My budget, my well-being
Do you find yourself brooding about your financial situation and not achieving your goals for saving and investing for your future? Making a financial plan can…
Following the 2007-2008 financial crisis, interest rates on savings accounts hit rock bottom, even approaching zero. Add inflation, meaning rising prices in almost every sphere, and it is easy to understand that investing money so that it gains value over time is a more attractive proposition than leaving money lying dormant in an account.
The key words in this article will therefore be “duration” and “objective”. And in fact the aim of your strategy will be to create value over time.
Remember: when you had to define your investor profile, this took into account the MiFID II regulations, which require all banks to define customers’ investor profiles, in order to be able to advise them about their investments. This profile is the foundation used to decide upon your strategy.
If you want to be advised by your bank, it is crucial to know your risk sensitivity, your financial situation and your performance objectives, so as to determine the type of investment that best suits your needs. Namely, whether your investment will entail high or low risk, and a high or low yield. The more risks you take, the higher your hoped-for yield, but are you suited for this type of investment? Why exactly are you investing? Your investor profile is designed to answer exactly these questions and enable you to receive advice that matches your criteria.
Your investment horizon determines the form your investments will take. For example, if you are investing for the short term, for 1 or 2 years, under no circumstances will you be advised to invest in a product described as “volatile”. Such products are far too risky to expect that the sum it is hoped to reach in 1 or 2 years’ time will actually be achieved. Imagine that, at the time you need the money, markets are not at their best, and so you sell at a loss at that point. In this case, your investment will not have achieved your initial objective, and that is not the aim of investing.
When you invest, you are the one to set your horizon, i.e. the expected time scale and anticipated yield.
Investing everything in one security is definitely not desirable. Indeed, diversifying your portfolio protects you against major price fluctuations that might occur on the financial markets. So spread your investment over different periods of time, and build a portfolio of at least 20 different securities.
You are the master planner of your investments, and it is you who sets your limits and your expectations. However, you can choose to be guided by an advisor at any time, because if doubts arise, it is better to have expert help than to wander around lost.
Learn not only to know yourself, but also to listen to yourself.
Have clear ideas from the outset, and if you feel unable to go it alone, approach your bank for support and guidance.
Be honest and transparent with your advisor as regards your expectations and your limits.
Trust your banker; remember everything you disclose will be treated confidentially.
Be patient 😉.