Financial Planning – A Guide to Allocate Your Investments

 

 

Financial Planning is an important aspect in human life as it helps individuals set & achieve their long-term financial goals, through investments, tax planning, asset allocation, risk management & retirement planning. It means maximizing one’s wealth by investing in different asset classes, so as to capitalize on their unique risks, rewards & liquidity attributes. It is therefore, becomes necessary for an investor to identify their financial needs & goals, understand their investment choices & decide an appropriate mix of various investment choices.

 

 

 

 

 

 

Financial planning is generally recommended to start early as possible as when a person starts earning, so that he/she can benefit from the compounding by the time they reach their retirement stage. Compounding means the computation of interest paid using the principal plus the previously earned interest. Each investor has different goals in life & in order to achieve that goal in a systematic & planned way, financial planning is necessary & for financial planning to make successful in the long -run, an investor should understand their available finances in different forms & how he/she can best utilize the available resources (finances) to achieve greater returns & within a time frame set by them.

Hence, in clear terms, financial planning can be defined as an exercise aimed at identifying all the financial needs of an individual, translating the needs into monetarily measurable goals at different times in the future, & planning the financial investments that will allow the individual to provide for & satisfy his/her future financial needs & achieve his/her life’s goals. The objective of financial planning is to ensure that the right amount of money is available in the right hands at the right point in the future to achieve an individual’s financial goals.

 

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