So many factors come into play when considering the right investment option:

Person’s age: someone in their 40s may have a longer timeframe to invest money than someone in their 70s.

Attitude to risk: are they risk adverse or willing to take some risk with their money?

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What level of risk are they prepared to take?

Liquidity: is this the only money they have or do they have an emergency fund?

Past investment experience.

If someone is completely risk adverse, their only option will be a deposit account or a tracker type investment where their capital is 100% protected.

In relation to tracker bonds, my advice is to get an independent adviser to carry out a review of the options available and get a report recommending which option is best and the reasons why.

Deposit rate options

Rates are at an all-time low and are expected to stay this way for the next couple of years, so people will be giving up growth for security.

The best rate for money fixed for one year is 2.4% with KBC Bank or Permanent TSB. This equates to €1,200 gross interest on €50,000. DIRT is now at a rate of 33% (it has risen in each of the last five budgets from a low of 20%), so the net return is €804.

There is no real benefit in tying up your money for longer than 12 months because the AER (annual equivalent rate) does not increase. The EBS 15-month fixed rate is 3%, but this equates to an annual rate of 2.39%.

What many people don’t realise is that they have a duty to declare this income (interest earned) and could be subject to USC and RSI, thus netting the already low return down further.

An Post also has options here for risk adverse investors, giving them 100% capital security, but the price of security is one which forgoes growth potential in real terms.

The four-year State savings rate is 8.0% with an AER of 1.94.%

The 10-year State savings rate is 35% with a better AER of 3.05% (10 years can be a long time but is suitable for some).

Another option through An Post is prize bonds. No guaranteed return, 100% capital protected, you can cash in very quickly so they are very liquid and you have the chance to win €1m!

The only thing you risk here is the interest you would have received by putting your money on deposit. However, you should not overly concentrate on prize bonds.

Taking on some risk

Before subjecting your savings to an investment risk, you should ensure that you have an emergency fund, where you have immediate access to these funds. Six months net profits/salary is usually the recommended amount and I would suggest having this in a high yielding deposit account. For example, KBC’s smart access demand account pays 2.3%,

If people are willing to take on some level of investment risk, they should seek advice from an experienced and regulated independent adviser.

The first priority for any investment adviser is to accurately ascertain the level of investment risk you are comfortable with. Therefore, you will be asked a series of questions around this area.

All funds are now rated on a universal European scale of one to seven. One is low risk (cash), while seven is high risk (100% shares).

A well-diversified multi-asset investment fund is a good start for many investors. The reason I say multi-asset is back to the old saying ‘never have all your eggs in one basket’.

Too many people in Ireland were depending on one asset class to accumulate wealth in recent years, i.e. property.

A multi-asset fund will generally have exposure to the main asset classes:

Cash

Property

Shares

Bond — both government and corporate bonds.

Having exposure to these four assets brings diversification to your investment.

Brian Leslie