Attitude to risk

One of the important aspects of financial planning is understanding your risk tolerance. For example if traditionally you have a conservative attitude towards risk then you may want to steer clear of those investments where there might be a huge return. What you ask isn't that good? A 50% return might sound pretty mouth watering but remember that if it goes up 50% it can also mean that it may go down 50% as well. You conservative types still interested? I bet not a lot of sleep would be had by people like that if that is what they are invested in. On the other side of the equation the ultra-aggressive investors may grow a little tired of single figure returns. They want to be in something a bit more interesting, a bit more exciting.

So, what do you have to do? First of all, clarify what you are saving/investing for. What is your time horizon? When do you want the money? If you want the money in a year, then maybe the local bank is the best place for it. What if you want the money is 30 years? Then you could start a regular savings plan. At the start of the plan because of your time horizon you can take some risk. maybe invest in equities and hedge funds. In the middle stages you would then become a bit more strategic with your investing and then towards the end of the plan because you have built up a large amount of money you would become more conservative as you head towards maturity of the plan.

So, what are you? Are you conservative? Are you aggressive or are you in between?

Your personal financial planner

In Robert Kiyosaki's best selling book Rich Dad Poor Dad he writes that you must start to invest early in life and definitely have a retirement plan. He suggests hiring a financial adviser that you trust to guide you in the wonderful world of investing.

So, what should you look for in a financial adviser? Obviously the first thing  to ask yourself is do you trust him or her? For a great number of people the relationship is more important than the actual advice so you may like an almost friendship relationship with your financial adviser.

The next thing that is important is experience and qualifications, if the financial adviser has just started his career, his knowledge may not be up to scratch and you should progress with caution, that is not to say the new adviser can't do the job it maybe worth your while to talk to other people.

Does the financial adviser go through your current financial situation with you? If the adviser asks a host of questions then you know that you are dealing with someone who is on your side. If he or she just shows you a product straight of the bat he or she may have other things on their minds. How much commission they can make from you for example.

Go ahead ask your financial adviser how they are paid. Some advisers will skirt the issue. If they are straight up with you then you could be dealing with someone with integrity who is looking out for your best interests instead of their own.

Remember their are a number of financial advisers out their and you don't have to be stuck with the first one you meet.