Thinking of buying AIB shares? You need to read this first!
It’s been all over the media recently, AIB’s IPO is coming and it seems like every investor in Ireland is getting giddy again. If there’s one thing Irish investors like more than property its Bank Shares. If you google “AIB IPO” you will see a huge array of opinions on whether it’s a good idea or bad idea to invest or not. Here’s a headline from Newstalk for example:
“AIB share price greatly inflated ahead of IPO”
And directly underneath, is the RTE Headline:
“Market conditions encouraging for AIB’s IPO”
This blog isn’t going to advise you on whether AIB shares are good value or not but I will give you one piece of advice on buying shares; to base your investment decision from what you hear in the Media means you are already starting out on the wrong foot.
The aim of this blog isn’t to analyse AIB’s share price and tell you if you should buy or sell but to help you realise that there are more fundamental questions to answer before you make any investment decision.
What are my investment Goals?
If your goal is to build up a substantial fund for your retirement then investing in shares is probably a good idea.
If you are already retired and on a fixed income then investing in high risk shares might not be the most appropriate approach for you.
How long do I plan on investing for?
If you are long term investor who knows they won’t need to access these funds for a long period of time e.g. 10 years + then investing in shares seems appropriate.
However, if you are saving for a deposit for your first house and may need to access these funds in the next few years then investing in high risk assets is probably not the most suitable strategy
What is your attitude towards investment risk?
A lot of people in the 2000s held bank shares as they were seen as a low risk investment that paid a good dividend. Equities are a high-risk asset class it doesn’t matter how strong their balance sheet may look or how good their income projections are, there can be extreme volatility in the short term.
If you are a low risk investor that is going to lose sleep if your investment drops 10% then buying shares probably isn’t something you should be doing.
What is the remainder of my investment portfolio invested in?
If your entire portfolio is invested in equities then perhaps diversifying your portfolio across other asset classes like property, commodities, cash and bonds is something you should consider.
If you have a well-diversified portfolio in place that holds a number of different asset classes, spread across different regions and business sectors then buying a small amount of AIB shares might not be a bad idea.
Do I have a financial plan in place?
This is the most important question of all. Our view at Metis Ireland is that your investment decisions need to be driven by your financial plan not by the potential returns on offer from a fund manager or financial advisor.
Before anyone gives you investment advice they should know, when you want to retire, how much income you will need in retirement, what other assets you hold and what your lifestyle and financial goals are.
Only after someone has this level of insight into your personal situation can they really recommend the most suitable investment strategy for you.
Cian Callaghan QFA RPA MSC
Head of Operations and Financial Planning
Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland. All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts