Investment Planning East Tennessee: Key Steps
An investment portfolio is a tool. Before selecting investments, investors need to understand what the money is intended to accomplish.
Investment planning in East Tennessee can help connect savings and investments with goals such as retirement, education, business transitions, charitable giving, or legacy planning.
Five Questions Every Investment Plan Should Address
1. What Is the Goal?
An investment plan should begin with a specific objective. A retirement portfolio has different requirements from money being saved for a home purchase in three years.
2. When Will the Money Be Needed?
Time horizon affects how much market fluctuation an investor may be able to tolerate.
3. How Much Risk Is Appropriate?
Risk tolerance is personal, but risk capacity also matters. Someone who needs portfolio withdrawals soon may have different constraints from someone investing for decades.
4. What Are the Tax Considerations?
Account type, investment income, capital gains, withdrawals, and other factors can affect after-tax finances.
5. How Will the Plan Be Reviewed?
Investment planning should account for changes in income, spending, family circumstances, markets, and financial goals.
Investment Planning and Retirement
Retirement planning often requires the investment plan to work alongside an income strategy. Investors may need to coordinate portfolio withdrawals with Social Security, retirement accounts, required minimum distributions, taxes, and other income sources.
A firm such as ProffittGoodson describes investment planning as part of a broader process involving retirement income, tax considerations, and estate planning.
Investment Planning for Major Transitions
Investment plans often need attention when a household experiences a major financial event.
Examples include:
Selling a business
Receiving an inheritance
Retiring
Receiving a large equity compensation award
Selling real estate
Beginning charitable giving
Managing assets after a spouse's death
These events can change the size, tax characteristics, liquidity, and purpose of an investment portfolio.
What Does an Investment Plan Include?
A written investment plan may document:
Goals
Time horizon
Risk considerations
Asset allocation
Account types
Liquidity needs
Tax considerations
Rebalancing guidelines
Review schedule
The exact structure depends on the investor and advisor.
Conclusion
Investment planning East Tennessee investors undertake should begin with the purpose of their money and continue through risk, taxes, liquidity, and portfolio decisions. A clear investment plan can provide a framework for evaluating financial choices as circumstances change.
FAQ
What is wealth planning?
Wealth planning coordinates financial decisions involving investments, retirement, taxes, estate matters, business interests, and wealth transfer.
Is wealth planning only for high-net-worth families?
Wealth planning can be useful for anyone whose financial decisions have become interconnected, although the scope of services may vary.
Can wealth planning include estate planning?
It can include estate planning coordination, while legal estate documents should be prepared with an appropriate attorney.
Does wealth planning include investment management?
Some wealth management firms provide investment management as part of their services. Ask what is included in the engagement.
This material is for informational purposes only and does not constitute legal, tax, or investment advice. Please consult appropriate professionals before making decisions.
DISCLOSURES: The information provided in this letter is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy, or investment product, and should not be construed as investment, legal, or tax advice. Proffitt & Goodson, Inc. makes no warranties with regard to the information or results obtained by third parties and its use and disclaims any liability arising out of, or reliance on the information. The information is subject to change and, although based on information that Proffitt & Goodson, Inc. considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data suppliers (Interactive Data Corporation, Morningstar, etc.). The Market Categories illustrated in this Financial Market Summary are indexes of specific equity, fixed income, or other categories. An index reflects the underlying securities in a particular selection of securities picked due to a particular type of investment. These indexes account for the reinvestment of dividends and other income but do not account for any transaction, custody, tax, or management fees encountered in real life. To that extent, these index numbers are artificial and cannot be duplicated in real life due to the necessity of paying those transaction, custody, tax, and management fees. Industry and specific sector returns (technology, utilities, etc.) do not account for the reinvestment of dividends or other income. Future events will cause these historical rates of return to be different in the future with the potential for loss as well as profit. Specific indexes may change their definition of particular security types included over time. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of Proffitt & Goodson, Inc. Past performance does not guarantee future results.