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7 Classic Investing Myths Debunked

When it comes to personal finances, being able to separate fact from fiction is an essential first step to making well-informed decisions. That’s why we’re demystifying seven classic misconceptions to help keep you on the right side of investment know-how.

Myth #1 Investing is a playground for the rich

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The higher minimum amounts set by some providers in the past, may have added to the fallacy that you have to have money to make money in investing. In fact, friends, work colleagues and family members are perfect examples of the typical Irish investor - moving us further away from the notion of investors as high rollers, to everyday, financially-savvy people.

It’s fair to say investors tend to have some back-up savings and understand the trade-off between risk and reward, but affordability is key and with regular investor offerings widely available with smaller minimum amounts - it’s not limited to those who can afford to invest in lump-sums.   


Myth #2:  You must know how to time the market  

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Experts agree it’s ‘time invested, not the time you invest' that’s most important.

 

No one can time the market with absolute certainty. Some market events are described as cyclical, but anyone who claims to know exactly when the tides are going to turn, is buying into the myth.

Time and a diverse investment that helps you to weather market turbulence, is a much smarter investment plan than trying to time any single event or upturn. 

Myth #3: Always trust your gut

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In most things, we’re led to believe our gut instinct is always right, but if there’s any risk of emotion influencing your investment decisions, that’s something to watch out for.

It’s not unusual for emotionally-charged events or changes in someone’s personal circumstances, to drive financial decisions like investments. The problem is, financial decisions made during emotional times, don’t always play out well, as our judgement and reasoning might not be as balanced as we like to think.

Having access to a knowledgeable and impartial sounding board is just one good reason to use a trusted financial advisor. That way, you can ensure you’re always investing for the right reasons and at the right time for you. 

Myth #4: All financial advisors are the same

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Not so. Some financial advisors are limited to an area they’re qualified in, while others cover everything from life insurance to investments. Some will work exclusively with one provider and know their products inside out and others will offer products from multiple financial institutions.
Top tips for choosing a financial advisor:

  • Check their credentials
  • Read their terms of business
  • Don’t go with an ‘execution only’ broker if you think you’ll need advice
  • Visit websites or meet face-to-face to build a picture of the service they provide
  • Ask about fees and charges upfront

Myth #5: Big rewards mean big risks

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Some people are happy to dial up the risks they take in the hope of bigger rewards, but investing doesn’t have to be a white-knuckle ride. The reality is, many investors sit at the low-to-mid end of the risk spectrum and look for funds that match their appetite for risk and growth.

No investment comes with a guarantee, there’s always a risk of losing money, sometimes all of it. The important thing is managing the risks you take as best you can. That’s why it’s key to shop the vast range of funds, asset combinations and investment strategies available, to find the option that feels right to you, without taking risks that make you uncomfortable.

Myth 6: It’s performed well in the past, so it must be a good investment

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Track record is obviously important and something fund managers pay close attention to, because they understand past performance is not a reliable guide to the future.  

You’ll hear industry experts talk about investment cycles and asset classes rising and falling periodically, but it’s impossible to time them, so investment based on past performance alone is not recommended.

Myth 7: Getting older means investing more conservatively  

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Protecting what you’ve built in the years leading up to your retirement makes perfect sense, but it’s worth thinking about whether going too conservative on the investment front could reduce your opportunities at a time when expenses can be high.

Healthcare, lifestyle, helping children financially, looking after older relatives, even inflation are typical costs that can eat into your pension or retirement pot.

That means it’s even more important to make sure the money you have invested, is working as hard as it can to help you look after yourself and those closest to you.

There’s a healthy balance, but a big birthday doesn’t have to mark the end of your investment possibilities.  

Investment myths aren’t just off-putting; buying into them could hold you back from creating the kind of financial plan you need to help meet life-long goals.  

Our advice?

Leave the myths to the storytellers and talk to a financial advisor about Irish Life’s savings and investment plans.

 

Learn more

If you enjoyed this blog we suggest you read “Why everyone needs financial advice”. Personal finance journalist, Jill Kerby, makes a logical argument on the topic and demonstrates how good financial advice can save you a lot of unnecessary costs.