A Sequence To Guide Your Saving And Investment Journey

Mr. Inv (Investor) to Mrs. FA (Financial Advisor): Hi. I have some surplus money right now and I was planning to perhaps invest in this new fund idea.

- Ajit Menon

Mrs. FA: That’s a great thought. May I ask what prompted you to take this decision?

Mr. Inv: My colleagues in office have invested in this scheme recently and they were talking about it. This theme has done well in recent times and looks good for the future. I also heard on business channels about the bright prospects of such companies. I want to participate in this future trend.

Mr. Inv: Oh, is that so! But isn’t investing in equities, especially such new age stocks for the long-term the right thing to do? Could you please elaborate?

Mrs. FA: Yes, it is. However, what really matters is the sequence of financial planning. The first steps are to evaluate your insurance coverage and emergency corpus based on a solid budgeting exercise before looking to invest.

In the above conversation, if you identify with the thoughts of investor Mr. Inv, then let me explain the importance of sequencing in financial planning.

Financial planning is both an art and science in my opinion. While there are well-accepted rules for the same, each individual and his requirements have some unique elements.

This makes customization an inherent part of financial planning. Often, there are a range of issues to take care of before one settles for a customized financial plan: taxation, associated costs, flexibility, cash flows, insurance, type of instruments among other things. A seasoned financial planner can help sort out this aspect. However, the onus is on the investor to follow the right sequence of financial planning activities.