What is strategic indexed financial planning of our assets?
Posted: Wed Dec 11, 2024 10:59 am
Very often we worry more about knowing what return we can get for our money and little about doing good indexed financial planning for our assets. And in reality the latter is much more important than the former. Or put another way, if we do the latter well, it is likely that we can obtain good returns for some part of our assets and we can live more peacefully. Let's see why and how.
Financial objectives of indexed financial strategic planning
At inbestMe we believe that it is important to manage our assets based on our financial goals. At inbestMe we believe that by combining different indexed accounts it is possible to fully plan our financial life. This is what we call indexed financial planning.
Let's review first: What do we mean by financial goals?
One that is easy to understand is to accumulate money hong kong gamblers phone number data for our retirement. Almost everyone is aware that at some point they will not be able or want to work any more and will need a supplementary income or pension to be able to maintain or have an acceptable standard of living.
But there may be many more like this:
An emergency fund, or safety account.
Buying a flat.
Our children's university.
A special holiday.
Or simply try to be rich, accumulating capital.
If we do not have these objectives well defined, we can think about them in another way, for example in the possible or probable horizon where we may need the money:
Immediate.
In 2 or 3 years.
Not before 5 years.
Beyond 10 years or for an undetermined long period.
Download 7 long-term profitable investments
A practical example
Let's imagine a person who has been lucky enough to accumulate 550,000 euros in his life and wants to make sure that he gets a good return on this money. The most correct approach is to think about the best way to structure his assets before thinking about the return he can get, because in reality the return will be conditioned by how he structures it, the horizon of each person and the risk he can assume for each objective based on that horizon. Two types of approach would be:
Equity
Average on investment 5.8%
Operating assets
It is the one that may be needed most in the short term.
Within it, clearly separate the money you may need in the next 1 to 2 years and the next 15 years.
That it is not advisable to invest (it obtains 0%) and, on the other hand, a security account that, since it is already more than 2 years old, can decide to invest with low risk (Profile 1 has an expected return of 1.95%). Another more prudent option would be not to invest, but it would be subject to the deterioration of inflation.
Accumulation assets or income
Set aside an additional amount as an emergency account with a medium-low profile that would cover a horizon of 3 to 5 years or an emergency and for which you would obtain a 3.75% return.
The advantage of this scheme is that from this point on, the rest of the capital is no longer needed for the short-medium term. Therefore, you can have a much longer horizon and invest with a riskier profile, for example the largest amount with a profile 7 with an already high return of 6.5% and even another amount for the longer term that you will not need until retirement with a profile 9 (expected return of 7.5%).
The average total return expected to be obtained is 5.4% on the total or 5.8% on the amount invested.
Obviously, this distribution is just an example and is subject to opinion. Each investor must structure their assets in a way that makes them feel comfortable. And the distribution does not have to be static and should change with our needs.
Index Funds Investment Guide
Equity structure 2
In this second approach, the saver/investor does not spend much time structuring his assets:
Equity Structure 2
Aim Horizon Profile Capital Segment Expected profitability Expected performance
Not Defined Money for everyday life + security - Do not invest 85.000 € 0% -
Without a specific objective 5 years average Profile 5 465.000 € 1.95% 20.985
€550,000 20.985
Total average 3.8%
Average on investment 4.5%
In this case something similar to the table above may occur.
The amount that stops being invested is higher.
And the worst thing is that by not “breaking down” your accumulation or income assets, you are not clear about your time horizon in sections and will probably obtain a lower return than a more structured approach.
The average total expected return is lower in this case: 3.8% of the total or 4.5% of the amount invested.
Conclusion
At inbestMe we are in favour of managing our assets by objectives and in cases like this in well-separated accounts. Indexed financial planning is perfect for achieving this.
The advantages are very clear:
On the one hand, it is likely that we can obtain a higher return by very clearly differentiating the capital where we can take more risks, as we have seen in our example.
But above all because it has very clear advantages from a psychological point of view .
Each segment has its own well-assigned portion. In asset structure 1, we have 3 years well covered and an “emergency account” that covers us for 5 years of our possible needs.
The longer-term section, although it varies more (a higher profile will be subject to more volatility), should not matter much to us because we have our short- and medium-term needs well covered.
You can add multiple accounts to your user account by clicking in your customer area by clicking here :
Financial objectives of indexed financial strategic planning
At inbestMe we believe that it is important to manage our assets based on our financial goals. At inbestMe we believe that by combining different indexed accounts it is possible to fully plan our financial life. This is what we call indexed financial planning.
Let's review first: What do we mean by financial goals?
One that is easy to understand is to accumulate money hong kong gamblers phone number data for our retirement. Almost everyone is aware that at some point they will not be able or want to work any more and will need a supplementary income or pension to be able to maintain or have an acceptable standard of living.
But there may be many more like this:
An emergency fund, or safety account.
Buying a flat.
Our children's university.
A special holiday.
Or simply try to be rich, accumulating capital.
If we do not have these objectives well defined, we can think about them in another way, for example in the possible or probable horizon where we may need the money:
Immediate.
In 2 or 3 years.
Not before 5 years.
Beyond 10 years or for an undetermined long period.
Download 7 long-term profitable investments
A practical example
Let's imagine a person who has been lucky enough to accumulate 550,000 euros in his life and wants to make sure that he gets a good return on this money. The most correct approach is to think about the best way to structure his assets before thinking about the return he can get, because in reality the return will be conditioned by how he structures it, the horizon of each person and the risk he can assume for each objective based on that horizon. Two types of approach would be:
Equity
Average on investment 5.8%
Operating assets
It is the one that may be needed most in the short term.
Within it, clearly separate the money you may need in the next 1 to 2 years and the next 15 years.
That it is not advisable to invest (it obtains 0%) and, on the other hand, a security account that, since it is already more than 2 years old, can decide to invest with low risk (Profile 1 has an expected return of 1.95%). Another more prudent option would be not to invest, but it would be subject to the deterioration of inflation.
Accumulation assets or income
Set aside an additional amount as an emergency account with a medium-low profile that would cover a horizon of 3 to 5 years or an emergency and for which you would obtain a 3.75% return.
The advantage of this scheme is that from this point on, the rest of the capital is no longer needed for the short-medium term. Therefore, you can have a much longer horizon and invest with a riskier profile, for example the largest amount with a profile 7 with an already high return of 6.5% and even another amount for the longer term that you will not need until retirement with a profile 9 (expected return of 7.5%).
The average total return expected to be obtained is 5.4% on the total or 5.8% on the amount invested.
Obviously, this distribution is just an example and is subject to opinion. Each investor must structure their assets in a way that makes them feel comfortable. And the distribution does not have to be static and should change with our needs.
Index Funds Investment Guide
Equity structure 2
In this second approach, the saver/investor does not spend much time structuring his assets:
Equity Structure 2
Aim Horizon Profile Capital Segment Expected profitability Expected performance
Not Defined Money for everyday life + security - Do not invest 85.000 € 0% -
Without a specific objective 5 years average Profile 5 465.000 € 1.95% 20.985
€550,000 20.985
Total average 3.8%
Average on investment 4.5%
In this case something similar to the table above may occur.
The amount that stops being invested is higher.
And the worst thing is that by not “breaking down” your accumulation or income assets, you are not clear about your time horizon in sections and will probably obtain a lower return than a more structured approach.
The average total expected return is lower in this case: 3.8% of the total or 4.5% of the amount invested.
Conclusion
At inbestMe we are in favour of managing our assets by objectives and in cases like this in well-separated accounts. Indexed financial planning is perfect for achieving this.
The advantages are very clear:
On the one hand, it is likely that we can obtain a higher return by very clearly differentiating the capital where we can take more risks, as we have seen in our example.
But above all because it has very clear advantages from a psychological point of view .
Each segment has its own well-assigned portion. In asset structure 1, we have 3 years well covered and an “emergency account” that covers us for 5 years of our possible needs.
The longer-term section, although it varies more (a higher profile will be subject to more volatility), should not matter much to us because we have our short- and medium-term needs well covered.
You can add multiple accounts to your user account by clicking in your customer area by clicking here :