What is the best way to determine your investment strategy for your financial goals? (2024)

Material goals like buying a new house, car, etc... are often easy to determine and helpful in creating a financial plan. However, people often struggle with defining their goals beyond this.Determining the meaning and purpose of your wealth should drive your investment decisions and help you define your goals. Ask yourself:What is really important to you and your family?What do you want to spend your time doing?What are your true assets?How wealthy do you really want to be?

3 key points:1. (S)pecify and (M)easure the future value of the goalPlan for the future value of your financial goal. Else, you are almost sure to miss it, due to the depreciation value of money.2. Is it (A)chievable to your current financial capacity and will it be (R)elevant to have the goal at the time thenYour goal must make sense to your current financial capacity, if not, you'll neglect it very soon. Either you improve your capacity or lower your goal. Then, it must be relevant by the time you achieve it. Plan for the needs, not for the goods/services.3. The (T)ime frame of the goal.The longer the time frame, may require less of your financial capacity, but higher uncertainty of how things may evolve. Find the balance.

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Before diving into investing, it's important to know exactly what you want and when you want it. Think of it like setting a destination on a map. Your goals should be clear, easy to measure, realistic, connected to your life, and have a time frame. Whether it's saving for retirement, a home, or your child's education, having clear goals will guide how much you invest, how long you invest, and how much risk you can handle.

Asset allocation based on - Emergency needs, must meet your 6 to 12 mo needs & expenses. Place this in the safest assets with the lowest volatility. You wont want it in a losing position when you need it.- Medium-term needs. Dont rush to quickly to risky asset, your foundation of wealth is the one to meet your medium term needs up to 3 years. Place it in a more moderate asset such as bond which yields somewhat higher than money market or cash.- Long-term needs. You go to any asset classes as far as your guts allows you. But bear in mind: capital preservation > than capital appreciation. When you lose it all, there's nothing left to be appreciated. Make sure to diversify well, and dont go to stuff that's too good to be true.

Asset allocation is crucial for achieving financial goals. Properly diversifying your investments across asset classes helps manage risk and optimize returns.Asset allocation is like crafting a personalized roadmap for your financial journey. It's a dynamic strategy that adapts to your evolving circ*mstances and goals

In my experience, urgency and importance are helpful parameters in determining asset allocation. High priority urgent goals need a liquid low risk approach. So, short-term high quality fixed income assets work well. Whereas low priority non-urgent goals could follow an aggressive approach. Equity/ private equity/ cyclical assets like real estate may suit. Goals that fall in between need to balance risk, return, and liquidity expectations.

Everyone understands that diversification is important, but achieving good results is only possible if you are an investment professional. Look for a Model Portfolio Service (Managed Portfolios) that you can use. They will be diversified by default and managed by professionals. Depending on your preferences and views, they can also be implemented via different instruments (ETFs, active funds, etc).

We believe in modern portfolio theory.We want to take on just the right amount of risk to accomplish our goals. And no more!Diversification helps us lower risk without compromising returns. We look at 9 asset classes and rebalance as different assets go up or down disproportionately. This allows us to buy low and sell high naturally.

Maintaining the same allocation indefinitely in a portfolio can be detrimental, particularly when there are significant market changes that impact asset performance. With expert guidance, a portfolio should be rebalanced periodically. By this, the weightings of different asset classes will be adjusted to the required levels to meet set goals.

Usually, for a specific goal, you would use risk-weighted portfolios, and typically, there are 5 of them based on the level of risk:- Low- Low to medium- Medium- Medium to high- HighIt only makes sense to compare them (to get meaningful results) to the following: - Private client portfolio index for that level of risk- Other portfolios within the same risk levelAgain, seek professional advice as there maybe other factors to consider or if your circ*mstances change.

The investment strategy (or portfolio) must be adjusted regularly, as asset allocation will change over time. Also, the portfolio must be adjusted if your personal/financial circ*mstances change. Seek professional advice and talk to your adviser once a year to review your financial situation and investment strategy.

Your investment plan can change, and it's good practice to adjust to keep things balanced.As you get closer to your goal or retirement, you might want to choose safer investments. Ramit Sethi (Author of I Will Teach You To Be Rich) has a good way of putting it:- Age 35: 90% stocks, 10% bonds- Age 45: 90% stocks, 10% bonds- Age 55: 69% stocks, 31% bonds- Age 65: 53% stocks, 47% bonds

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That is the most important thing as this is your financial health. You need to understand at least the basics of investing and financial planning, but professional advice is crucial. It's the same when it comes to health. You need to understand how your body works etc, but you must visit a professional to properly review your health especially when you need help.

Don't forget to account for the cost of hiring an advisor. Most financial advisors charge 1% of your portfolio value annually. Robo-advisors are a more affordable option at around 0.25%. You may even be able to do it yourself at a much lower cost, if you are willing to take the time to learn. This is where seeking professional advice can be really helpful.

Es muy necesario, pues con el auge del uso de las redes sociales y medios de comunicación masiva como fuente de información (desinformación), surge la tendencia de confiar en rentabilidades (promesas) fuera de contexto y sustento, que han dado origen a múltiples casos de estafas (engaños) donde las personas por “x” motivo han confiado y perdido incluso los ahorros de su vida. Se necesita la labor de especialistas en el área para poder educar (primer gran desafío) y luego, orientar y canalizar a profesionales capacitados que puedan evaluar el perfil de riesgo de cada potencial inversionista y así presentarles las múltiples alternativas que entrega el mercado financiero que se adecúe a sus reales necesidades y posibilidades.

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Don't underestimate the value of professional financial advice. Many "financial gurus" on social media only focus on fees and talk a lot about cheap index funds. Fees are only one element to consider. You need to take into consideration your overall financial situation, tax implications and different financial goals. You need to learn to understand how investing works, but a financial adviser would help you to create a holistic financial plan and provide you with a number of options to implement it.

Here's a story. Consider some young investors during a tech boom. Despite limited resources, they spread their investments across several promising startups. When a market downturn occurred, some of their investments suffered, but thanks to diversification, not all was lost. Their proactive monitoring and adaptability highlight the importance of individual decision-making and responsiveness in navigating unpredictable markets.