Planning for your financial goals... My own mantra

Since, I have taken on my new role, I have been a part of multiple conversations around future financial planning. I have heard some of our best Agents give some great advice on the topic and also heard a few usual myths being raised by friends and family around financial planning.

Like most people, I have gone through different phases of tweaking my portfolio. But, I thought I will share my own personal beliefs on this topic. This does not represent the views of my company and one will need to constantly monitor market movements and cover for other demographic factors like age, etc.

Rule # 1 - Protection is the most basic and fundamental calling!

Before one starts thinking of wealth creation, it is critical to plan for the unforeseen. This may impact you or your family. These include health insurance, basic life protection (term life), motor (mandatory for motor vehicle owners) and personal accident cover. In developing countries, we continue to read so many stories of how a health condition can bring a whole family down and make them bankrupt.

If one is covered by company health policies, have a read through what you are covered for. This may not be much in many examples and a condition may push you back significantly. And finally, being young and healthy doesn’t mean, one does not the basic protection!

Rule #2 – Actively assess your future needs

There are many ways to do this. But, one simple way to analyse this is by removing all your savings and luxuries per month to arrive at basic income you need per month to live comfortable during your old age. AXA has a simple but useful calculator - https://www.axa.com.my/financial-planning

Talk to your Agents or Independent Financial Advisors who would be able to conduct a comprehensive “Financial Needs Analysis” for you and your family.

I divide my future needs into 2 buckets – (a) Retirement planning for my wife and me (b) Children’s education

Rule #3 – 30/30/30 balance

• I invest 30% of my savings in relatively more secure investment options (Insurance, Bank FDs, Stable Government bonds, PF, etc.)
• I invest 30% in property
• The last 30% goes to more riskier options like equities, mutual funds, seed funding, Gold/ETFs, etc.

The portfolio does vary from time-to-time and this is a function of market and personal situations too. One has to be aware that our investments need regular monitoring as they are subject to market and other relevant risks.

Rule #4 – Investment horizon is a function of life stage

At different stages of our life, one does take slightly different views. E.g. marriage, child birth and so on. This is part of future planning and no one can take one view of the future time horizon. Hence, it is advisable to invest in different time periods. E.g. 4-pay, 20-pay insurance, 5-year tax free bonds and the like. Watch out for different time periods on insurance products and commensurate returns/probability to help you plan better.

Rule #5 - I do not invest actively in stocks anymore

Since, I cannot track my investments regularly, I stay invested in a few direct stocks. But, I prefer to invest through fund managers who actively manage large investment blocks.

Rule #6 – Liquidity

It is always advisable to have at least 6-months of investments in highly liquid assets. This helps for contingencies without shaking your portfolio.

These are just my basic philosophies. I would be happy to hear your views and if this series does excite you, I am happy to write more on specific topics with respect to financial planning.

Warm regards,

Rohit