Independent financial advisors agree that it takes careful thought to create an investment portfolio. These questions are important for new investors to ask before they create an investment portfolio.
1. What are your financial goals?
It is important to remember that a financial objective or investment goal is more complicated than “making as much money as possible in the shortest time”. This objective determines the amount of time and the duration. Your portfolio managers will also need to know your risk tolerance.
2. Are you able to save enough money for an emergency?
This fund typically ranges from 3-9 months of one’s monthly salary. The ability to set aside enough funds reduces the disruptions that unexpected events – such layoffs – could have on an investment strategy. An investor who does not have an emergency fund would need to sell more of his investments in case of an emergency.
3. Which investment tools do you have? Are you familiar with the risks and functions of each type of investment instrument?
Investment instruments are contracts, such as shares, bonds, unit trust funds and shares, that allow investors to purchase equity, loans, or funds. It is crucial to identify the available investment instruments because investors cannot create a portfolio without knowing which instruments are available.
4. What strategy will you adopt when designing your portfolio (value driven or growth driven, technical or fundamental)?
Financial Alliance’s Wealth Management Director, Mr Sani Hamid, advises that portfolios should be managed according to a set of parameters, and not on the whims or fancies of investors. These parameters are important in establishing a disciplined investment strategy. “
When a portfolio is being constructed, it takes time and thought. The next step is to monitor for risk management and rebalance. Rebalancing is the process of adjusting the allocation weights to achieve the desired ratios. This is important because funds can perform differently over time and cause the portfolio to diverge from the intended allocation.
Financial consulting services such as Financial Alliance typically rebalance their clients’ investment portfolio at least once per year. This happens when a certain asset class is suddenly or sharply outperforming.
5. Are you financially competent enough to manage and design your investment portfolio?
Managing an investment portfolio can be a complex task. This is why it may be worth exploring the various portfolio management and financial consulting services offered in Singapore. It is possible to manage your portfolio without the assistance of an expert, especially if you are using a buy-and hold strategy that allows the investor to ride out the cycles and not have to intervene to reduce volatility. It is important for investors to realize that a buy-and-hold strategy could mean riding through high levels of volatility.
6. How is your financial situation?
A subject matter expert from the field of financial consultation, someone should be in a good financial position to invest . In other words, one should have a positive net balance each month.
It is essential to understand the basics of investing before you can create an investment portfolio. The list of questions can help you get started and provide a roadmap for your future investments. Click here to contact an independent financial advisory company and request financial consulting services.