RISK LEVEL IN INVESTMENTS
A lot of people think that Investment funds are not for them and they wouldn’t be able to bear the risk associated with this type of investment, but the fact is that not every single investment is a big risky one, there are really good level 2 funds which have a slightly more risk than a deposit account. Below please see some of the funds I recommend.
Every fund I advise on has been rated on the possible level of ‘volatility’ on a scale of 1 to 7 by ESMA (European Securities and Markets Authority) which is a risk band, where 1 being the lowest & 7 the highest. (Volatility refers to the potential ups and downs that a fund may experience over time & is measured using the past returns of the fund over a period of up to 5 years.)
Let’s dive deep into the different levels of risk & I’ll give a top pick under each of them. Bear in mind, that these funds will all have their day in the sun, so the top picks today might not be the same in a 12 months’ time, that’s why reviewing your investment funds on an annual basis is so important.
ESMA Rated Level 1 Fund
Level 1 is basically a cash account which is similar to deposits. I would never recommend a client with a cash investment use an ESMA Level 1 fund, even for security as they will have management charges which will, in most cases, produce a negative return for the client. If you have cash and want this risk level, a deposit account would be better as they would not have management charges, but will produce really low returns! When it comes to pension planning, while someone is coming close to retirement & wants to reduce their risk dramatically is when they can choose to rest at this level for a short period of time.
ESMA Rated Level 2 Fund
This has a slight increase in risk as compared to level 1 cash accounts. There are around 24 funds under level 2 in the Irish market place. If you plan to invest on a monthly basis then the recommended fund for this level as on 31st July 2019 is Zurich Life Prisma 2 fund which ranks 2nd in the category and has performed 7.40% in the past 5 years along with offering 1.34% in the past year so if you invested €10,000, you would earn €10,740 after 5 years, before charges and taxes.
ESMA Rated Level 3 Fund
Most of my clients fall in a 3 or 4 band. There are around 60 funds in the marketplace which means there are a lot of funds to choose from in this category. I’d recommend the Irish Life Diversified Cautious fund as an ideal one to invest in, if you want to maintain level 3 band of risk. This fund has performed 32.24% in the last 5 years & ranks 1st in the list. In the last 1 year, it has offered 5.06% to its investors (as of 31st July 2019) so if you were to invest €10,000 5years ago, you would gain a return of €13,224 before charges and taxes. Another fund in this area that I recommend to clients would be the Greenman. The fund targets 5.5% per annum and over the last 12 months has performed to meet expectations
ESMA Rated Level 4 Fund
There are around 75 funds in this category, which is a phenomenal amount of funds. Most of my clients also come under this risk band. My fund of choice under this risk bracket (as on 31st July 2019 ) is Irish Life High Income fund which ranks 2nd in the market & had performed 57.23% in the last 5 years & offered 7.92% in the last year. So if you invested €10,000 in this fund 5 years back, it would have given you a return of €15,723.
The Zurich balanced fund is also a great recommendation since it has been around since 1980 & has performed 48% over 5years, 145% over 10 years & 1657% in the last 30 years. However, depending on the proportion of stocks & shares in the fund increase & decrease, it shifts keeps moving from risk level 4 to risk level 5 & vice versa.
ESMA Rated Level 5 Fund
There are around 90 odd funds in this category. It’s crucial that your financial advisor studies the market to filter & choose the best fund to suit your risk appetite. My fund of choice in this category (as on 31st July 2019) is Standard Life Euro Smaller Companies fund which can make up a small part of your portfolio since it carries a certain amount of risk with it. It has performed 82.73% in the past 5 years & has offered 0.67% in the last year which also ranks number 1 in its category. So if you were to invest €10,000 5years back, it would yield a return of €18,273. Please bear in mind that these category of funds are only suitable for investors with high risk appetite.
ESMA Rated Level 6
This category has around 211 funds from amongst that Irish Life Indexed technology 1G fund is the most suitable to invest in (as on 31st July 2019), however, bear in mind that this is only suitable for investors with high risk appetite. This fund has performed 57.56% in the last 5 years & has offered 15.93% in the last year. This particular fund also ranks 1 in the list of funds in this category so If you were to invest €10,000 5years back, it would have offered you a profit of €15,756.
Standard Life Assurance Limited is authorised by the Prudential Regulation Authority in the UK and is regulated by the Central Bank of Ireland for the Conduct of Business Rules. Aviva Direct Ireland Limited is regulated by the Central bank of Ireland. Friends First Life Assurance Company DAC is regulated by the Central Bank of Ireland. Premier Benchmark Property Ltd., T/A Greenman Investments is authorised as an Alternative Investment Fund manager by the Central Bank of Ireland under the European Union.
The value of your investment may go down as well as up.
Past performance is not a reliable guide to future performance.
If you invest in this product you may lose some or all of the money you invest.
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