Understand Your Portfolio, Financial Goals and Investment Objectives

2008-10-18T09:56:00.000-07:00

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There are major concepts that form the working knowledge required, amongst many other things, by the planner to carry out their fiduciary responsibilities to their clients. Let me go back and talk about portfolios again first.
1. Your Portfolio
A portfolio refers to all of your assets and gives a complete investment picture of the various types of investments. The investment mix also expresses your investment strategies, as it will reveal the amount of risk and potential for return held in the portfolio. It is vitally important for your to understand that your investments associate the risk and potential with your goals. In other words, great care must be taken not exceed the your risk tolerance when building the portfolio.

2. Financial Goals
The below three terms may sound synonymous, but they’re not, namely:
a) Financial objective:
Financial objective is a specific condition with certain financial implications.

b) Accumulation Objective:
It targets a specific accumulation of wealth, such as short-term by setting aside a certain amount of money each month, quarter, etc.

c) Financial goal:
This is where you want eventually to be. This amount includes those amounts required to meet a specific accumulation objective.

3. Investment objectives
There are 4 specific benefits an investor might require from an investment
a) Income
Income is a return on an investment such as is achieved through the payment of interest or a dividend. Income may provide a return on investment or if the investor is retired and require a steady income flow.
b) Safety of principal
Some investments guarantee a safety of principal if held to maturity such as T-bills, savings bonds GICs and money market funds.
c) Liquidity
This is the ease with which an asset cab be converted to cash quickly with minimal or no loss of capital such as saving account and emergency funds.
d) Capital Growth
It is the increase in value earned by original investment. The investment products used should be targeted as long-term investments. Growth vehicles usually experience spurts of growth and periods of market correction.

I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:

http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://financialinvesting09.blogspot.com/

Financial Investing 09

Understand Your Portfolio, Financial Goals and Investment Objectives