1: Understanding thyself i.e., one's own self.

It is very important, that before the onset of the financial journey, you need to get prepared for a long journey. It involves instilling a mindset to go through a real grind. Understanding yourself through financial goals and developing your risk profiling is a crucial step in financial planning. Behavior is a very critical aspect. It calls for the creation of behavior. It helps you align your aspirations, needs, and risk tolerance with your investment strategy.

Here are some steps to help you with this process:

Self-reflection and Goal Setting:

Please allocate important time to reflect on your life goals, both short-term and long-term. These goals could include- buying a house, funding your children's education, retiring comfortably, or even starting a business.

Be specific and quantify your goals in terms of money and timeframes. This will give you a clear picture of what you need to achieve. Please put it in writing as it gives a proper perspective.

Assess Your Risk Tolerance:

Risk tolerance refers to your ability to handle market fluctuations and potential losses in your investments. Understanding your risk tolerance is crucial as it will determine the investment options that suit you best. Evaluate your financial and emotional capacity to handle risk. Consider factors such as age, income stability, investment experience, and your reaction to market volatility. This can be achieved by performing the risk profile. A risk profiling questionnaire is a common tool used by professionals to gauge your risk tolerance and investment preferences.

Seek Professional Advice:

It's advisable to consult with a financial advisor or planner. They can help you understand your financial goals better and conduct a formal risk profiling exercise. In case, you want to embark on this journey using the DIY model, it is important to understand and devote time to various concepts of the financial planning journey.

Diversification and Asset Allocation:

Based on your financial goals and risk profile, your financial advisor can help you design an appropriate investment portfolio. Diversification is crucial to manage risk effectively. It involves spreading your investments across various asset classes like stocks, bonds, real estate, and cash.

Reassess and adjust regularly:

Your financial goals and risk tolerance may change over time due to various factors like life events, economic conditions, or personal preferences. It is better to periodically, review your financial plan and adjust your investments accordingly to stay on track with your goals.

Be Realistic:

While setting financial goals, make sure they are achievable and realistic. Avoid setting goals that are too ambitious or unattainable, as it may lead to disappointment and frustration.

Stay Disciplined:

Once you have a well-defined financial plan, stay disciplined in following it. Avoid making impulsive decisions based on short-term market fluctuations.

Understanding yourself through financial goals and risk profiling allows you to make informed decisions about your finances. It empowers you to build a customized financial plan that aligns with your aspirations while managing risks effectively. Remember that financial planning is an ongoing process, and it's essential to reassess and adjust your plan as circumstances change.

Please fill the risk tolerance questionnaire using this link to find your risk tolerance. Please write down your important goals with your spouse jointly. It gives a very good perspective on the coming financial travel.

Jai Hind

Seshadri Krishnaswamy Iyengar

Mentor – Stockeazy Financials