Asset allocation : Importance in financial planning

Asset Allocation : How much Important..?

This word is very familiar in today’s investment world but often the investor or general public confuse or not very clear about it. The main purpose of asset allocation is to minimize the risk involved in achieving a target return or maximize returns with managing risk in prudent way. Asset allocation works on a very famous proverb “Don’t put all your eggs in one basket”. It also play very vital role in any comprehensive financial planning.

We have mainly these types of investment assets:

• Cash
• Equity
• Precious Metal
• Real Estate
• Bonds

Among many of the the asset classes, mutual fund provide the well diversification and professional management. Asset allocation through mutual funds gives you the opportunity to get maximum benefit through diversification and reduce overall portfolio risk. Mutual funds provide better asset allocation in cash, equity and bonds asset class.

Before making any strategy to achieve long term financial goals through asset allocation there are some important points given:

• Asset allocation helps you to make fine balance between return and potential risk. It provides also a disciplined investment plan.

• It also protects your portfolio against declining market through rebalancing and diversification.

• The most important thing is that your personal asset allocation strategy may not similar than others. The financial goal and risk appetite different for person to person. It based on mainly your age, risk tolerance level, liquidity needs and time horizon.

• Please remember that asset allocation does not guarantee the best return but it offers the balanced return with managing the risk which is good enough to take care of your all future financial needs.

• The main aim of asset allocation or financial planning is to achieve your future financial goal and peace of mind. It is not much important that gain a maximum return from the investment but to achieve a peace of mind with achieve a financial goal through risk management.

For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Financial Planning : Is it for you ?

Financial Planning : Is it relevant for you..?

Whenever I conduct workshop on financial planning or meet the client. It is very common doubt inside the client’s mind whether the financial planning is so important for them or not. In our country, we plan everything but not our finance. We are the largest saver country in the world. In fact we have  great saver mindset but most of us don’t understand or underestimate the need of financial planning. A common myth exist among the investor that it is only useful for only rich and elite class person. Today we will try to find out for whom the financial planning is important.

• If you don’t know where is your income going every month and always wonder about your expenses then you definitely need to make a budget for your income and expenditure. It is very basic and vital setp towards making a financial plan. Impulsive buying and lack of budget planning may be proved very costly for your long term future goal.

• If you are in the trap of debt and your liability is increasing due to loan interest amount you pay then seriously you should make a proper plan to get out from various liabilities. For the blind race to lead much comfort life style, you often use the facility of credit card, personal loan and bank overdraft facility. These all loans lead you towards a serious financial mess. A financial plan will help you to come out from financial mess.

• If your investments are scattered and you are not sure that whether it is right investment or wrong then financial planning for you. Many times we do investment on the recommendations from agents, relatives and friends without knowing the product’s risk and return ratio. Keep in mind each investments have always some degree of risk. A financial plan provides you consolidated investment statement and you can analyze it time to time in very easy manner.

• If you have a multiple life insurance policies and you are paying a hefty premium for those policies without knowing the expected return and sum assured then you must need of financial plan. Most of the people are underinsured in our country and people must know the about adequate insurance amount what they need. It is very important to know that how much life and medical cover you need. A financial planner help you to determine all these need based on your provided information. Insurance also is the vital part of any financial plan.

• If your major investment in the particular asset class and you are not sure whether it can help you to achieve your particular goal then you need a financial planner who help you to achieve your future financial goal through diversified investment portfolio with proper asset allocation. Asset allocation may be differ for person to person and you need to know which type of asset allocation you required to achieve your financial goal.

• If you don’t have habit to regular investing then you must need a financial plan. In every success goal achieving story discipline and determination is the key element. By create a financial plan with the help of expert and follow that plan religiously is very crucial to achieve your long, medium and short term goals.

Now after reading the above mentioned pointes it has become clear that financial plan is like a road map to achieve your dreams and desires to lead a happy and prosperous life. However, many of you have not any idea how to invest and where to invest or you may not have sufficient time to make financial plan and track your investment portfolio then you should must hire a expert planner lead to stress free life.

For more detail and any other query related investment, you can contact me through my email

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Some Important Points for Investors

Since last 4-5 year the retail investor has been losing money in equity market as market is not performing well. But not only in equity the so called advisor are fooling the investor from last so many years. I have earlier written so many times in my blog that if you have not much time and knowledge about market or investment please find a well knowledge filled financial planner. Set your financial goal and save before spending. Here I am sharing some basic tips which is very important for every investor before taking investment decision.

The most important thing is to protect your capital first. Take moderate risk for getting decent return. It is said that high risk give high return but before taking high risk assess your age, need and goal.

Never expect unrealistic return. Always try to get the return above average of the particular investment category. You cannot compare a single script return with any type of equity mutual fund. If anyone tell you about extra ordinary return please beware and alert before investing. I want to say only that keep reasonable expectation from any investment avenue.

Try to well diversify your investment portfolio according to your investment horizon and risk appetite. A well diversified portfolio reduces loss in other word say never put all eggs in one basket. Diversify your portfolio among different asset classes.

Keep away from any market rumors or news hype. Give proper time to your investment to grow. The process of investment is like sowing seeds. It need proper time to grow according to investment avenue. There is no rocket science to get multi-times return in short period.

There are other important things regarding investment which you will know in coming blogs. If you have some query about investment or financial planning please contact feel free to me

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Common Investing Mistakes

The individual investor often makes certain typical mistakes that will eventually cause him to give up or to lose everything. If we just follow some discipline and avoid some mistakes then investing is not much critical rocket science. In this article we are sharing some common investing mistake and how to avoid those mistakes.

Any investment is not 100% safe:

Yes believe me, none investment is 100% safe including your bank fix deposit. Every investment implies a certain risk factor that is determined by a multitude of factors. So if you are ignoring risk factor, it means you are fooling yourself.

Do homework on your investment before investing :

Those investors who neglect risks also have great expectations regarding the general profits. I advise them do proper homework of the investment product. It is very important to understand risk and return ratio very well before investing. If you don’t do proper homework you may be lost the final investment also.

Diversify your portfolio:

Portfolio means, all the investment a certain person has made. Through diversification the investor attempt to cover losses through profits some companies that might register losses. Regarding the optimal rapport between winning and security, a portfolio will have a pyramidal distribution of the stock types. The biggest investment will be done in companies with minimum risk and maximum security like governmental bonds. Climbing the risk stair the number of investments will decrease. Investments in extremely risky companies will represent a low percentage of the portfolio.

Being greedy and/or being afraid:

Greed never pushes to safe investment. Through greed you will only make investments that do not stand a chance. Fear will determine a rather calm and secure behavior that won’t bring you losses but will cause you to flip over great opportunities also.

Identify your need and risk tolerance:

An investment has to be done accordingly to the needs and risk tolerance of every individual. These two elements are unique for each person like fingerprints are always different. The same way there can’t be two persons with identical needs and risk tolerance. So, if an investment is an opportunity for the one, it does not mean it is for you too.

Thinking you are the smartest:

Thinking that you are the smartest investor it is a big mistake. Every investor bases his decisions on information he knows at a certain moment. Not wanting to hear advice or to hear new things, does not make you smarter, it brings you a great disadvantage and you will only put on hazard with your investments. So be updated about financial market and investment.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com