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Today, there has never been a greater opportunity for individuals to achieve real wealth creation. With the rise of income levels in Ireland since the 1990's and the parallel rise of property values during the same period, there is a larger pool of excess income & capital available for investment.

The continued growth of world economies provides many global investment opportunities, across all investment classes. There are also greater opportunities for the individual investor to get access to a wider range of investment products.

Let's look at some of the factors to consider when developing, or rebalancing, an investment portfolio.

Risk Reward

The most important aspect of investment is establishing the target investment risk profile prior to deciding the type of investments. Obviously the greater the level of investment risk, the greater the potential for investment gains. Below are some examples of common investments and the risk rating for each.

Low Risk - Deposit accounts, government bonds, guaranteed bonds

Medium Risk - Balanced managed funds, property funds

High Risk - Direct equities, leveraged residential property

Very High Risk - Direct equities in emerging markets, leveraged equity funds

Real Returns

It may seem obvious, but the first objective for an investor should be to make money. It is only possible to make money if your net investment gains beat the rate of inflation. If your net gains match the rate of inflation during the investment term, then you have maintained the value of your capital, you have not made any money.

It’s important to note that despite some longer term deposit rates offering security, if the net gains from those deposits do not meet the inflation rate, then your capital is loosing real value. It is a known fact that you can make a lot more money in investing in your banks shares than by placing your money on deposit.

Risk Management

Many investors want a chance to make real returns (beat inflation) but do not want to place their capital invested at risk. A common dilemma is trying to establish an investment plan that gives both the potential of gains, but also minimises the risk of loss of capital. This can be achieved by diversification of an investor’s capital across a number of different asset classes (equities, cash, bonds, property and commodities) and different economic areas (Europe, USA, Asia & emerging markets).

Investment Term

The investment plan should set an investment term in place for each individual investment within a portfolio. Property may be held as a longer term asset, while a one year term deposit, will obviously be seen as a short term investment with a term of one year.

Access to Funds

If you need access to funds during the investment term, you will need to ensure that you can partially encash some of your investment and know what exit charges may apply. There are some investments which will pay a regular income, these may suit an investor who is looking for a regular encashment of funds.

Tax on Investment Gains

Planning for the taxation of gains from the investments is as important part of investment portfolio planning. Knowing what the tax implications are on each particular investment, may shape the investment decision at the outset. For example residential property not only opens the prospect of capital gains tax, but also opens the prospect of income tax on rental income during the investment term.