I N V E S T I N G M A D E E A S Y By Paul Merriman QFA CFP®

Welcome to the World of Investing!

This is my investment strategy, designed to help you get started on your investing journey. There's a lot of great information in here, so settle in, make a cuppa and read on to find out how to put your hard-earned money to work to earn even more money for you.

W E B E M A I L P H O N E

www.askpaul.ie [email protected] 01-2955766 CONTENTS 2 0 2 0 F I N A N C I A L I N V E S T M E N T S T R A T E G Y

01 The current market situation

02 Changes to markets and "timing" them 04 Returning to "normal"

Buying stocks and shares and buying directly VS 05 Investing with a financial advisor

07 What is a fund? 09 My investment strategy 16 I’m Interested – What’s next? T H E C U R R E N T S I T U A T I O N

First let's talk about why you should invest?

Whether you’re looking to build a nest egg, I feel that this now creates an opportunity for saving for your retirement or your child’s anyone (namely you) with savings or extra education, chances are you have big plans ahead. disposable income to start investing now for the Investing is one way that can help you pursue future. The main reason for this is that a turbulent your financial goals – even as they change over market presents opportunity for the long term.. time. Time is also an important factor when considering In fact, savings and investing are two sides of the investing: it’s recommended to investment using same coin: you should first have a savings pot money that you can do without for the next three built up for unexpected expenses, then look at to five years or more to get the most from your investing to build your wealth over the medium- money. long term. Deposit savings accounts typically give you quick Another thing to note is that you don’t need a large access to your money but, because they tend not lump sum of money to start investing. to keep up with inflation over the long term, savers usually need to do a little bit more.

The current situation

The stock markets aka the equity markets have a had turbulent start to the year due to impact of Covid-19 on world economies.

March and April 2020 has seen a massive down-turn as Covid took hold worldwide but they have now largely rebounded from their lows due to financial support from various governments around the world.

I am expecting markets to continue with this turbulent activity for the remainder of 2020 mainly due to fears of a second wave of Covid-19 and the upcoming Presidential election in the US.

01 Changes to the Markets and timing them.

Markets Cannot Below you will see a graph showing the performance of the above 3 indices over be "Timed" different time frames.

"It is impossible to tell when the market has peaked and when they are at the bottom. If people could accurately time markets, we’d all be billionaires.”

Investment markets do have a very noticeable pattern, which is that they go up and down in value all the time. This might seem like common sense but the industry over-complicates this.

Let’s take Covid-19 and you will see that Below you will see the impact the 2008 financial crisis had world stock markets fell by over 30% during on all 3 indices March & April 2020 but rebounded quickly to be generally flat year to date.

To monitor the investment markets, financial advisors use different benchmarks or ‘indices’ to keep track of what's going on. An Index is used to measure a certain subset of the stock market.

Indices you might have heard of before are:

S&P 500 Index – top 500 companies in north Below you will see how these 3 indices regained their loses America from 2012 to 2013 FTSE 100 Index – top 100 companies on London MSCI World Index – Stock of 1,644 companies throughout the world

Looking at the performance of these will give you a general idea of how stock markets in a global or region-based context perform over time.

02 Changes to the Markets and timing them. 02

The last major dip in equities was 2008, which was the world’s Financial Crisis.

In 2020, equities are going to have a very similar pattern but over a shorter time frame "It’s time to – markets will fall drastically in 2020 while the world gets to grips with Covid-19 crisis. start taking However, once we adapt to Covid-19 it should be back to business as usual for everyone. If this is the case, markets will rebound very advantage and quickly compared to the financial crisis. drip feed In 2008, the crash was caused by financial institutions being reckless. This time, banks are far more robust and have stricter rules as money in to to what they can do with their money, and the correction is being caused by something else. benefit from You could say that the finance world was almost ‘prepared’ for this. That's why I think the upturn.” the recovery will be quicker.

The graph below shows that it took over 4 years for the markets to recover from the financial crisis. 2008

The last major dip in equities was 2008, which was the world’s Financial Crisis. 2020

COVID-19 Pandemic causes markets to fall

03 RETURNING TO "NORMAL"

Using the 2008 Financial Crisis an example, we will get back to a place where the stock market will make money. It always has, and always will.

I think that Covid-19 crisis will be solved in a much Commentary from reliable medical sources is quicker timeframe, the stock markets and indicating that a vaccine is closer than we economic activity should recover quicker than the think. Governments financial response to the 4.5 years from the Financial Crisis. The solution is crisis has been extremely supportive and the to find a vaccine. markets have reacted better than expected.

Looking at previous similar world events, it took I'm expecting volatility for the remainder of the the world 20 months to come up with a vaccine for year until fears of a second wave subside and the SARS in 2003. results and consequences of the US presidential election are clearer. Reports are suggesting that we should have a vaccine for Covid-19 by the end of 2020. This volatility presents a perfect time to start using my investment strategy and take Another factor to consider is that in the past, advantage of supressed prices. institutions such as the Federal Reserve and the International Money Fund (IMF) have intervened to help dampen the impact and speed up recovery. The graph below shows historical world epidemic and stock market performance: For example, on Sunday 15th March 2020 the Federal Reverse cut interest rates to 0% (equals more money in the economy) and launched a new range of Quantitative easing (basically pumping €700 Billion into the American economy).

What do we know today?

The world markets have largely recovered due to government stimulus and the promise of continued stimulus until economies are back on a stable footing.

04 B U Y I N G S T O C K S A N D S H A R E S A N D B U Y I N G D I R E C T L Y :

It's relatively easy to do, i.e. going to a L e t ’ s t a k e o n e s t o c k a s a n e x a m p l e ; and buying €500 worth of Apple or Ryanair shares. This is not my preferred Ryanair which hit a high of above €16 at the strategy. start of 2020 to a low of just above €8 around the middle of March, representing a 50% drop in Degiro is a European stock brokering price, which surely for an airline of it’s stature company from Amsterdam. The reason I pick represents good value, yet my phone wasn’t Degiro is that their fees are extremely low ringing! compared to Irish Stock . Ryanair is today trading at €10.80 which is a Click here to see how Degiro’s fees compare: 25% increase from the lows.

The main problem that I have with my But the price isn’t that important. It’s the Degiro account is that I’m not a day trader – psychology and emotions attached to a price. I don’t have the time or the research capabilities to pick the best stocks at the The reason for this is that is twofold; one – we best time and therefore it is extremely all smell blood when the media are talking about overwhelming and you get stuck in the mud trillions being wiped off the stock market- call it easily – i.e. you end up not making trades and opportunity if you must. Two, we all have a bias staying in cash, which is pointless. to brands and companies that we are familiar with and trust – But that can be fatal when it Sure I’ve received “tips” on stocks before but comes to investing your money. I also received “tips” on Cheltenham in the past and that never worked out either! Very similar to 2008-2010 when most people in Ireland thought that falling bank stocks where “great value” as they thought the banks couldn’t fail. They had an unbelievable bias to the banks.

Not many fund managers would have bought When buying stocks and shares directly, Irish banks in that period as they would have you need to consider a couple of things: had the financial information and knowledge to know not to touch them and this is where my What stocks or index to pick? strategy really comes into play.

How long am I planning to invest? It's important to note that I don’t think Ryanair When am i planning to get out? will follow in the same path as the Irish banks, however, I think they have a very difficult 12 - What would my reaction be if the 18 months ahead. markets fell by 30%? It's expected that they'll have to cancel up to Do I put a lump sum in now straight 80% of their flights which will take the company a considerable time to make back up. Is it worth away? “a punt”? As a single stock no. Do I drip feed money in over time? Diversification, an important life lesson is to not Or is it a mix of both? put all your eggs in one basket, well it's the same when it comes to stocks and shares.

05 If I had €100,000 to make up a portfolio of stocks sure, Ryanair would be in there with a small percentage.

If you do open a direct stock account account it’s important to note that you must make a tax return to revenue each year notifying them of any gains or losses if applicable. The stockbroker will provide you with a Tax pack which will assist you with making the return.

When it comes to Tax and buying direct stocks you pay tax on your gains at 33%, this is known as Capital Gains Tax (CGT). Each person has a CGT exemption of €1,270 meaning you don’t pay any tax on the first €1,270 of your gain. If you have any previous losses (previous property that sold at a loss etc.) you can write off the loss against the gain which can be extremely tax beneficial.

Investing through a Financial Advisor

Markets are down and yes as a Certified Financial Planner, I think this is a great opportunity for you to get some value for money B u t w h a t v a l u e w i l l I b r i n g ?

Well interest rates are extremely low at present. If you have money going into a savings account with the bank, credit union or post office you are earning practically 0% interest.

For the purpose of transparency lets take a look at Ulster Banks 12-month fixed term deposit; currently 0.20%. My job is to beat that. Simple.

And your job as my client is to look out for your money’s best interest (excuse the pun). So hypothetically if I was to get you 5% per annum over a five year period; that would be 500% more gross* interest each year.

Yes, 500% more each year compared to the bank. Not bad. Truth is, this is something the stock market has been doing for a considerable amount of time – beating the banks.

06 In order to help my clients beat the banks, I previously recommended a fund called the Zurich Balanced Fund.

My clients would typically invest on a monthly basis and could access the balanced fund from €75 per month to €3,000 per month.

The reason they would invest monthly was to reduce risk through Euro Cost Averaging (more on this later).

Most of you that follow my work are most likely fed up with me discussing this fund, BUT the reason I recommend this particular fund is because it has an amazing track record and the fund has been around since 1989.

Since 1989 the fund has an annualised performance of 10% per annum (pricing at 31/05/20)

WHAT IS A FUND?

When you invest in a ‘fund’, it’s very different to investing directly with stocks and share.

An investment fund is made up of collective amount of money from a number of individual .

The individual (you) chooses which type of fund to invest in usually guided by a financial advisor (that’s me).

A fund manager overseas the fund and makes the decisions about which assets to invest in, and most importantly in what quantities they should be sold.

07 THE MAIN BENEFITS TO INVESTING IN A FUND:

The fund manager picks the stocks for you

Less administration as the fund manager does all this for you

Can be cheaper than buying investments individually

More choice and more opportunity

Tax is returned to revenue for you

08 THE ASKPAUL INVESTMENT STRATEGY

WHAT IS MY CURRENT INVESTMENT STRATEGY?

I’m recommending that clients consider investing in the Zurich Dynamic Fund by using a concept called ‘Euro Cost Averaging’. During, this time I recommend, if possible, to place a lump sum into the fund at the start and at intervals.

This comes with a time frame warning:

To be honest, I, nor many market commentators could have anticipated the markets to have recovered so quickly during Covid-19, but in fairness Covid-19 isn’t technically over.

Therefore, I only recommend that you invest in this fund if you do not require access to the money over a 3-5 year period.

Let’s look at what happened to the Zurich Dynamic Fund between 2007 and 2012.

The fund value falls dramatically in 2008 (-37.8%) and then makes substantial gains BALANCED FUND in 2009 and 2010. I feel that 2020 will be very similar to 2008 and 2021 will be like 2009.

The reason why I’m switching from the Zurich Balance Fund to the Zurich Dynamic Fund is because of the amount of equities that each fund holds.

Here you will see the Balance Fund has 69% equities in the fund at present while below the Dynamic Fund has 92%.

While markets are falling, I want clients to have more access to equities.

09 DYNAMIC FUND With this approach, you end up buying more shares when prices are low and fewer shares when prices are high.

By following this simple strategy, you can protect yourself against market fluctuations and downside risk in the market.

By buying a fixed euro amount on a regular schedule, your focus is on accumulating assets on a regular basis, instead of trying to time the market.

For lump sum investments Zurich have an investment strategy called Auto-Invest When it comes to my current strategy, which allows you to place a lump sum with there are a few rules I want to mention: Zurich today and they drip-feed it in to a fund over a 6 month - 12 month period Rule 1: ‘Euro Cost Averaging’

Euro-cost Averaging is simply the term used to describe the strategy of making regular incremental investments over a period of time as opposed to a one-off lump sum investment. It’s a method used to reduce your exposure to ups and down in one sitting.

It’s done at regular intervals regardless of the share price at the time of purchase. In order for this work you must be willing to invest for a period of 3-5 years. Picking a monthly investment amount you are comfortable with is key to the success of the strategy.

While the amount of money you put in at each interval will be the same, the number of shares that money buys you will not. That's because market fluctuations dictate share prices, causing them to rise and fall.

10 How does Euro Cost Averaging reduce costs?

By way of example if you want to invest €6,000 over 12 months, you can never know exactly when it is the best time to do so.

By using this method, you will eliminate the need to ‘time’ the market as this prevents you from investing a lump sum at the worst possible moment and enables you to benefit from market falls.

As per data below, we can see that the average cost per unit during the year was €1.39. However, by investing regularly smaller amounts your average cost is lower, at €1.29!

It is important to note that I am not trying to time the market. Although, I think this is a great opportunity to get involved with investing, this strategy does not aim to “get rich quick”. It aims to get you involved with investing over a period of time. The strategy will take time but will work. Rule 2: Diversification

Back to the Ryanair comparison from earlier. My investment strategy is to diversify. This means that I don’t put all my eggs in one basket, I don’t want to buy one company from one sector in one country.

I want to buy hundreds of different companies in different areas across the world. Usually when it comes to building portfolios it is recommended to diversify across asset classes too.

This would mean investing in equities (companies), bonds (corporate and government), commodities (oil, gold etc.), property (office blocks or retail parks) and cash in most cases. However, we want to invest in mainly equities at this time, as we think that is where the opportunity lies.

As you can see from the below information the Dynamic Fund is invested in different sectors and geographical regions:

11 The fund also has approximately 400 Track Record stocks. The Dynamic Fund has an amazing track record and is in business since 1989. You will see from the table below that the fund has consistently beaten the sector average.

Rule 3: Paying Tax If I was to use a standalone trading account like Degiro to buy direct stock or track indices, I would have to make a tax return each year. If I’m doing my own tax returns for income each year anyway, it won’t be that difficult to add this to my return. However, if I don’t do my own taxes, it can be a bit daunting.

In saying that, most providers of trading accounts provide you with a tax pack and make the returns very easy. I also get to pay tax Capital Gains Tax at 33% on my gains but more importantly, if I have any losses I can use them against my gain so I can reduce, or potentially eliminate my tax liability which is extremely beneficial. I also get to use my €1,270 CGT exemption (so my first €1,270 of gains is exempt), again very beneficial.

12 My investment strategy has one flaw which is that by using a fund provider, you’re subject to the higher rate of Exit Tax at 41%.

However, the tax is deducted and paid on your behalf by the fund administrator/manager.

As the name suggests, its deducted when I exit the fund or if I’m leaving it in there for a few years, on the 8th anniversary. Unlike the standalone trading account I don’t get to write off any losses or use my €1,270 so it is important to consider this.

Buying Direct "if I have any losses I can use them against my gain so I can reduce, or potentially eliminate my tax liability which is extremely beneficial."

Using A Fund "the tax is deducted and paid on your behalf by the fund administrator/manager"

MONEY MADE EASY.

13 14 I'M INTERESTED, WHAT'S NEXT? THERE HAS NEVER BEEN A BETTER TIME TO START INVESTING.

I'm encouraging anyone that is If you have a lump sum set interested to start drip feeding aside, you can start to drip feed surplus income into the this into a fund such as the markets to benefit from the Dynamic Fund. downturn that COVID-19 has caused. The payment comes out each month by regular Direct Debit I’m going to start an account – you get to chose 1st, 7th or alongside you so that we access 15th of the month. to the same funds and together we'll navigate the investing There is an implementation fee world. of €149 as there is quite a bit of admin required to get the You will get members only account set up for you. content, where I’ll be posting regular videos and blogs to This gives you access to my keep you updated on how the team of Qualified Financial funds are performing, Advisors. expanding your investment knowledge and answering any They will get to know your questions that you have. financial circumstances, provide expert advice and If I identify any further explain the process in detail. opportunities over the next 12 -18 months, I'll provide my They will also sort all the recommendations to you documentation and implement through these groups. the investment account with Zurich on your behalf. You can save as much or as little as you can afford each Click here to book an month, you can get started appointment with the askpaul from €75 a month. team and they will contact you to get started!

14 FEES & CHARGES WHAT'S IN THIS FOR ASKPAUL? Investing with me means that 100% of your monthly contributions hits your account each month giving your money the best chance to grow

As with any investment Initial Commission: askpaul account there are charges and will receive an initial fees that apply to manage the commission from Zurich of account, but I have access to 10% of the annual premium. the most competitive rates in the market. Government Levy of 1% usually applies to investment Most investment contracts, accounts, we will pay this levy especially via a bank, have up on your behalf by reducing our to 5% allocation charges commission . meaning only 95% of your money gets invested; this puts An example of the charging you in a negative position structure in monetary terms: before you even start! If you invest €3000 over 12 months (250 per month) the I'm offering 100% allocation annual management charge meaning 100% of your money would equate to €45 of which gets invested. askpaul get €7.50

The annual management Remember I will be starting charge is 1.5% - that’s broken my own Zurich account with into 1.25% for Zurich and you. I will have the same .25% for askpaul. contract, with the same charging structure as yous so The above charging structure I’ll be right beside you guiding allows easy access to your you through the entire process money from day one, meaning so we will be on a journey no exit penalties apply. together.

If you don't need easy access The COVID-19 crisis brings there are other charging along a huge opportunity and structures available which my if you are in a position to team will explain in detail to invest get involved and you during your appointment. together we can make your money earn more money.

15 HOW TO SIGN UP...

Book an appointment with the askpaul team. Click here ! STEP 1

The askpaul team will call you to give you expert advice and get to STEP 2 know your financial situation

Provide the necessary documentation for compliance and complete the forms STEP 3

The askpaul team will submit your application to Zurich and STEP 4 manage it until activation

CONGRATULATIONS! You're now an "investor" sit back and watch your money work harder! STEP 5

askpaul is regulated by the Central Bank of Ireland under Pax Asset Management DAC, here are the documents that we need to provide you with to make sure we adhere to their compliance regulations here are our Terms of Business and Privacy Policy

16 Warning: The value of your investment may go down as well as up. Warning: These figures are estimates only. They are not a reliable guide to the future performance of this investment. Warning: These funds may be affected by changes in currency exchange rates. Warning: If you invest in this product you may lose some or all of the money you invest

Ulster Bank Ireland DAC is regulated by the Central Bank of Ireland. Zurich Life Assurance plc Is regulated by the Central Bank of Ireland

Published 03/07/2020

Pax Asset Management Dac., t/a Pax Asset Management, Pax Financial Planning, Income-Protection, AskPaul, Expertpensions, is regulated by the Central Bank of Ireland. Registered No. 461783. Directors: Paul Merriman, Conor Byrne, Ian Britton. 10 Sandyford Office Park, Sandyford, Dublin 18. Tel: 01-2955766 Email: [email protected] Web: www.pax.ie