What dominates your mind while taking investment decisions?

What dominates your mind while taking investment decisions? Fear of losing your principal? Safety of capital?

Well, losing principal is not the only risk in investing. People confuse certainty and safety. They think of fixed deposits as safe. They’re not safe. They’re certain because you’ll get your money back, but unfortunately we live in a world where inflation is an issue, so although you may get your money back it will buy you less and less. That’s not particularly safe.

Ideally, one need to balance preservation of principal with preservation of spending power. Investors need a real cash flow – one that grows with inflation. And they can’t get that through fixed income investments or “safe” investments.

A mathematical process of financial planning helps you in quantifying your life goals, prioritize them and determine the return on investment needed to accomplish your goals. A suitable Asset Allocation strategy and Reallocation process will then guide you to in achieving your defined goals.

Do not just focus of safety of principal. Instead aim for meeting your long term life goals. Preservation of capital and preservation of purchasing power of your capital will come naturally, once you think big and keep an eye on your long term life goals.

However it is essential to focus on the process of planning!!!

Have you created your Financial Plan to guide your Investment Portfolio?

Your Investment Portfolio isn’t pulled from thin air or created in a vacuum. Your Portfolio is a tool to get you to where you want to go. You need to realize that you don’t have a portfolio – you really have a plan. It’s very important to understand that your investments must fit with what you’re trying to accomplish and that you must take appopriate risks to meet your goals.

Everything begins with assessing financial goals. You need to look at what’s important to you, what’s essential and what’s ideal. Then look at where you are, where you need to go, where you want to go and what it takes to get there. It is not easy. This procedure is not something you do in five minutes. An overall analysis – in form of a Financial Plan – is the best way to establish the returns needed to reasonably accomplish your goals. One of our experienced Wealth Advisor can guide you in accomplishing the process.

Next important thing is to determine the appropriate risk that can be taken. Risk is not determined by your neighbours or by the markets but rather by your own needs. Knowing how much risk you can take is essential. If you are saving and accumulating sufficient amounts and your goals are attainable, you may not need to take much risk at all. If you take more risk you may inadvertently jeopardize your financial health. On the other hand, if your needs are much greater than your resources, you may have to take on a higher level of risk in order to have a chance to succeed. If you take less risk, you may condemn yourself to a dismal financial failure.

The Financial Planning process will help you determine your Investment Portfolio strategy and determine the appropriate level of risk.