Investing for Long Term Wealth

If you are reading this blog in the hope of learning how to get rich quick, I am afraid you are going to be disappointed. Get rich quick schemes are exactly that schemes were the probability that you are going to lose all of your money is extremely high. You only have to look at the thousands of retail investors who recently got burned buying GameStop shares at over valued prices only for them to crash. Unfortunately, as a result of this thousands of retail investors will never trust the markets again and because of this will never learn the benefits of long-term investing.  Because they took an 100% loss on the investment the thoughts of investing over the long term and earning 8% a year will never appeal to them.  This just adds to the fear factor of the stock markets.


I have been in many meetings over the years where people have told me they don’t invest because they lost a lot of money in previous recessions. When I dig deeper the same answers normally appear and the same mistakes are made over and over again by people who do not get proper financial advice or who do not work with an advisor on a long-term basis.  Emotion gets in the way of rational thinking and thousands are lost as a result.


Here is a typical example I come across time and time again.  Someone had saved €150,000 in their pension by 2008 and had still 20 years to retirement. They were invested in a fully diversified fund containing 70% stocks (100’s of individual successful companies) and 30% bonds and cash in 2008 their fund dropped to €105,000 and they immediately panicked and moved it all into a Low-Risk low volatile fund of 30% stocks, 70% bonds and cash.  By doing this they realized (made certain) a 30% Loss to their portfolio.

13 year’s later their portfolio is now worth €154,000. If an experienced advisor educated them at the time and they stayed the course and not made an emotional decision their pension would be worth €253,000 today. (these figures assume no more contributions were made in the intervening time period.)


Here is another example of why professional advice is critical. I recall in 2008 when looking at the news at some of the bank AGM’s where retired people were in absolute tears because all their pensions were invested in bank shares which effectively became zero when the bank’s collapsed.  Bank’s had to be bailed out and millions were lost.  These people thought bank shares were solid as a rock. However, they made a fatal mistake. They had all their eggs in one basket. Diversification was zero and as a result what they though were a safe investment was extremely high risk.  Unfortunately, as a result of this news spreads in the media like wildfire and puts people off pensions and investments for a lifetime.


In summary on the above the key takeaway is that it is critical to work with an advisor long term. Everybody’s circumstances and needs, and objectives are not the same.  A good advisor will know your finances inside out, educate you on risk and understand your attitude and capacity to it and advise accordingly. Long term wealth will be achieved if you follow the plan put in place.  The earlier you start the better.


If you want more tips on how to manage your wealth, feel free to contact me. As a Certified Financial Planner (CFP), I can be by your side every step of the way and help you secure a happy financial future for you and your family.