May 22, 2014

Read this BEFORE You Buy A Financial Product!

By Aldric

LEGAL DISCLAIMER: What you find in this entry, and this blog, are opinions of Aldric Tinker based on observation, reading, research and experimentation. The author ensures the accuracy of the information at the time of writing, but it is not a definitive guide; so the author cannot and will not assume any liability for the consequences of adopting these opinions. As a consumer and investor, you are required to perform your own research and discuss with financial professionals near you BEFORE implementing or adapting the ideas herein.

When it comes to financial products, we mostly buy according to the recommendation of licenced sales professionals. Your insurance plan, for instance, or your mutual funds, are usually bought because someone said it was good. Probably past returns or claims were satisfactory. However in this lies the biggest problem: acquiring without understanding your own needs.

I am sure many of my contemporaries in the financial products line mean well. An insurance agent, for instant, do want you to have the coverage and protection. At the end of the day, however, you have to ask yourself “Do I need this? Why do I need this?”

When talking about financial objectives, you have to know what you want. If, for instance, you want to build a portfolio of passive income within the next 3 to 5 years, you need to adopt a strategy unique to your capability and needs. But if your aim is to buy a RM500,000 house in 10 years, you need a different strategy altogether.

Here are examples of different financial goals:

  • Home Ownership
  • Education fund for kids, grand children, employees, yourself
  • Retirement income
  • A long term trip around Asia or the Americas
  • A regular quarterly income yielding RM5,000 per quarter
  • Securing a legacy of RM500,000 to RM4 million
  • Creating a private retirement fund with at least RM3,000 in annual contributions
  • Estate planning for those in the golden years
  • Increasing cash flow through cash not needed for medium to long term
  • Accelerating payment of home or personal loans
  • Creating an annual income through annuities after contributing for 5-10 years

Based on these goals, you see what do you need in place. From there you can properly decide how all the financial products fit into your long term and emergency plan. Financial consultants and planners have the duty to guide you. At the end of the day, you are responsible for the decisions you made.

Remember, we want a system in place for you. Not just having things.