them.

In conclusion have a plan, based on what it is you want to achieve (answering that question by itself is can be challenging) created by you or more likely with the assistance of someone you trust, work on it, and stick to it. Do this, and you will massively increase the chances of a successful outcome. It isn’t easy, but it isn’t rock science either.