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Personal Financial Planning, Fourth Edition by Wai Mun Fong, Benedict Koh

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8. Risk Profiling and Asset Allocation

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Introduction

Every individual has financial goals but not many know how to go about achieving them. They may not have the investment knowledge or expertise to design an investment plan that optimises their savings. Consequently, they adopt the passive approach of leaving all their savings in deposits. By doing so, they have already made an asset allocation decision, one that is very conservative. They soon realise that this simple investment plan will not work as it is not compounding savings fast enough to keep up with inflation. They need to invest more wisely so that their savings earn sufficient returns ...

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