Assembled outlook concerning your investment decisions

A casual investor usually has less knowledge. He doesn’t follow calculated investment strategies. During business cycles, he’s the first ones to behave oppositely. Markowitz portfolio theory attempts to nail down investment decision-making in terms of risk and return. A casual investor ignores financial goals and respective planning horizons, thereby, acts as a stuntman. His behaviour resembles the act of tossing a coin in the air while the outcome is unknown. To all intents and purposes, he needs to adopt planned behavior to develop a structured investment strategy based on risk profile, purpose of investments, investment time horizons, priority of goals, macroeconomic and other personal aspects. Review of strategies at intervals are a must to check whether goal amount is viable or not and if the existing investment strategies are relevant in prevalent conditions or not. Without knowing all the above factors related to investment, he’ll be distressed with negative results in the short run.

“Patience is bitter, but its fruit is sweet.” ― Aristotle

The untoward tendency while investing is impatience. The sources of impatience while investing are lack of decision making abilities, impulse of mirroring others, unspecified investment time horizon, undefined goal amount, disregarded risk appetite and foggy objective of investment.

Investment decisions should be made logically

Investment strategies depends on age, objectives, time horizons, number of potential dependents/s, health, marital status, longevity, ability to take risk and willingness to take risk, other unique personal aspects and macroeconomic scenarios, etc. Some of the investors mostly disregard their willingness and ability to accept risk.

Paradoxically, a retired person becomes impatient while the Nifty/ Sensex (benchmarks) moves continuously upwards and even when the market scenario is looking exhausted. Perhaps no other stage of life, except retired life, causes such acute feelings of enthusiasm and freedom. On the other hand, they become fearful out of anxiety. It’s because of both excitement and agony. We know it as “emotion”. It’s the personal side of money. Unfortunately, very few financial planners address the personal side of money, apart from analyzing the technical aspects of money.

Retirement means you’ll be on a long holiday forever. You’ll have enough time. But how to spend the entire leisure time! Many pre-retirees may have unclear plans after retirement. But due to some reasons or the other, they do not fully comprehend how dramatically their lives can turn into scar without a financial plan.

Investment decisions during Transition stages are intricate

Retirement is a major transition stage. There are several other transition stages that may befall in one’s life, irrespective of life stage. Each transition stage is unique in terms of personal finance and personal behavior.  Transitions refer to the following major life events, where major changes in life are challenging and inescapable:

• Change of job,
• Quitting job to start own profession,
• Job loss,
• Relocation,
• Divorce,
• Loss of parent,
• Loss of spouse,
• Permanent and total disablement due to accident or illness,
• Sale of business,
• Liquidation of assets,
• Inheritance,&
• Settlement of life insurance death claim etc.

No one can do away with any one of the above changes. Some of the occurrences are pre-planned and some are accidental.  Unless a professional Financial Planner is well equipped to implement skillful navigation, both planner and client will be frustrated. The planner needs to address both qualitative & quantitative inputs of the client along with technical side and personal side of money. From the above mentioned scenarios it’s obvious that investment strategies adopted by qualified Financial Advisers are time-tested. However, to help you get the best results from your investments are investing your money according to strategies. Money is easily recognized by value and we always blame it, but we never blame our unrealistic behavior around money.

Although, a traditional Financial Planner addresses the technical sides, it may have limitation(s). In the above situation traditional Financial Plan may not work fully for a client.

You may take a note that, specially, investments, insurance coverage, tax, estate, contingency, retirement, and children’s’ planning depends on personal factors. Therefore, any form of transition needs to be resolved by addressing both technical and personal side of money. The above transitions are inescapable. Only few of them appear on time and rest is incalculable.

A Certified Financial Planner has to visualize both visible & invisible facets. He adopts permutations and never advises reckless & complex investing.

“Everyone smiles with that invisible gun to their head.” –  Chuck Palahniuk

A structured approach adds value

A  proficient Adviser serves in a fiduciary capacity, holding legal and ethical responsibilities with his clients. Product suitability is the cornerstone. Action plans are arrived at after scrupulous analysis of client’s financial situation, requirements and personal factors along with macroeconomic facets. As professionals, we work for specific result(s) for our clients. Generally, they aim to accomplish a goal within defined time frame accompanied by defined goal amount. We make our clients aware of investment objectives, investment risks (certain amount of risk is an inherent part of the investment process), goal amounts and respective time horizons, their risk profiles, macroeconomic facets, etc besides understanding them.

No investment strategy will work unless you are patient. A gambler will never behave like a patient investor. A patient investor has a great growth mindset which will allow him/her to continue due to his/her attitude.

If you’re overwhelmed or confused on any occurrence, it means that emotions are rooted in such a way that you feel as if you’re defeated. This leads you to act irrationally. Patience is a habit. Unjustifiable expectations from any decision (financial & non financial) is likely to cause irritation. The role of a genuine Financial Adviser is to streamline action plans for you towards financial wellness (sweet fruit).

You need to know your Risk Profile first

Having patience refers to being tolerant. In investing, having patience means being risk tolerant. Do you know your risk tolerance level? Have you ever tested your risk tolerance level & willingness to take risk before you arrive at any investment decision? Therefore, you must know how much financial risk you are willing to take for that extra return on investment (expectation). Additionally, you must know your investment time horizon, goal amount to enjoy the sweet fruit. A detailed Financial Plan not only covers asset management guidelines but also addresses other visible and invisible challenges and opportunities of a client. A Financial Plan ultimately aligns objectives with a vision of the present and future.