The Complete Guide to Investing: How to Grow Your Wealth with Confidence (including tax considerations)
Investing involves putting your money to work in assets that have the potential to grow in value or generate income over time. Unlike saving, which prioritises safety and liquidity, investing is about aiming for higher long-term returns — with the understanding that it also involves more risk.
Asset classes:
Equities (Shares/Stocks)
Return: Historically the highest-returning asset class over the long term (e.g., global equities ~7–10% annually over decades).
Risk: High volatility – prices move daily based on company earnings, economic data, investor sentiment, and geopolitical risks. Can drop sharply in downturns.
Correlation:
Bonds: Often negatively correlated, especially in stable economies — when interest rates fall, bonds rise and equities are supported. However, in inflationary shocks (like 2022), both can fall together.
Property: Moderate positive correlation – both benefit from economic growth.
Commodities: Mixed; equities of commodity producers (e.g., oil companies) correlate positively with the commodity cycle, but broad equities don’t always.
Cash: Negatively correlated in risk-off periods (investors flee stocks for cash).
Bonds (Government/Corporate Debt)
Return: Lower than equities over the long run but provide predictable interest income (the “coupon”).
Risk: Considered lower risk, especially government bonds of strong countries. Risk comes from interest rate movements (bond prices fall when rates rise), credit risk (corporate bonds may default), and inflation risk (erodes fixed income).
Correlation:
Equities: Traditionally negative correlation, but can break down in periods of inflation.
Property: Low correlation, though rising interest rates can hurt both at the same time.
Commodities: Usually low/negative correlation, as commodities rise in inflationary periods (bad for bonds).
Cash: Bonds track interest rate cycles, so positively correlated with expected future cash yields.
Property (Real Estate)
Return: Moderate to high over the long term, combining rental income with capital appreciation. Returns often track GDP and income growth.
Risk: Illiquid, cyclical (prices can stagnate or fall sharply in downturns, e.g., 2008). Sensitive to interest rates, as higher borrowing costs reduce demand.
Correlation:
Equities: Moderate positive correlation – both tied to economic health.
Bonds: Inverse relationship with interest rates (higher rates hurt property values).
Commodities: Weak correlation, except construction materials/energy costs affect development.
Cash: Negatively correlated when interest rates rise (cash more attractive, property less affordable).
Commodities (Gold, Oil, Agriculture, etc.)
Return: No inherent yield (unlike stocks, bonds, or property). Returns come from price appreciation, often cyclical. Gold is a safe-haven, oil/agriculture are demand-driven.
Risk: High volatility, driven by supply/demand shocks, geopolitics, and weather.
Correlation:
Equities: Often negative in crises (e.g., gold rises when equities fall), but industrial commodities can rise alongside equities in economic booms.
Bonds: Negative in inflationary environments (commodities rise, bonds fall).
Property: Low correlation, though inflation-driven commodity spikes can push property costs higher.
Cash: Weak correlation; cash is stable while commodities swing.
Cash & Deposits
Return: Lowest return (typically below inflation), but provides liquidity and stability.
Risk: Minimal nominal risk, but high inflation risk (loses purchasing power).
Correlation:
Equities/Bonds/Property: Negatively correlated during crises (investors move to cash).
Commodities: Not strongly correlated.
Funds (Mutual Funds, ETFs, etc.)
Return: Depends on the underlying mix of assets. A global equity ETF tracks stock market performance; a balanced fund smooths returns with bonds and cash.
Risk: Diversified risk, lower than investing in a single stock or bond. Can be high or low depending on allocation.
Correlation: Essentially a blend of correlations of the underlying assets.
No asset is best — some work better for certain outcomes. Generally, a structured combination of assets works better over the longer term. This is known as diversification, which spreads risk and helps smooth out returns.
Understanding risk and return
The relationship between risk and return is central to investing. Generally, higher potential returns come with higher risk. Your goal should be to find a balance that aligns with your financial goals, time horizon, and personal comfort with risk.
Risk profile
Understanding your risk profile is essential. It includes:
Your financial capacity to withstand losses
Your emotional tolerance for volatility
Your investment goals and timeline
The European Securities and Markets Authority (ESMA) ranks investments according to their risk or volatility, ranging from 1 to 7:
1: Very low risk and growth
7: High risk and potential return
For most investors, a rating between 3 and 5 is expected, but every individual’s circumstances are different.
Investment Strategies
Active vs passive investing
Active: Portfolio managers aim to beat the market through actively buying/selling
Passive: Track a market sector without intervention
Lump sum vs regular investing
Lump Sum: Invest all at once. More exposure to market movements upfront.
Regular Contributions: Invest monthly. Helps smooth out price fluctuations (known as euro cost averaging).
ESG investing
ESG stands for Environmental, Social, and Governance. It refers to investments that prioritise sustainable and ethical practices alongside financial performance.
Environmental: How companies impact nature
Social: Their relationships with employees, communities, and society
Governance: Leadership, board structure, and shareholder rights
SFDR Fund Categories – Environmental Considerations
Under the EU’s Sustainable Finance Disclosure Regulation (SFDR), investment funds are classified based on how they integrate environmental, social, and governance (ESG) factors into their investment process:
Article 6 – No specific environmental focus
These funds do not integrate sustainability into their investment objectives.
They may still consider ESG risks for financial reasons, but they do not promote environmental or social characteristics.
Article 8 – “Light Green” funds
These funds promote environmental and/or social characteristics, but sustainability is not their core investment objective.
ESG factors are considered alongside other financial factors when selecting investments.
Article 9 – “Dark Green” funds
These funds have sustainability or environmental goals as their primary investment objective.
Typically focused on activities that contribute directly to environmental or social outcomes (e.g., renewable energy, climate change mitigation).
While environmental preservation is a top priority, focusing solely on ESG-focused investment can limit your investment universe. Hopefully, in the future, the options will expand.
Tax and investments
Tax plays a major role in your investment returns.
Capital gains tax (CGT)
Charged at 33% on profits when you sell an asset for more than you paid
Levied on the profit only.
There is an annual exemption of €1,270 per person
Previous losses can be carried forward to offset future gains
Dividend Withholding tax (DWT)
25% is withheld at source when you receive dividends from Irish companies
The balance is liable to income tax, PRSI, and USC depending on your marginal rate
Exit tax
Applies to Irish life assurance and investment funds - ETF’s, Managed Funds, Mutual Funds (Collective investments)
Taxed at 41% on gains
Includes a “deemed disposal” – you’re taxed every 8 years even if you haven’t sold
No exemption and losses cannot be carried forward
Tax rules may change, and your individual situation will determine what applies. We recommend personalized advice to maximise tax efficiency.
All profits need to be paid for and declared with the Irish Revenue commissioners. Failure to do so will result in penalties and fines. If you are unsure we can assist.
How to start investing
Define your goals – Are you saving for retirement, a house, or long-term growth?
Understand your risk profile – Use online tools or speak to a professional
Choose your investment platform – Direct with providers, via brokers, or through pension/investment accounts
Select your strategy – Based on your time horizon and risk profile
Monitor and review – Rebalance your portfolio as your circumstances or the market changes
Final Thoughts
Investing is one of the most effective ways to build long-term wealth, but it’s important to make informed decisions based on your individual goals and risk profile.
Diversification, understanding the role of tax, choosing suitable asset classes, and reviewing your portfolio regularly are all key to long-term success.