Regular savings plan
We wish to invest in equity, bond, cash and property funds. However, we don’t want to put in a lump sum – rather we wish to put in amounts on a monthly basis and have the ability to change asset allocations ourselves. What’s the best way to go about doing this? Emma, Co Cork
All the life assurance companies provide options in the savings space where you can save a regular monthly amount – usually starting from around ‚Ç¨250 a month.
Multi-asset funds (funds made up of a combination of asset classes – such as equities, bonds, property and cash) will be available through these platforms.
The level of exposure which you have to different asset classes will depend on the risk rating on your investment fund. A risk rating indicates how much risk an investor takes on when putting money into a fund or product. That rating typically ranges from one to seven.
An investment fund with a risk rating of two will have a low exposure to equities, while an investment fund with a risk rating of six would have a higher level of exposure to equities – usually around 80pc. The extent to which a fund is exposed to bonds, cash and property would also be determined by the risk rating of the fund.
Diversification – where your money is invested across a range of different investment types – has always been a golden rule of investment. It essentially means that you don’t have all of your eggs in one basket, thereby smoothing out the investment risk.
Investing in a good multi-asset fund – which fits with your risk profile (that is, your appetite for risk) – is a good way to ensure that your investment is well-diversified and would be a more prudent approach than putting your money into funds which invest solely in one asset class.
Before setting up a savings plan, it’s important that you clarify what exactly it is that you are saving for.
Typically, when investing into a multi-asset fund through a regular savings plan, you should be looking at saving into that plan for at least five years before withdrawing any money. Such an approach would avoid unnecessary costs and is a wise investment strategy.
You suggest that you would like to change asset allocation (the mix of investments you have in your portfolio) yourselves – in other words that you would actively manage the investment yourselves. Be aware that research has shown trying to time the market is an inefficient form of investing and is often unsuccessful.
I would instead advise that you agree on an investment strategy at the outset with a term (that is, the length of time you want to invest your money for) and savings objective in mind.
Be prepared too for volatility in your investment – such volatility is the cost of obtaining an investment return over the medium to long term.