Financial planning is an ongoing process. It is like aiming at a moving target. It cannot be a one-time activity simply because its sole objective is to provide you an optimal route to your desired goals – which are always fluid.
We know that a financial plan should be practical and has to be customized for every individual because there are too many variables that make it impossible that one size would fit all.
Features of a sound financial plan:
1. Adapts to changing macroeconomics conditions
2. Flexible enough to accomodate your changing goals, aspirations and lifestyle
3. Should insure your primary goals and build towards your aspirational goals
4. Should be able to support you even when your income dynamics change
There are certain factors that can throw off even the most comprehensive financial plans. A loss of job, slack periods in business, changes in EMI’s due to rate changes, and prolonged critical illness can all affect budgets.
A Case for Balanced Portfolios
Regardless of your age and earning capacity, during times of uncertainty, one can do well to not have all the eggs in the same basket. Hence, sound financial planning is also about diversification. A balanced portfolio is almost always better equipped to cushion a fall while allowing you to get a fair share of the rallies.
An ideal balanced portfolio gives you a healthy mix of debt and equity while trying to achieve your financial goals. One of the key asset classes that allows you to achieve a balanced portfolio is a balanced mutual fund scheme from an Asset Management Company.
Features of a Balanced Fund:
a) Portfolio Diversification – Balanced funds provide you the diversification without having to invest in different asset classes. The debt : equity ratio is almost the same in such funds but a fund manager might tweak the allocation at times to capitalize on the changing market trends.
b) Automatic Portfolio Rebalancing – During volatile markets, your fund manager might rebalance the fund portfolio as per changes in the market. Therefore, when the market is positive, he or she might sell equity to maintain the maximum level and vice versa.
c) Peace of Mind – Balanced funds can save you the hassles of managing multiple investments across equity and debt, while giving you a decent chance of achieving good returns. Such funds are actively managed by a team of expert financial analysts who aim to achieve a pre-determined scheme objective.
Hence, balanced funds provide you an excellent opportunity to diversify, manage and achieve a balanced portfolio.
Other Considerations:
In order to shortlist the correct fund for your portfolio, you might need the assistance of your financial planner. Also, constant monitoring is required if you wish to maintain a balanced portfolio. Most of us waver here due to lack of discipline and knowledge.