EOY Planning: Review Your Financial Needs and Goals

Taking the time to think about what you really want from your investments.

As 2021 comes to a close, it’s natural to think about where you’ve been and where you’d like to go. During this time, you might also be thinking about your goals — personally, professionally, and financially. Financially speaking, perhaps you built up your emergency fund or finally paid off that credit card bill that’s been haunting you for years. If so, congratulations. Or perhaps your situation has changed and you’d like to set some new investment or financial goals. Before you do this, it’s important that you first reflect on what your current financial needs or lifestyle goals are to help you define what you want from your investments and your financial plans for the year ahead.

To further assist you, we’ve outlined a few things you might want to consider.

Think About The Reasons Why You Are Investing

To begin, you need to think about why you are investing. Are you looking to earn higher returns than those seen on your savings or are you putting money aside to cover the costs of a certain goal such as the education of your children? Perhaps you are planning for retirement? Whatever the reasons, understanding those now will help you determine your investment objectives and how your investments should be managed.

Determine How Long You Want to Invest For

If you have a certain investment goal, then there is a chance you have a date in mind for it. If you have several goals, the dates might be spread out. As investments can rise and fall, short-term goals should use cash savings while investments should be used for longer-term goals.

• Short Term – While most investments are for a minimum of five years, there are some short-term options. However, this will involve using cash savings.
• Medium-Term – When you commit for a minimum of five years, you will have a range of options available for your portfolio. These may consist of shares, bonds and other assets which should be carefully selected and monitored for performance by your financial planner.
• Long Term – If you begin investing at a young age, then you could have decades before you begin drawing money from your investments. With more time on your side, you might be open to taking on more investment risk to get higher returns. On the other hand, as you get closer to your retirement age, you may want to sell some of these riskier investments and opt for safer investment options to protect your wealth whilst still growing it. The amount of time you have to invest your money will impact your investment returns. Generally speaking, the longer you invest, the higher your returns may be although this can never guaranteed.

Create an Investment Plan (And More Importantly, a LifePlan)

Once you have determined your goals, we can create (or adjust) your LifePlan which will include a tailored investment strategy for your portfolio based on your life aspirations. The purpose of LifePlan is also to help you to visualise your financial future, to understand the implications of your “what-if” questions and ultimately, to ensure that you will be able to live the life you want for yourself and your loved ones.

Focus on Portfolio Diversification

Your portfolio will be protected if you have a diverse set of investments. When you hold different types of investments, you are mitigating risk and protecting yourself from any market fluctuations as each investment type reacts differently to certain economic conditions. You can diversify your portfolio in various ways through funds that invest in different investment types, countries, markets, companies and industries. The amount you invest in each is known as your ‘asset allocation’.

Review Your Portfolio Regularly

You don’t have to wait until the end of the year to conduct a full investment or financial review. Although your financial planner will review your portfolio on a regular basis, it’s important to check it to ensure that it is performing in line with your goals as these may change over time.

• Financial Goal Changes – The only constant in life is change. As you experience any major changes in your life, your financial goals should also be modified. Perhaps you have decided to have a child, send them to university, or you might be moving to another country. If your life plans have changed, this could impact your ‘investment time’ or your risk preference. Your financial plan should be dynamic and change over time, therefore we suggest you look at your portfolio to see whether it continues to work towards your financial goals.
• Asset Allocation – Investment management involves asset allocation. Your portfolio might have aligned with your desired asset allocation at one point in the year but your portfolio’s ongoing performance might change this. If your asset allocation sits beyond your original targets, then it might be worth changing your portfolio to get it back on track.
• Diversification – While your portfolio may have a proper asset class balance, you should also make sure that you diversify within each asset class.
• Performance – Look at your portfolio and see whether there is anything that needs rebalancing. You might also look at selling to offset capital gains that you might choose to take through the year.

Other Considerations

Aside from reviewing your investment goals, we also recommend you review the following:

• Your pension contributions and seeing how your pensions are performing- Maximising the amount you contribute takes advantage of available tax deductions and employer matching contributions.
• Your tax position if your job or income situation has changed anytime throughout this year.
• Your estate plan- Ensure your overall estate plan, including your will, trust and power of attorney are current.
• Your beneficiaries- Double-check that changes or updates are not needed on your estate or accounts. It’s all too common to leave an ex-spouse, for example, assigned accidentally.
• Any insurance policies you might have and decide whether you need additional cover to protect you from the unexpected.

Need help? At Pyrmont Wealth, we want to help you manage your life and money in a whole new way. If you need any help with your short-term and long-term financial goals as well as your end of year financial planning, book your FREE initial consultation with one of our Hong Kong based financial planners here. We would be happy to assist you with all of your financial planning needs.

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