Developing a Sound Financial Strategy

Do you have a financial plan?

Are you buying investments because they fit in with your strategy? or

Are you investing by reacting to recent events?

A sound financial strategy can help keep you from being stampeded into making poor investment decisions.

A Sound Investment Strategy

There are three main considerations you need to bear in mind when developing a sound investment strategy:

• Investment objectives
• Time frame
• Risk tolerance

Investment Objectives

There are four basic objectives associated with any investment:

• Return of principal
• Income
• Growth
• Tax benefits

Time Frame

The time frame you have until you reach your investment goals can have a tremendous impact on the investment categories you choose. Changes in the financial environment and fluctuations in the financial markets can make a difference in your return.

If, for example, your investment goal is investing for a down payment on a house next year, you generally wouldn’t want to invest all your money in aggressive investments that carry a lot of risk. You simply wouldn’t have time to recover from heavy losses.