In an era of constant changes and volatile financial markets, it is important for each one of us to ensure that our investments stay on track to achieve investment goals over varied time horizons. Besides, maintaining a balance between the risk and reward is the key to achieve investment success on a consistent basis. While it is great to see investors taking interest in their investment process, the "Do It Yourself" (DIY) strategy could expose them to unwarranted risks that can put their financial future at risk.
Over the years, there has been a proliferation of financial products and a growing amount of information in print, electronic and digital media. More than ever, you need someone who can guide you on how to invest in these products and in monitoring your portfolio's progress. Therefore, it is important that you engage an investment expert who is reliable and has the wherewithal to help you track your investments and ensure they remain on track.
A qualified investment adviser will develop a unique financial plan for you. This will include the recommended asset allocation and various investment options to suit your needs. While doing this he will also analyse your current investments and present a final version of your customised financial plan, so that you are well positioned to move forward.
Despite the proven benefits of having a financial plan in place, many investors often face the dilemma of whether to engage a financial planner or not. A financial plan gives you the discipline necessary to save money and keep your investments on track. It can help you get the best returns for your risk level by dividing your investments into different asset classes, as well as investment options.
For example, at the start of your career, a financial plan can bring discipline to your investment process. Besides, by starting your investment process early you can benefit a great deal from "power of compounding". In other words, even by investing a moderate amount every month, you can achieve your goals without too much of stress. Moreover, a financial planner can also help you in rebalancing your portfolio as you near your retirement age or the term of achieving a pre-defined goal.
A comprehensive financial plan is the first step towards securing your financial future. Financial planning is a multi-step process that provides you with an in-depth review of your current financial situation and a blueprint that shows you how to achieve your goals and objectives. Your financial planner will collect information from you on your income, expenses, current savings and investments, current insurance policies, and estate planning documents. Using this information a blueprint will be worked out to fund your future financial needs for different goals.
An analysis of these details can help you ascertain the returns needed to achieve each of your goals and what kind of risk cover would be needed in the form of life and health insurance for you and your family. You also get an analysis of your emergency fund, which is the amount of money you must have in investments that can be encashed readily.
Your current investments are also analysed and recommendations are given to make changes in your investment strategy, if required. Remember, financial planning doesn't have to be an intimidating process. A professional investment adviser will have the expertise to make it a simple and fruitful process for you.
The writer is CEO, Wiseinvest Advisors
