The Benefits of Financial Planning — Investment Management

One of the major components of a financial plan is a complete, objective analysis of your investment portfolio. Note, a portfolio analysis is only one element of a comprehensive financial plan. If your financial advisor presents you with a review of your investments but not a retirement, insurance, estate, and tax analysis, you do not have a truly comprehensive financial plan.

A financial plan should be objective in nature. If the investment section of the plan revolves around pitching certain products, you may be working with a commission-based financial advisor. From my experience, the best comprehensive financial plans are developed by fee-only financial planners who are not motivated to sell products.

The investment section of a financial plan should begin with general, basic financial principles, such as determining an appropriate asset allocation between stocks, bonds, and cash. After identifying an asset allocation, the investor can then narrow their focus and develop a diversification strategy. Only after committing to an asset allocation and a diversification strategy is an investor ready to again narrow their focus and evaluate certain stocks, bonds, mutual funds, or ETFs.

Click on this link to learn more about these investment management techniques.