Investing without a financial plan or a collection of goals

In times of plenty, we look for a safe haven for excess cash that will produce potential passive income. Some of us take desperate measures to raise our money supply in order to meet the demands of the day in times of need. Both activities necessitate investment decisions, which many of us are often ill-equipped or inexperienced to make without assistance. As a result, knowing the answers to the four “wives” (why, where, where, and who) and one “husband” (how) questions about investing and financial planning is important. The two most critical prerequisites for making wise investments will be addressed in this article. By clicking here we get info about  E.A. Buck Financial Services

I am often asked for investing tips or guidance as a licenced financial planner and a business and financial adviser to small and medium businesses. It makes no difference whether I am a great investment guru or tipster because I will never answer such questions without first learning and recognising the questioner’s financial history, status, and financial goals. This article is not meant to be a guide on investing or financial planning; there are plenty of books on the topic available in any decent high street or online bookstore. Rather, I’d like to discuss what I believe to be the top two pre-requisites that an investor should consider before making an investment decision.

1. Develop a financial plan that contains SMART targets.

Planning is something we all do on a regular basis, whether it’s for a vacation, a wedding, or some other event or to accomplish a specific goal. However, how many of us really get interested in making and executing a detailed personal financial plan? Why not, if not?

Financial planning is described by the Certified Financial Planner Board of Standards, Inc (CFPBSI) as “the method of achieving your life goals through proper financial management.” Life goals are aspirations that we hold dear and would like to see achieved, especially throughout our lifetime. Saving for a car or a round-the-world cruise, for example, or spending to offset the impact of inflation in retirement planning, are examples of such targets.

When setting goals, we must be realistic and not set goals that would be too difficult to accomplish in the timeframe allocated, otherwise we will become frustrated and abandon the plan entirely. Thus, we should follow the SMART principle, which states that our targets should be Precise (for example, save $50,000 to buy a car), Observable (for example, plan to buy a car costing a sum we can afford), Practical (for example, plan to buy a car costing a sum we can afford), Timely (for example, plan to buy a car costing a sum we can afford), and Timely (for example, plan to buy a car costing a (say, achievable within a reasonable time period).

We can plan how to meet our SMART financial goals if we know what they are. If we don’t know how to make a financial plan that works for us, we can employ a financial advisor to help us. One thing to keep in mind is that we should seek the advice of a financial planner who is both competent (e.g., has the CFPBSI’s Certified Financial Planner credential, which is recognised worldwide) and experienced (and perhaps licenced to practise as a financial planner by the appropriate authorities to ensure accountability and ethical behavior).

2. Consider your own financial risk profile

Before making any investment decisions, we must first consider ourselves in terms of our personal financial risk profile. In our everyday lives, we all take chances, whether it’s crossing a busy street, travelling somewhere, or even getting married, given the growing number of separations and divorces. It’s important to remember that different individuals have different risk tolerance levels for a variety of reasons.

Assuming a danger for which we are not prepared or capable may have negative effects and be harmful to our wellbeing. Similarly, the level of financial risk we are willing to accept or tolerate should be carefully assessed, and this evaluation will typically be based on a set of parameters specific to each person. Furthermore, an individual’s risk profile can change as his or her personal circumstances change, and it is widely agreed that a younger person can take on more financial risk than anyone approaching retirement because the former has more time to accumulate or recoup losses due to poor investment decisions.

As a result, it’s important to know our financial risk appetite and risk profile so that our investment decisions are suitable for our risk profile. Investment prospects abound in the marketplace for investors of all risk profiles, whether they are cautious or can take on a lot of risk.

In conclusion, the above are what I consider to be the two most important pre-requisites to investing, while the others mainly concern details in understanding investing, investment strategies, and investment opportunities that can be found in any good investment text books or articles, advice from investment professionals or financial planners, or maybe the subject of a follow-up article by this writer. A final piece of advice is to stress that we should not make any investment decisions that could negatively affect our financial well-being until we have a solid financial plan in place, and that if professional advice is needed, we should always consult a trained and licenced financial planner. Always bear in mind the old adage, “FAILING TO Prepare IS PLANNING TO FAIL.”