At Lion Global Investors, we believe strongly in investor education. We feel that in the expanding investment universe, investors need to equip themselves with the necessary knowledge and tools, in order to make the most informed decisions on how to manage their wealth.
With a plan, you can evaluate your current financial situation, integrate your financial decisions into a cohesive, long-term investment programme and set a realistic strategy to reach your goals.
Everyone has their own unique needs and thus each has different reasons to invest. However, these needs can be broadly classified in the following categories:
It is possible that you could have all the above reasons to invest. This depends on the types of needs you have, including but not limited to your investment objectives, time horizon, financial resources, risk profile and appetite.
You have different needs throughout the various stages of your life. You could be just starting out on your career or be at the peak of it. Maybe you're starting a family or perhaps you're preparing to retire. You could be buying your car and your first house, a second property perhaps, or the holiday you've been dreaming of all these years. These are important milestones that call for different financial approaches to saving and investing. If you have more than one goal in mind, you might want to allocate assets to a separate portfolio for each of these goals. Goals serve several purposes. They:
Next, you need to look at your time horizon - the number of years you have available to invest. If you are saving for retirement at 30 years old, you should anticipate an investment time frame of 45 years or more, because your life expectancy is likely to be 75 years or more. The longer your time horizon, the more risk you can afford to take. Most fund managers will give you an indication of the following time frame:
Your risk tolerance is your ability or willingness to endure declines in the value of your investments while you wait for them to return a profit that will help you meet your investment goal. The more tolerant you are to risk, the more you can stomach risky investments or fluctuations.
Your financial resources strongly influence your asset allocation decision. Some questions you may like to ask yourself:
Investing is a long-term process, thus it is important to have realistic expectations of your investment returns. Nobody can time the market and investors must understand that market correction eventually happens. Therefore staying focused on your long-term goals with a disciplined investment approach will help you ride out the market fluctuations.
In order to build a well-diversified portfolio, you need to understand the various investments available. Equity, bonds, and cash investments (such as money market instruments) are all "asset classes" which, when used together, can establish an effective and well-balanced portfolio.