Proper investment planning involves the process of accumulation and management of funds to improve one’s financial position and achieve goals set for oneself and for one’s family.
Strategies should be mapped out on how assets are to be allocated among various outlets such as cash, stocks, bonds, real estate, and other investments. In planning for investments, it is important to have a careful assessment of one’s personal situation before choosing on the various investment outlets available in the market. Each one is unique and the same applies to one’s investment profile. The suitability of investment outlets and strategies to a person would depend on several factors. Some of these are the following:
Amount of Capital
How much capital do you have available? Are these excess funds or funds intended for business or standby for other potential business opportunities?
Investment goals should be specific and quantifiable. For example, you may want to save up for a comfortable retirement. How much is “comfortable” would depend from person to person. You may have to compute how much monthly income you would need during retirement, and how much funds can provide that amount of retirement income. Then you can make saving and investment strategies in order to achieve that retirement goal.
How much time do you have to reach your goals? An investor’s age and possible future use of the funds can help you determine your investment horizon. Short-term goals should be matched with short-term term, lower risk investments. It would be wiser to keep funds in instruments that protect principal and guarantee yield because you don’t have the benefit of time to recover whatever will be lost. With long term goals, you have the benefit of time to ride out the volatility in the market. There are investment outlets that may have the possibility of losing the principal on a short-term view, but have a higher yield potential on a longer term.
Finally, it is important to determine your risk tolerance before investing. A very conservative investor may not be comfortable putting his money on an investment that offers a high potential yield, yet with the possibility of capital loss. He may be affected with the volatility in the market, thus preventing him from making rational investment decisions.
On the other hand, an aggressive investor may not be very happy with the returns that a low-risk investment offers. It may be more fitting for him to invest in an instrument that may be a little riskier on the short run, yet has a higher potential for capital gains in order for him to achieve his goals faster. Each person’s risk profile differs, and should be matched along with his investment goals before choosing on any investment.
For more information, contact:
Private Banking Group
Tel Nos. (632) 885-5641 to 45 Fax (632) 840-1983