Different needs need different portfolios

Financial planning is not an art.. its quite simple really, all we need is some commonsense.

We plan for different things in life,  we plan for new things and new requirements all of our lives - even when we will be grandparents.

The most important thing in this is the timeframe and the risk than one wants to associate with that need.

Lets explain the two dimensions in a little bit more detail.

Timeframe : this is very simply the time that you have to fulfil the need that you have defined .

Risk: this is the inverse of the importance of your need. So if it is extremely important you want lower risk.

Here is a sample chart on the two dimensions 

Need.                                   Timeframe.                                   Risk allowed 

Child's education.                15-18 years away.                        Low

Childs marriage.                    22 years away.                            Low

International holidays.             3 years away                              High 

Now of course my importance to these needs may be different to yours , so feel free to create your own list and importance.

So we were discussing the need for different portfolios for different needs . The above discussion gives you a good view on why these portfolios need to be different .

Here are some key requirements to understand if you need to have different portfolios 

1, if the time frames are different .. Eg the need for international holiday and the child education ... Keep them separate.

2. Different portfolios enable you to track better. .. So keep them separate where this will be critical 

It's not really rocket science.. Make the table of your needs and define your portfolios.

It's simplefinancialsense