Plant a tree, steady streams into a river and set sail……

Inflation is like a slow leak in a tyre. You might not notice it at first, but over time, that leak can leave your tyre flat, making it much harder to reach your destination. In the same way, inflation quietly eats away at the value of your money. What you can buy today for €10 might cost €15 or more in 20 years. This means that if your money is just sitting still in a savings account or under the mattress, it's losing its power to keep up with rising costs.

Now, imagine your pension as a ship setting sail for retirement island. If you don't equip it with strong sails and a reliable engine (i.e. a well-thought-out investment strategy), inflation is like a strong headwind that will slow your journey and might even push you backward. On the other hand, with the right investment strategy, your pension can act like a motorboat, steadily powering forward despite the headwinds of inflation.

Investing in assets like stocks, bonds, or property gives your pension the chance to grow faster than inflation. Stocks, for instance, are like planting a tree—it starts small, but over time it grows, produces fruit, and can even grow new branches. While there are occasional storms (market ups and downs), trees generally grow taller over decades. Similarly, investing in stocks can provide your pension with the growth it needs to not only keep pace with inflation but also surpass it.

Bonds are like steady streams that flow into a larger river. They might not grow as quickly as trees, but they’re reliable and can provide balance when the stock market gets stormy. Property investments can be thought of as building houses that not only increase in value over time but also provide rental income (just like rent from tenants can provide cash flow).

Without a suitable investment strategy, your pension could fall short of covering your future needs. Imagine arriving at retirement island only to find out that the cost of living there has doubled, and your ship doesn’t have enough supplies. That’s what happens if your pension isn’t prepared to battle inflation.

By working with a financial advisor and choosing the right mix of investments, you can ensure that your pension grows strong and steady, ready to handle the inflation headwinds and secure your future.

Don’t Just Watch the Dips – Look at the Journey

Every so often, my phone rings more than usual and it’s nearly always when markets are falling. That’s perfectly understandable. When you hear the headlines warning about plunging stock markets or see your pension value dip, it’s natural to feel worried. But here's the thing: these short-term drops often make a lot more noise than the long-term growth.

Most years, the value of mainstream investments, especially higher-risk growth funds, actually goes up. Yet we rarely talk about the steady gains. It’s the sudden drops that make headlines, even if they’re often temporary. Take the S&P 500, one of the world’s most-watched stock indexes. It saw sharp declines in recent times — but most of those losses have already been recovered. In fact, even in the middle of the so-called crisis, the fund was still up over the 12-month period.

That’s the nature of investing: it’s a journey, not a straight line. And my job as a financial advisor is to help people stay focused on that journey.

The investments I use are mostly with mainstream pension and investment providers—strong, regulated institutions with long-term track records. Some of my clients use a specialised investment platform like Conexim, which gives us access to more niche options, but for most, it’s about steady, diversified strategies, not chasing the next big thing.

It’s important to remember that no one can predict the future, not me, not the experts on TV, and not the markets themselves. That’s why risk is part of every investment, including the one most people don’t think about: cash. Even bank deposits can lose value in real terms if inflation outpaces interest.

The key is to match your investments with your goals, your time horizon, and your comfort with ups and downs. Reacting to every drop can do more harm than good because the worst days are often followed by some of the best. So, the next time markets get shaky, and the headlines go into overdrive, take a breath. Look at the bigger picture. Your investments are like a long hike: there’ll be hills and valleys, but with the right preparation and guidance, you’ll keep moving in the right direction.

Are you 10 years or less away from retiring?

You’ve spent your working life saving and you can almost taste retirement. The decisions you make from here on could have a considerable impact on the size of your retirement savings pot and whether or not you can achieve the required income you need once you stop working.

I work with clients to help them see a snapshot of how their current strategy will look at retirement. If needs be we look at alterations they may need to make to achieve their goals. Here are some of the things we discuss:

1. What are your expenses now and what might they be at retirement?  Although you may be well-practised in budgeting, many people don’t know what income they will need when they retire. Make a budget or get financial planning advice on how to integrate pension savings into a retirement plan. This will also allow you to see how much money you need for everyday life and for additional events such as holidays and hobbies in retirement.

2. What will be your sources of income post-retirement?  Once you’ve got an idea of what income you’ll need, it’s now time to start identifying where your income will come from. There are a few common sources of retirement income, such as pensions, rental income from property, savings, state pension.

3. Make the most of your pension contributions now.  As you’re later in your working life, it’s possible that you’ll be at the peak of your earnings which might make it easier to put extra money into your pension. Many people throw in significant lump sums into their pensions as they get closer to retirement.

4. Check your investments.  Once you get closer to retirement - say 10 years to go – it might suit you to amend your pension portfolio into ‘safer’ or low volatile investments. I heard many stories from the financial crash of 2008 about people who “lost a huge portion of their pension value near retirement”. Part of the problem was that many people didn’t understand where their money was invested or the volatility of their pension strategy.

5. Combine your pensions or maintain separate?  Having your pensions together could make them easier to manage, as well as help you to make more informed choices when it comes to saving for retirement. On the flipside, there are scenarios where it makes more sense for some people to have more than one pension.

6. Start thinking about your retirement options.  Do you know what options you will have with your pensions at retirement? How will that help you achieve your retirement goals?

Market Update

US markets have officially entered a bear market, with only 1932 representing a worse start to the year for the key S&P 500 market gauge. A 50/50 portfolio of global equities and global bonds look set for their worst quarter in history.

However, it is worth noting that the above tells us that we are at extremes and hindsight will tell us that a move to cash in early January would have represented a salient New Year’s Resolution so far this year. Last Monday every constituent of the S&P 500 was in negative territory at some point (first time since 1996), and the wider New York Stock Exchange advance/decline ratio was the most negative since 2007. The moves over the weekend in riskier ‘assets’ such as Bitcoin (-70% from record high) also suggest sentiment is now negative in the extreme.

What does history tell us at this juncture?

Firstly, do we know when equities will start to rise significantly again? No, we don’t. But there are some things we do know. We know that there is technical overselling. We know that negative sentiment is extreme (Bull/Bear Spread). And we know that valuations are now below ten-year averages (Global P/Es). We also know that if you had stuck with stocks after the first 25% fall in 1970, 1974, 2001, and 2008 you would have been back in positive territory in between two and five years.

This is all very easy to note ‘ex-post’, and the price of admission to this point has been double digit declines across multi-asset funds so far this year. But the declines experienced by some investors in certain risk assets (single ‘meme’ stocks, cryptocurrencies) do not in general represent the returns experienced by those who engage with a financial advisor.

Markets may have ‘changed’ in the short term, but if a person’s circumstances haven’t it is highly probable that the plan, fund choice etc, at the start of the year continues to be the right one. It is also known that even in a world of rising interest rates; real returns are still negative – and are lower than they were at the start of the year. Inflation is decimating the purchasing power of money held on deposit more than any time this century. This is a crucial point for investors looking to save for the longer term. Whether for pension, child’s education, or a rainy-day fund.

Equity markets are under pressure, inflation remains hot, and interest rate policy continues to heat up. However, in scenarios such as this, those with cool, calm heads will prevail. This can be achieved by people engaging with their advisor, sticking with their financial plan, and recognising that the price volatility experienced whilst investing is the admission price for long term investment returns. 

Once again… a time to reflect and not necessarily to act ...

Almost 2 years ago to the day the global financial markets crashed badly, as fears of the COVID brought uncertainty and fear. Nobody knew exactly what was going to happen or how long it was going to be before relative normality would resume. Well, it feels like it was just starting to get to that point and then Mr. Putin decides to invade Ukraine.

The following graphs show a prominent Global Equity (Stocks and Shares) fund during two particularly volatile event periods:

Global Financial Crisis 2007

COVID 2020

I would potentially expect a similar reaction in the markets now and indeed we are already seeing it as I type this (the day Russia invaded Ukraine). While the circumstances have changed, the same concerns apply, how bad is it going to get? How long might it last?

I wouldn’t care to predict anything at this time, nor would I cling to a mantra that “past performance would indicate a rebound”. That said, the reality is that past performance has usually shown this to be the case.

Leaving money on deposit is not exactly a perfect solution either as inflation looks to be climbing dramatically in some cases (energy prices). So, while your €100 may remain €100 in your bank account, its spending power could diminish.

In the past, the best course of action has been to “take no action” when it comes to investments when you see how the markets usually recover. This is not to say that this strategy suits all investors/clients. In some cases, it is important to take stock of what you have now and to take corrective actions to preserve your savings/pensions even when the value has fallen.

Clever Investing

Let’s say you have a lump sum sitting in your bank account that you would like to invest, with the hopes of making a profit…what should a first-time investor consider when deciding on if and where to invest it?

How much risk are you comfortable with?

If you are ready to invest, consider how much risk you’re willing to accept. With all types of investments there will be some degree of risk, but some have more than others.

• Would you be more likely to choose high risk for potential high return investments, or an investment with the lowest potential loss?

•   Are you cautious or carefree when it comes to making financial decisions?

•   Are you quick to react to media or market changes?

Some tips to help with your investment decisions;

¬  Invest with a regulated company: A company regulated by the Central Bank of Ireland must always act in the best interests of consumers and comply with strict rules that help protect consumers. Your financial advisor will also be able to guide you in choosing a company and with assessing your needs.

¬  Diversification: Spread your risk across several types of asset classes and sectors to avoid putting all of your eggs in one basket.

¬  Consider volatility: Certain assets are more volatile than others. If you only invest in a single asset type (such as individual shares) you are more exposed to changes in market value for that asset type. This can demand a lot of your time to monitor the market and use your judgement as to when to sell.

¬  Choose a managed fund: You’ll have an expert investment manager at the lead who is knowledgeable about what assets across which sectors to mix, and who is actively monitoring performance and responding to market movements and opportunities.

What does return on investment mean?

A return on your investment is the potential amount you could gain or lose. A return can be positive where you gain money over the amount you have invested. Or a return can be negative where you lose money you invested. It’s important to know that unless there is a capital protection guaranteed, most investments are not protected, and you could lose some or all of the money you invested. No one can predict what is going to happen with the market. However, it is a good idea to leave the money you’ve invested alone for a while and a recommended duration of at least 5 years can give your investment a suitable time to perform.

A time to reflect and not necessarily to act . . .

As a quick reminder, I would always recommend you speak with your professional financial adviser before making any changes/decisions with regards to the products/services I discuss in these columns. Each person’s individual circumstances warrant specific advice that may make their decision different from what others have done. I never advocate trying to time investments, more to work off your personal circumstances and the time that you have to invest.

The last month has seen quite a change for us all, with the threat of a virus forcing us to change our behaviours and we have had to give up some freedoms many of us probably took for granted. So, in this new world, with so much uncertainty facing us possibly over months or years, what is the best action to take with investments and/or life assurance policies?

I have to say that I have not received anywhere near as many calls from clients as I had expected over the last few weeks. I really hope it’s as a result of educating my clients in the past on the ups and downs of investments and the importance of not letting our emotions/feelings affect our decision.

I would be reiterating this more than ever to clients, particularly ones who do not need to make any decisions on their investments. The investment markets go up and they go down, people are confident when they go up and are more risk averse when they go down. To me, this is no different and to make a financial decision now without any professional advice may be a bad decision.

Some investors may think that now is the perfect time to invest, as you are getting more for your money. If you had intended on investing 2 months ago but held off, in some cases you may be investing today at up to a 30% discount on the cost to buy a month ago. A simple comparison would be if you were going to buy a car in January but held off for various reasons. Now, if you still intended on buying the car but could get it for 30% less, it would appear to be a good idea to buy it, even if things were still up in the air.

In terms of Life Assurance, Mortgage Protection, Serious Illness cover or Income Protection, your normal conditions on these plans should apply. In the case of these policies, once you have disclosed all information possible at the beginning of the policy, events that change after the policy has started do not usually alter the conditions allowable to make a claim. If you are unsure or concerned, my recommendation is to contact your broker or the company who provided the policy. Many companies are still offering customer service support at this time.