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determine-your-investment-objectives

7 Major Factors that Determine Your Investment Objectives

by Holistic Leave a Comment | Filed Under: Investments

Every investor has his own set of unique investment objectives. What he wants in life, i.e. his requirements and needs have a direct impact on his pattern of investment and its objectives.

Before getting into the seven major factors, try to answer the below question.

Table of Contents

  • Does the corona crisis deviate you from your investment objective?
  • Determining your requirements
  • Risk Tolerance
  • Income Level
  • Tax Liability
  • Total Wealth
  • Investment Time Horizon
  • Liquidity Payment
  • Other Considerations

Does the corona crisis deviate you from your investment objective?

If you feel deviated from your financial goals, you can follow these simple steps to be right back on track to meet your financial goals.

1. Create a coronavirus financial contingency plan

A contingency plan will keep you prepared for crises and to mitigate the risk. It prevents panic and promotes action.

“Intellectuals solve problems, geniuses prevent them”. – Albert Einstein

Don’t wait for a disaster to happen, be proactive, plan for the worst, and be prepared.

This is the list of things to do:

  • Prepare for emergencies
  • List your mediclaim policies,
  • Ensure family and COVID 19 coverage,
  • Create an information vault.

When you plan, you’re prepared to deal with the unexpected. When you’ve done everything to handle a bad situation, you can approach problems with a calm attitude. It creates flexibility, quicker action, and peace of mind.

To know more read: coronavirus financial contingency plan.

2. What should you do with your investments?

Due to the panic, you would have planned to

    a) Withdraw to avoid further losses and
    b) To time the market bottom.

“Panic is not an effective long-term organizing strategy”. – Starhawk

Hence avoid panic. Also avoid, timing the market bottom as it is difficult to know when to buy at the lowest price and when to sell at the highest price. You may sell your investments only to see the markets recover soon after. Holding your investments during downturns has been an effective strategy. Do you want to make any significant changes to your financial plan in a moment of panic? No? Then it’s better to stay invested.

“Patience is bitter, but its fruit is sweet.” Aristotle

If in an unavoidable financial need, you can use your debt investments, emergency funds, and as the last option, you can use the EMI moratorium facility.

For more info read: How to take advantage of the coronavirus crash.

3. Steps to recover faster and better from the Stock market crash.

a) By a portfolio revamp

Test your funds’ performance. If you have any poor-performing funds, it is better to move them to better performing funds before the stock market recovers. This is also called as portfolio optimization. Experiments on portfolio revamping worked. To know if you should redeem and reinvest now, read: How to revamp for faster and better results.

b) By a portfolio rebalance

After the stock market crash, your asset allocation would have changed. Then you are supposed to bring it back to the original asset allocation. This is portfolio rebalance. This enforces a level of discipline and also balances risk and reward. It allows you to buy assets at a cheaper rate and sell them at a higher rate.

“The most important thing you can have is a good strategic asset allocation mix. So, what the investor needs to do is have a balanced, structured portfolio – a portfolio that does well in different environments…. we don’t know that we’re going to win. We have to have diversified bets”. -Ray Dalio

For more, read: How portfolio rebalance is done.

c) Choosing on SIP

You can either stop, continue, or increase SIP.

There is a Dutch proverb that says: “He that has a choice has trouble”.

So to not fall into trouble, we tried finding the best choice on SIP. Two experiments with three investor categories were conducted, each of them chose an option. One to stop, another to continue and another to increase SIP (all during the market fall). In both the experiments, the one who chose to increase his SIP during the market fall earned the highest portfolio value.

    a. The one who stops his SIP incurs a loss.
    b. The one who continues his SIP gains better.
    c. The one who increases his SIP gains the highest.

Hence increasing SIP will help you recover faster and better.

For more, read: How to play smart with your SIP.

Have you heard of this proverb? “Time waits for no one”.

Yes as the saying, if you want your portfolio to recover faster, do these before the market recovers. This is the time to do it, as the time once lost is always lost. Adhering to the above steps will help you reduce your risks and also help you recover when the market recovers.

Let us understand the influencing factors behind our investment objectives.

Also, watch the video here!

1. Determining your requirements

Follow the path that helps you achieve your short-term and long-term goals. These can include funding the education for your children, or investing in your business for expansion, retirement or travel plans, etc. You can directly address your requirements by identifying these goals with your investment.

2. Risk Tolerance

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How much risk can you tolerate in the long run? Thus, understanding the risk factor is one of the major keys for choosing an investment scheme. The risk tolerance may differ for every investor, being a personal characteristic.

Our age and the emotional make-up, also largely impact our ability to tolerate risks. Risk tolerance levels may differ for every part of your portfolio.

3. Income Level

Your absolute income level as well as your return requirements, can largely effect your decisions relating to investment. Our income can also influence our risk preferences. Investors with higher income may be more inclined towards riskier strategies, as they can conveniently contribute to added investment capital at the time they face any losses.

4. Tax Liability

Your tax or any special tax circumstances are a few considerations that will help you determine ways to seek the maximum utilization from your tax-benefiting investment schemes.

5. Total Wealth

Our investment objectives should also consider the assets outside our portfolio. The value of a person’s expected pension, or his other retirement benefits may influence the return objectives and risk tolerance of his investment portfolio.

Moreover, our wealth levels can also impact the way we live (our lifestyle). A desired standard of living determines our risk tolerance factor, and should be considered with your investment objectives.

6. Investment Time Horizon

This may require us to ask questions such as:

  • When do you plan to draw the assets in your portfolio?
  • Do you prefer to choose short or long term maturity assets?
  • Do you have enough time for recovering from a descending market?
  • How important is capital preservation, for meeting an urgent financial need?

7. Liquidity Payment

This is about the ease with which you can transform your assets into cash, at or near to the latest fair market value.

This may require us to ask questions such as: do we need an investment portfolio to liquidate easily, or can we wait some more?

Liquid assets examples include cash at hand, cash at bank, fixed deposits and liquid funds

Other Considerations:

You must acknowledge your overall financial assets, expected income sources and obligations that affect your portfolio under management. Questions that come up here include the following:

  • Does your job have an adequate retirement plan, or will you have to fund the same from your investment portfolio?
  • Is a stock-purchase plan from your employer,an important part of your personal wealth or is it a diversification issue that arises when making other portfolio choices?
  • If you get tax-deferred or tax-qualified assets from your employment, what impacts does these have on your investment decisions?

Once your investment provides you the answers to all these questions, you will have surely succeeded in achieving all its objectives. Here, you may even seek help from your financial advisor, whose advice can be essentially valuable towards clarification as well as accomplishment of your investment objectives. However while doing this, you must ensure that he is not selling any investment product, therefore has no personal interest that can cause a conflict or bias in his investment advice.

Please share your views on these 7 major factors that determine your investment objectives. Were they useful to you?

To make all the successful and sound investment principles and techniques work in your favour, you may test-drive our wealth management services by opting for

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Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
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Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
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Sridhar
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Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
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6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
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Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
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Nellai B
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26. June, 2021.
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