Podcast 19th February 2016
Hard work leads to success in whatever field you choose to be in. You work hard to achieve your career goals and then you would like to make sure that your hard work pays off when you stop working. However are your investments working hard for you as well? Your financial strength when you stop working will depend on how well your investments do over a period of time.
Financial goals could be to buy a house, educate your children, enjoy retired life and leave behind a good inheritance. You may also want to buy expensive cars, spend on luxury holidays and even want yachts. All these financial goals are achievable if you make the right investments.
A good connect between your financial goals and your investments must be achieved otherwise you are at a risk of not meeting your financial goals. How does this work? For example, if your goal is buy a house in a few years time and home prices are rising every year by 10%, your investments too must earn more than 10% for you to buy the house. Investing in assets that earn less than 10% will not help you in your quest to buy a house.
Similarly, education costs are rising exponentially and far outpace returns from fixed income investments, children education schemes of Insurance Companies and other guaranteed return products. You must invest in growth assets such as equities or even real estate but at the same time you must also be smart about the timing. Timing matters as investing at times of high valuations leave you susceptible to market corrections and your investments may actually lose value at the time when your children have to go to college.
Monitoring your investments then becomes extremely important for you to make sure you are on track to achieve your financial goals. The market environment has become more complicated and you would require to build knowledge of the factors that affect your investments. Even if you have outsourced your investments to money managers or financial advisers, you must understand what they are doing with your money and see if they are on the same plane as the investing environment. You do not want a situation where your money manager or adviser is taking excessive risk when the environment itself is risk averse.
Think of your investments and financial goals as practising to run a marathon. You build up for the marathon slowly and then progress towards running the full marathon even as you keep an eye out on your health. You cannot stagnate or progress too slowly in your training else you may injure yourself while running the marathon.
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