Growth through investing is qualified by investment objectives and risk tolerance whilst structured by investment timeframes and diversification through a process of continual review to address change and potential opportunities.
Income is the 2nd foundation to the structure of a financial plan and its significance is simply the means to maintaining and developing a quality of life based on needs and wants - from putting food on the table, paying utilities and education to celebrating important events to taking holidays including the purchase of personal assets and funding retirement. An essential feature is its ability to grow over time to offset a rise in inflation or simply put - the cost of living.
Growth is the 3rd foundation to the structure of a financial plan and its purpose is to build on monies which have been saved for future needs and wants. Growth in this case represents potential and how that potential might be realized by selecting investments that provide an opportunity based on outlined investment mandates and supported by historical outcomes – though past performance is never a guarantee of future outcomes.
In the context of a financial plan, we consider growth relative to money being invested as established through the “Investment Advice and Planning” stages as outlined in “Module 1” in which the “Current Situation and Experience” of the investor becomes key to the direction the advice will take. We start with considering the experience had by the investor as this will begin to shape the focus of the advice. As we review the investors current situation, we are provided a base from which to consider what our next step in the selection of investments needs to take. Once growth outcomes desired have been established we can concentrate on investment timeframes and start setting out the level of diversification needed.
Sources of income can vary but the need for a consistent, stable and growing source over time is essential. It may be generated from multiple sources and these sources may very well change over time and based on the stage of life a person has reached. Essentially putting a portion of an income aside for the future is a key element to ensuring that future needs and wants can be met.
