FIONA REDDANreviews The Unwritten Laws of Finance Investmentby Robert Cole; Profile Books; £9.99 (€11.40)

ALTHOUGH BUYING a book on investment tips two years after the credit crunch and the collapse of the property bubble might be akin to shutting the stable door after the horse has bolted, Irish investors should nonetheless find much of relevance in the 100-plus investment maxims in The Unwritten Laws of Finance Investment.

Written as a primer for the uninitiated, and a refresher course for those with experience, the aim of the book, which is written by Robert Cole, an investment journalist with the Times, is to put “the eternal wisdom of finance and investment together in one helpful volume”.

While it offers little by way of new investment insights, and much of the advice will be obvious to most experienced investors – indeed the author states that many recommendations have been included on the basis that familiarity need not breed contempt for the “ageless classics” – the recent past shows that knowing what you should do, and what you actually end up doing, are two very different things. Therefore, the book should find a place as a useful reference tool.

Remember those foreign properties which offered a guaranteed rental yield? Or those property developments which threw in the offer of a new car to sweeten the deal? Cole is very firm in his advice that investors beware anything that comes for free, or appears to be offering exceptional returns. “If something looks too good to be true, the chances are it is too good to be true,” he says.

Given how investors have suffered from their over-eagerness to invest in all things Irish, from property to private equity to shares, Cole’s advice on the importance of diversification – “Don’t put all your eggs in one basket” – should hit home with many. Rather than putting all your money in shares or property, Cole urges investors to spread money between asset classes because it “raises the chances of finding winners and reduces the risk of lumping on losers”.

Cole’s advice that apart from death and taxes, nothing in life comes with an absolute guarantee, may strike a shiver of fear into Irish investors given how important investors perceive guarantees to be – particularly in relation to the Government’s support of deposits in Irish banks. Moreover, when it comes to investment guarantees, such as the proliferation of capital-guaranteed products which have appeared of late on the Irish market, Cole says to remember that the guarantee is always paid for somehow.

The impact high charges can have on an investment also attracts Cole’s attention, and under “A penny saved is a penny earned”, he imparts the message of not just trying to keep expenses low – but to “work intensely” on costs. He points out that it’s necessary to remember all costs, such as the dealing fees for selling as well as buying; penalty fees that might apply; and the cost of advice.

Given how low-cost index funds remain out of sight for most Irish investors, while Irish-based stockbrokers continue to charge significantly higher dealing costs than our EU counterparts, this can be a difficult goal for Irish investors. Nonetheless, it is one to aim for – a €10,000 investment in a fund based on an annual return of 5 per cent and an annual management fee of 1 per cent, would cost you €1,557.52 in fees over 10 years, for example, compared to just €242.69 in a low-cost fund which charges just 0.15 per cent in charges a year.

While there may be much that is familiar in the book, however, you are unlikely to have heard of all the advice on offer. For example, have you ever heard of the “nightclub rule”? Once you have a mature portfolio of investments, Cole suggests you apply this rule to help you exercise control over your investments. “Like the bouncer on the door of a popular nightclub, let one in when one has come out,” he says, recommending you only introduce a new investment when you have sold an old one. This, he says, will make you ask hard questions about which investments have the best prospects, as well as leading to regular examination of when is the best time to sell.

Finally, Cole advises: “When you are in a hole, stop digging.” So, for all those investors in Anglo Irish Bank, AIB, Bank of Ireland etc it’s time to accept your errors and move on.