Tuesday, July 5, 2016

What Is A Good Investment Plan (Part Two - Goals)

Hi Everyone,

This post is the continuation of the "What Is a Good Investment Plan" - Part One - Financial Needs


Question on what Is A Good Investment Plan?

Recently (After I posted the part one on what is a good investment plan), I have received emails on asking that why a good investment plan requires us to know the financial needs, goals, liability and etc. rather than finding a high returns in both capital and dividends, isn't that the most important thing? 

Of course, high capital gain and dividends will certainly be welcome by me (who wouldn't want to earn more right?), however,  the "Give and Take" analogy still exist in investment plan. Whatever the investment plan can give you (interest, dividends and capital gain) there is always something that you will need to give in return (time, money, energy and etc. depending what kind of investment plan are you taking)

For example, if you purchase a saving plan, you will need to take into consideration of the monthly payment, the duration whereby you are unable to touch the money, the consequences of breaking the contract and etc. So understanding the "Give and Take" analogy, you will have to asked yourself, whether is this a good investment plan for you. Thus, you will have to study your own financial capabilities, liabilities, everyday needs and what is you goal that you would want to achieve.

Certainly, different people will have different ways to measure what is a good investment plan. Some might include the rate of return (the higher the better, ignoring the risk involved) and etc.

So without further ado, lets continue with the part 2 of "What Is A Good Investment Plan"!

What Is A Good Investment Plan - Part 2 - Goals
Having a goal for investment planning is important because it can help you decide whether what kind of investment plan that you can go for. For example, your plan is to be able to save up enough money for your child's university fees in 20 years time. So certainly, you will have to look for some saving plans so that you can contribute a sum of money to the plan so that you will have sufficient money for your child's school fees. 

Another example is that, you want to have a passive income per month so with that passive income it can help to offset your monthly bills or even offset your monthly expenses without risking much of your capital. For this, you will have to do shares investment, bank interest like OCBC 360, UOB ONE or BOC SmartSaver account for high interest and etc. 

So as you can see, there are many ways of creating an investment plan. However, a good investment plan requires you to really understand what you want to achieve so that you can have a better idea on which plan to go for.


Setting Your Goal

Setting goals isn't as easy as you think as you might think that we just write down whatever we hope to achieve and that will be the goal for me. This is a true statement however, if you set your goal too far, you will lose sight of it and naturally forget about it. 

So the trick to set your goals is to split them into different milestone or different terms. For example:


The picture above shows a short term goal / one year milestone of my personal goal, this will push me harder to reach this milestone before moving on to the next one. So let's compare with this goal setting:

I hope to generate $80,000 per year with my passive income with 2 private properties so that I can retire comfortably. 

If you compare these two, the second one will take years to achieve, if you are just a normal salary worker in Singapore. so naturally, you will either become too aggressive which resulted in loss of money or you naturally forgot about the goal you have set for yourself because it is too far away from your current status.

So setting your goal into different milestone will be an idea way of monitoring your progress and enables you to have the push to reach your goal!

So with this, you will be able to know what type of investment plan you should be aiming for and to further decide which investment plan you should go for, the other two factors will need to come into play which is the financial capability (current savings and income) and liability (loans, debt and etc.)

2 comments:

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  2. Yeah when creating financial plan, it’s important to know financial needs and goals. I am very much concerned about savings and get suggestions and guidelines from our registered investment advisor Las Vegas. We are now planning to invest in share market too.

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