Financial Planning

Whenever you think of making investment, three things should come on top of your mind – Risk Profiling, Products and Asset Allocation. Along with these – cash-flow situations, investments already made, net-worth and  are equally important to consider before deciding where should your hard-earned money get invested into.

RISK PROFILING –  Knowing ourselves well is more important than choosing products first. Risk Profiling helps in doing that. By carefully answering a well-researched set of questionnaires, your risk appetite can be known. This may not remain constant forever with changing dynamics of micro and macro-economic factors. Hence, it is important to go back and re-assess after regular interval.

PRODUCTS –  There are many investment products available in the market. The first check should always be that the product must be regulated by a govt. appointed regulatory body. Next, you must consider the suitability. All products are good in their own context and with a certain section of investors. Whether the same suits you or not, depends on your risk profile, investment horizon, liquidity needs and taxation aspect. Also, there are certain products which cater only to a particular section of society, e.g. resident individuals, senior citizens, girl child etc.

ASSET ALLOCATION – We should not put all eggs in one basket i.e. not all our money in one single investment product or category. Distributing our investments into poorly correlated asset classes often saves us from big losses and is expected to generate a steady return. Asset allocation must be re-aligned or re-allocated at regular intervals. There are investment products available which aim to inculcate this very principle of asset allocation in the way they are managed. Otherwise, custom asset allocation can always be done.