Welcome back. In this entry, we’re going to keep right on going with our series on asset allocation.
We’ve been discussing the ways that you can ensure that your investment portfolio is properly diversified in order to guard against sudden losses stemming from the unforeseen collapse of certain financial categories or even whole industries.
You never know when things are going to go wrong… so set up such a portfolio that it simply doesn’t matter!
Financial Plans
Today, we’re going to talk about the value of Financial Plans. When you deal with a broker or financial planner, you are typically assigned a certain financial plan that gives you a long term strategy for investing of your income with the end result of giving you a substantial sum of money to live on come retirement.
Sounds nice, doesn’t it? However, these plans are often in need of some intense scrutiny.
Even though many financial plans seem complex enough, and a lot of them even ask you personal questions before offering their prescription for your success, you have to be careful. Even though a financial plan takes into consideration what you’re currently making and what you want to spend in retirement, there are two major things it can never know…
Your Goals
The first is your goals besides retirement. While a financial plan might put you on track to having a comfortable retirement, do you really want to spend the next forty or fifty years scrimping and saving every penny, and never having any fun?
The second thing is any major external changes the market might face. It should go without saying that any good plan has fallback options, and this goes for Financial Plans as well.
While a Financial Plan is a great way to prepare for how you’ll spend your money and make investments over the long term, always remember that they need to be constantly updated to take into account the reality of the market and your present situation. Otherwise, they’re simply outdated advice that causes more harm than good.
See you next week for part 4 of Asset Allocation.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2009
{ 3 comments… read them below or add one }
Great point Sean – it really is something to think about.
Hi Sean,
I think this is a problem that beginners face. You really need to find someone you can trust to help you create a financial plan. It’s hard to know what you need to achieve your financial goals.
Essentially, everything is riding on your financial adviser. So, you really have to choose them carefully.
I haven’t had anything to do with financial planners although I have made up a financial plan when I was sorting out my self funded superannuation plan.
I have no faith in financial planners and decided to get an education in finance instead.