How To Invest

The question of how to invest is an important one, never more so than in a time of stock market turbulence. 2018 has seen one of the US stock market’s worst ever days, followed by a six day rally, but all adding up to a resurgence in volatility. So, how to invest (and why) in 2018?

What’s your goal? Keeping all your money in cash does not eliminate risk. So start by knowing what you need your money for, and when, as this is the key to deciding how much investment risk you are completely comfortable with.

What type of investment? Understanding the long term expected risk and return of various asset classes allows us to construct a portfolio that controls risk through global diversification.

Don’t be a trader. Because most of us are terrible at it. Those fully invested in the S+P 500 between 1995 and 2015 earned a 10% annualised return but those who missed the 10 best  days earned only 6% – and 6 of those 10 best days were within 2 weeks of the 10 worst days.

Stay invested. Volatility has returned with a vengeance but stock market history teaches us that every bear market has been followed by a recovery. Staying invested has always rewarded patient investors, particularly those who continue to invest year in, year out.

Avoid emotional biases. Media headlines are impossible to avoid in times of market stress but as this recent FT article by Undercover Economist Tim Harford points out, switching off the noise and keeping your emotions out of the investment process is the best way to stick to a financial plan.

Money Smart can design a globally diversified multi-asset long term investment portfolio for you – for life. Call 01 276 0006 or email

My 4 Unbreakable Rules Of Investing

As we watch global stock markets once again hit all-time highs, a perennial question is, how can we become more successful investors?

My simple answer continues to be, stick with my 4 golden rules below.

1. Don’t Hoard Cash

Cash should be for very short term savings and nothing else. Hoarding money in deposit accounts is not an investment strategy. Investing means taking some risk to enjoy better returns – for me that means continuing, all through life, to invest surplus cash as soon as I have it.

2. Never Speculate

Ever. So don’t buy individual shares, never time markets, never speculate on whether a certain country or asset class will do better than others. Why? Because then you are a market trader and taking all the unnecessary extra risks that implies.

3. Diversify

So how should we invest? Simple. Diversify across geographies and asset classes using a multi-asset fund of funds. Irish investors over the age of 10 have no excuse if they haven’t learnt the big lesson from the crash.

4. Stay Invested

Finally, ignore all the politics (Trump, Brexit, Elections, etc) and ignore all the noise (experts, talking heads, market gurus, etc) and stay invested.


These 4 unbreakable rules of investing are the core of the Money Smart investment philosophy. If you want to know more or need help with your money call us now on 01 276 0006.

What’s Your Financial Personality?

We all have very different ideas about what money means to us and we have many different, often damaging, psychological biases that impact how we make money decisions. Knowing our financial personality is the first step to making better decisions. So which one are you?

The Saver

= Values the security of cash much more than the fear of investment loss.

+ Rarely gets into any financial trouble of any kind as not all income is spent and no risk is ever taken.

May not enjoy life to the full if money is always hoarded. And being too risk averse, such as keeping all your money in the bank, will never make you rich.

The Spender

= Prefers the thrill of spending to the security of saving.

+ Gets full value out of the joy of spending money and amassing ‘stuff’.

May not think of the future and end up living beyond their means and in debt.

The Gambler

= Happy to speculate with their money. “If you’re not in, you can’t win”.

+ Big risks can occasionally mean big investment wins.

Often driven more by optimism and gut feeling than by research and analysis. Can lose it all with if just one big bet goes sour.

The Procrastinator

= Would rather bury their head in the sand than organise their finances.

+ I’m afraid there is no positive to this one!

Not engaging with personal finances leads to anxiety and stress.


Need help making better money decisions? Just call Money Smart on 01 276 0006 or email

Stay Invested

globe-europeThe U.K. votes on Thursday on whether to leave or remain in the European Union. With the two sides neck and neck in the polls, markets are extremely volatile. A vote to leave will undoubtedly cause market disruption. So what should investors do? We say, as always, stay invested. Here’s why…

Cash is not the answer. Moving to cash does not eliminate risk. Yes it may help you sleep at night but it exposes you to the very real risk that inflation will drastically reduce the future purchasing power of your money.

Trading kills returns. Think you can outsmart the market and avoid the down days? Think again. Most investors are terrible at trading/guessing. JP Morgan calculated that those fully invested in the S+P 500 between 1995 and 2015 earned a 10% annualised return but those who missed the 10 best days earned only 6% – and 6 of those 10 best days were within 2 weeks of the 10 worst days.

Don’t miss the bounce back. Volatility is inevitable but stock market history teaches us that every bear market has been followed by a recovery. Staying invested has always rewarded patient investors, particularly those who continue to invest year in, year out.

Avoid emotional biases. Doing nothing in periods of market stress may be difficult in the face of constant media headlines but staying invested, switching off the noise and keeping your emotions out of the investment process is the best way to stick to a financial plan.

A diversified portfolio is for life. That’s why we spend so much time considering client circumstances and objectives. We recommend multi-asset portfolios designed to withstand market cycles. Your financial goals are long term – your investment behaviour should match that.

Money Smart can design your diversified long term investment portfolio. Call 01 276 0006 or email

Why You Should Ignore All Market Forecasts

forecasting is like roulette

In the week that RBS tells us to “sell everything” ahead of a “cataclysmic year” it’s worth thinking about whether acting on market forecasts is of any value. Here are three reasons why forecasting is a waste of everybody’s time.


1. Nobody Knows The Future

Yes I know I’m stating the obvious here but it needs to be said again and again. Nobody knows where gold or oil or the S+P500 (or anything else) will be a year from now. And yet we (helped of course by all those ‘news’ headlines) so often succumb to these so-called experts who are, more often than not, wrong.

2. Which Forecast Is Right?

We’ve also heard this week from SocGen’s Albert Edwards, who thinks that the S+P 500 could fall 75% from here (no, not a typo, no decimal place between the 7 and the 5). ‘Renowned investor’ Marc Faber is much more optimistic, expecting only a 40% plunge in U.S. markets in 2016. But what about Citigroup, who expect a 23% rise in European equites, or Piper Jaffray, who foresee U.S. equities 15%  higher? And what about the hundreds of other forecasts in between? The problem? We just do not know which one will be correct. The solution? Ignore them all. Not only do the ‘experts’ not know the future but most of them got the past wrong too (Edwards predicted further plunges in U.S. equities in 2012, just before the start of a massive 3 year rally).

3. Trader Danger

If you decide to, say, switch out of equities into cash for the next 6 months because you think that stock markets have further to fall, the problem is you are now a trader, not an investor, and that brings with it a world of danger. What happens if equities rally while you’re stuck in cash? How do you time future entry/exit points? Do you honestly think you can successfully trade your portfolio?

What to Do?

We have to remember why we invest in the first place. Put simply, it’s because equities outperform inflation and cash in the long run. At Money Smart we firmly believe that the only way to handle inevitable market ups and downs is to build a long term multi-asset portfolio with the riskiness (or equity content) of that portfolio driven by two key factors: how comfortable you are with short term volatility and when you need the money back. Or to put it another way, we believe that trying to reposition portfolios every week, month or quarter so as to benefit from short term market forecasts is a complete waste of time and money.

Money Smart can build you a diversified long term investment portfolio. Call 01 276 0006 or email

Smart Beta – What You Need To Know


You may have seen the term Smart Beta bandied about as the latest ‘must have’ for your investment portfolio. So what does it mean and what can it do for you?

Beta = Passive

Let’s just first talk briefly about Beta. Beta is passive investing – buying an index tracker that cheaply and efficiently delivers market return. Sounds like a rational investment strategy, doesn’t it? It most certainly is. But of course we’re not rational beings so we’re not happy with the average – we want to beat the average. And that’s where it all starts going wrong …

Alpha = Active

In our (and our fund managers’) quest to beat the market we often fail. How do we find star performers? Are they worth the extra fees? Active management, epitomised at an extreme by hedge funds, is a world of general failure in which outperformers are the exception. So how can we rationally and consistently do better than average?

Smart Beta = ?

Smart Beta blends aspects of both passive and active investment management. It’s active in that it attempts to beat market capitalisation weighted indices by capturing long standing market anomalies. And it’s passive in that portfolio construction is rules-based and transparent. For example, Dimensional, renowned Smart Beta managers, tilt their passive portfolios towards value stocks and small-caps in the knowledge that these two factors provide long term consistent outperformance of the index. While not as cheap as pure passive funds, Smart Beta (or factor) funds are significantly cheaper than active funds.

So, Where’s The Catch?

The ‘catch’ is that the outperformance factors identified by Smart Beta managers cannot be relied on to deliver outperformance year in, year out. For example, value stocks lagged in the bull market of the mid-2000s. But over the long term, patient investors have been rewarded for bearing the risks of being overweight value and smaller companies. A recent article in the Journal of Indexes looked at a subset of Smart Beta indexes and found that all of them outperformed their comparable index over the last 1, 3 and 5 years as well as since inception. And, smart beta factors have generally not been correlated with each other – that is, each factor tends to be rewarded at different times of the economic cycle.

What Do I Think?

I think every investor should have core holdings of beta/passive funds, augmented by Smart Beta. In fact, the new Money Smart risk targeted portfolios are exactly that – portfolios of world renowned passive or smart-passive funds designed to provide global diversification, cheaply, efficiently and smartly.

To hear more, please get in touch by calling 01 276 0006 or emailing

The A, B, C and D of Investing

My A B C D of InvestingForget about learning the A to Z of investing. You probably have more important things to be doing with your time. But if you just manage to be aware of my A, B, C and D of investing then you will be a better investor.

Once your objectives have been clarified by a financial plan, you need to think of an asset allocation that matches both your planned goals and your risk tolerance. It’s at this point that you should consider four critical components of successful investing.

A is for Alpha.

Alpha measures how much your fund outperforms its benchmark. If your investment is anything other than a passive index you need to be very aware of this over- or under- performance – because you are paying extra, often a lot extra, for this ‘market beating’ promise. The market is littered with products that charge high alpha fees but only deliver market (ie, average) performance. The age old problem is finding fund managers who consistently beat the index and thus deliver the much promised (and very well paid for) alpha.

B is for Beta.

Beta is the portion of your return that comes from the market or benchmark movement (whereas the extra fund or fund manager return over and above this is alpha). Passive funds, as recommended by Warren Buffett, offer investors cheap access to the market return (beta). This is why they, and so called “smart beta” funds, comprise a large portion of Money Smart portfolios.

C is for Correlation.

Correlation is simply the relationship between returns of different asset classes. Negative correlation, asset prices which generally move in opposite directions, is the key ingredient to our next concept, diversification.

D is for Diversification.

Diversification means allocating your capital across different asset classes, thereby reducing the risk of investing in a single asset type, like property, or a sub-asset type, like Irish bank shares. If those asset classes or sub-asset classes are positively correlated (tending to move up and down together) then, as investors in Irish property and bank shares found to their horror in 2008, this is the opposite of risk reducing diversification – it is, in effect, doubling-up.

Admittedly these are concepts for the experienced investor. If you can keep these four metrics in mind when you construct or amend your portfolio you will ultimately end up with a cheaper, more efficient and more robust portfolio. But if you don’t have the time or inclination to be this attentive, then please don’t ignore them. Instead just call me for a free initial consultation. At Money Smart we build tailored investment portfolios with these concepts front and centre of our thoughts, maintaining client portfolios that are smart and cost effective.

Are You Sure You’re Not A High-Frequency Trader?

Man celebrating on stock exchange trading floorMichael Lewis is a genius.  He has regularly turned what, on the face of it sound like boring subjects into entertaining stories.  That The Big Short’, a book about the credit default swap market, is about to be made into a movie is testament to his storytelling genius.  And now he has done it again with another fascinating read.  Flash Boys: A Wall Street Revolt’ examines high-frequency computerised trading in US stock markets, shining a light on yet another murky corner of the capitalist world.  High-frequency trading represents half, yes half, of all U.S. equity trading.  Lewis points out that everyone who owns equities is being victimised, in which the fastest traders figure out which stocks investors plan to buy, purchase them first and then sell them back at a higher price.  It’s such a lucrative practice that a technology firm spent $300 million to build a cable that would shave three  milliseconds off the time it takes to communicate between New Jersey and Chicago, then leased it out to securities companies for $10 million each.  And it’s just as prevalent on this side of the Atlantic, so much so that the EU is about to introduce restrictions.

As the debate about high-frequency trading rages on, it’s worth thinking about our own human propensity to trade stocks or funds far too frequently.

We humans suffer from a whole range of psychological flaws.  Two ‘failings’ of particular interest to this discussion are over-confidence and its investment offspring, over-trading.  We systematically overestimate our knowledge and our ability to predict.  This is evident when we pick single stocks and trade them too frequently, thinking we know more about the value of a security than everybody else. The average holding period for a stock on the NYSE is around six months. This is not investing. This is our own, very flawed, very human and much much less profitable version of high-frequency trading.

The famousBoys Will be Boys’ study carried out by behavioural finance experts Brad Barber and Terrance Odean found that men traded 45 per cent more often than women and earned 1.4 per cent less annually.  Single men traded 67 per cent more often than single women, and earned 2.3 per cent less annually! The reason?  Women outperform not because of superior stock-picking ability; they simply make fewer mistakes. Men take on too much risk and trade too much, partly out of overconfidence in their ability to divine market swings, and partly because of thrill-seeking desires.

Research has shown that women are less likely to break traffic lights, less likely to smoke, more likely to wear seat belts, more likely to floss their teeth – so it’s little surprise the same differences would manifest themselves in investment behaviour.

So I say to you (especially if you’re a man!), do not trade, do not speculate.  If you want entertainment, read a Michael Lewis book.  Leave your investment portfolio alone – allow it to be dull.  Take a leaf out of Michael Lewis’s book, who says “I’ve always been a boring and conservative investor … I own index funds … I don’t time the market … I put it away and I don’t look at it very much”.

James Montier in his excellent ‘Little Book of Behavioural Investing’ quotes the French philosopher Blaise Pascal; “All men’s miseries derive from not being able to sit in a quiet room alone”.

So, How Long Is Your Ring Finger?

five-fingers-hand | Money smart | financial riskI recently listened to a radio interview with Po Bronson about his book Top Dog: The Science of Winning and Losing.  He and his co-author and fellow science journalist, Ashley Merryman, conclude that nature and nurture combine to make us the competitive (or not-so-competitive) animals we are.  We all perform best in different ways, we all respond to different motivations and 10,000 hours practice is not the be all and end all – in other words, there is not a single ‘success gene’.  They conclude that by understanding what influences our perceptions of risk and our ability to perform under pressure, we can make better decisions.

The book is full of many interesting facts, not least, that successful entrepreneurs have longer ring fingers than their index fingers!  This ratio is determined by fetal testosterone and is an indicator of risk taking and assertiveness – characteristics associated with entrepreneurial success.  So if your ring finger is longer, try to avoid too many trips to Paddy Power! And if your index finger is longer, maybe you have too much money on deposit?!

Being serious, how you deal with risk should definitely be a key component of investment decisions.  At Money Smart, our client Fact Find includes a risk questionnaire based on the Vanguard model – which we think is the best risk tolerance profiling tool out there.  However, this, like all risk profiling tools, only measures your emotional willingness to take risk so we ensure we also get a strong grasp of your risk ability (financial wealth and resources) in our comprehensive client questionnaire.  The third and final component is your need to take risk in order to meet a future financial objective.

We carefully consider these three elements in your Financial Life Plan to ensure that your goals and our recommendations are consistent with your true (3 component) risk profile.

We can then proceed with your Investment Plan in the knowledge that you will not be up all night worrying about your portfolio – a portfolio of assets which we ensure matches your willingness to take risk, your ability to take risk and your need to take risk.

And no, we don’t bring a tape measure to your free initial consultation.