Investing is a complex matter. And when you don’t have clear goals and a well-defined strategy, it can become a business. In order not to be mistaken, every decision should be taken following a rational and conscious assessment of the risks and possible gains associated with the financial instruments. This is where financial planning comes in personal financial planning singapore.
Financial planning is the process of analysis that leads to understanding individual and family economic needs. It focuses on the investor’s income and capital capacities and aims to satisfy their needs and requirements, taking into account the implementation of projects and the achievement of financial objectives.
It should be conducted as objectively as possible , with a view to minimizing the irrational component in the administration of money. Only under these conditions do we have an efficient planning in the management of the heritage, which includes various fundamental aspects that mark everyday life and particular events. Examples are: work activities, setting aside money for social security purposes, financing the education of children or other family-related projects (such as buying a second home), etc.
How to create financial planning, from objectives to risk appetite
What are the steps involved in good financial planning? First, any investment choice should follow a rational assessment of the meaning and value of the allocation decisions. Analysis for which the assistance of a financial advisor is often useful, supporting the saver in the construction of the asset allocation.
Financial planning seeks the utmost coherence between personal needs and asset structuring. For this reason, defining the investor’s profile is an essential step. There are three main factors to consider: financial objectives, risk appetite, time horizon.
The objectives : understanding what is expected from capital investment allows you to create a targeted strategy.
The time horizon indicates the times in which you wish to obtain certain results, as well as the maximum period for which you are willing to block a part of your availability. It can be short, medium or long, and is defined according to the age and objectives of the saver.
The risk appetite is perhaps the most sensitive issue in the definition of the profile. It indicates the ability to bear losses and must be clearly identified in order to correctly select the financial instruments. An incorrect assessment can jeopardize the entire planning.