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Why You Should Plan Financially

This article is reproduced with permission from
Normandy Advisory Services Sdn. Bhd (Licensed Investment Advisor)
15th Floor Menara Multi-Purpose, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur
Tel : 03 - 469 5560 Fax : 03 - 294 5561

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Why invest?

Why invest? This sounds a pretty simple question but it is sad to note that there are many people out there who do not understand precisely the meaning of investing. There are some individuals who invest without knowing the real objectives behind their own investments.

Investments simply means executing a financial plan or to take advantage of an array of financial products to help grow your money. There are essentially three main reasons why you should invest;

- To meet your personal financial goals

which means one should know his or her personal financial needs or objectives before starting up any investment plan.

- To provide for retirement
which means one should place greater emphasis on long-term financial planning.

- To beat inflation

inflation, the devil of any economy, shrinks the value of our hard-earned money.
What you earn today will likely be reduced in the future.

Different people have different needs

Different individuals tend to have different financial needs. What are you trying to achieve? Is your money is working hard enough to accomplish your needs?

Before constructing an investment portfolio, you must be aware of your investment objective and that any return that you achieve later in the future will meet your specific investment needs such as financing your house loan, supporting your child's college fees and your second car.

In short, before investing, you should have a clear investment objective. You should identify all your financial needs both on the short and long-term basis.

know your investment risk

Just imagine the impact of the recent famous "freefall" of the Malaysian stockmarket that would hit an investor had he or she allocated some funds in the stockmarket to hunt for "quick" profits.

Although it produces a higher level of retu r n, investing directly into the stockmarket particularly the smaller companies in the second board normally carries with a higher level of risk which may not be acceptable to many people.

Thus you should make sure that you know how much risk is associated with the type of investment that you choose. You should seek to understand the direct relationship between risks and rewards.