Savings advice is down as a top gift this Christmas

We are closing in on the end of 2017 and those who have to take responsibility for managing their own savings, wealth and pensions need to check what progress, if any, they have made this year, writes Joe Gill

Savings advice is down as a top gift this Christmas

Conservative investors must begin with the inflation rate as the key hurdle which has to be exceeded if savings are to make progress in real terms. Inflation is running at a tepid 0.3% so anything above this delivers positive returns.

The next reference point should be risk-free saving rates and these are usually determined by looking at high-quality Government bonds and deposit rates. This year, both of these instruments are delivering interest rates or dividend coupons of less than 1%, so a portfolio beating that return ought not to be an enormous challenge.

Irish equities are up 5% this year. There are a number of companies that have outperformed and underperformed. Bank of Ireland, for example, is down almost 7% this year while the insulation company Kingspan has risen 31%.

Property, as measured by individual house prices, has shot up in Ireland this year too. A myriad of data and statistics can often make planning for savings a frustrating exercise. It is often easier to throw your hands up and default to a “safe” option of keeping your money on deposit instead of wading through the technical terminology and risks attached to forging a robust portfolio. That would be a mistake.

The big lesson I take out of financial markets this year is that diversification and liquidity are critical elements in any plan.

There are two other pieces of advice. Firstly, make sure a good share of your assets are liquid. The property market is a classic example of how hard it can be to extract yourself from an asset when markets crash.

The second piece of advice is to ensure your portfolio is efficient. By that, I mean utilise as much as possible the tax breaks provided legitimately by Government to encourage long-term savings. In addition, ensure your portfolio is being managed at a competitive cost.

One last clarion call. If you have any influence, whatsoever, over anyone young and over the age of 18 please work on them to start the savings and wealth management process. If you can use the upcoming season to have a conversation about that, it could be the best present of all.

Joe Gill is director ofcorporate broking with Goodbody Stockbrokers. His views are personal.

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