Choose the right method

November 24th, 2021 Financial Planning

Mostly, it is seen that the entire process of planning finances is misunderstood as choosing good products, selecting those that give good returns. An investing may double in ten years, thereby providing good returns, but it may not provide you with the income you require today. So, while a products may be good, it may not necessarily be good for you.

We all want our portfolio to consist good financial products that will help us achieve our desired return....

But what is the impact of these so-called good products on our total finances in terms of growth, income and net worth?

Before selecting these good products you need to know the impact they have on your total finances.

Are we looking at an increase in income flow?

Are we looking at growth?

Or do we want to reduce our overall risk exposure to only one asset class, say property?

How much should be allocated to these products is also an important question. A product is said to be good if it is according to your needs and enables you to reach your expectations and helps you finally meet your life goals.

What’s important is to find a product that is good for you, which simply means that the product should suit your allocation needs based on your short term and long-term goals.

The process of planning should actually begin with your goals and aims, rather than end with them. Keeping your goals and aims in mind, select a financial product that fits in your expectations .This helps you in achieving your goals as desired by you, instead of being limited by your initial choice of funds.

Your goals and present finances should decide the return you require from your investments. This is also known as the return needed to achieve your goals. Depending on the returns target, your asset allocation to different asset classes such as debt, equity property and cash is decided. And these measure the risk you are assuming. If the risk involved does not match you risk taking ability, then you can either alter your goals or the return target.

So, it is important to remember that when we want to create our own financial plan, we must begin with the end in mind, and choose accordingly

(The author is a certified financial planner.)

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