Investing is both a science and an art. Science for all its principles in economics, asset allocation, portfolio management and whatnots. Art for the stroke of creativity it entails in putting together the mish-mash of financial products to suit an individual’s needs. It is a walking irony: simple in concept yet complex in details.

But whatever investment is, doing so without any framework is like being a headless chicken running around. Worse is not doing anything, leaving you a sitting duck for inflation and expenses that would have been otherwise averted if not for careful planning and execution.

Instead of having a well-thought-of method, taking an integrated and systematic approach to investing, a large majority of people just do it out of expediency, curiosity or novelty, if at all. To remedy that and to help investors, here are the four simple and easy steps that anyone can use for successful investing.

Step 1: Assess.

As Lao Tzu said, “The journey of a thousand miles begins with one step.” In our case, the journey to a million pesos begins with step one: Assess.

Often is the case when an investment is undertaken without the proper context, goals and objectives and realities in mind. The very first step in any exercise of investing is assessing your financial goals, your investment objective, and your present situation. Assess the whole picture: what you really want in life first, and where you are right now.

For instance, if you want to build up your retirement nest egg, determine the level of lifestyle, the number of years in retirement (best to estimate, not to commit, for you may overshoot it) and expenditure that you would want to live in. Take to mind that generally speaking, expenses would rise due to inflation and some items would have an increased allocation (like medical-related items, recreation) and some less (like food and clothing).

Next, determine at what how near or far to that goal you are in now. Have you funds and resources or are they still lacking? If lacking, how much funds is still needed? This can be also done not just for the retirement nest egg but also for other financial goals such as children’s education, a vacation, or home down payment.

With Step 1, you identify your goals, where you are right now, and the gap would have to be filled up. This gap would then be addressed by the second step.

Step 2: Design.

Once the gap has been identified, then it is time to design the investment strategy to achieve your goals. In this step, you check your cash flow, and then determine how much you can set aside for your investments. A tip: You may have to cut off some expenses and in order to reallocate to investing.

Let me stress that at this point it is very, very crucial to have a professional at hand. One who can sit down and guide you in the process of reallocating your resources, who is familiar with the different investment vehicles and who knows which can suit you and your targets the best.

Just as you do not take medicine for serious health concerns without having a checkup or prescription, so, too, with investments. It is best to seek professional help, advice and prescription. I cannot overemphasize the importance of a professional advice. It is that serious because what is at stake are your and your family’s financial future (unless you want to risk them and bite the bullet of uncertainty).

But, by and large, the basic menu for an investment portfolio includes time deposits, mutual funds, UITFs, stocks, bonds, and a host of others that can serve you well. The key is to know which instruments and in what mix can bring you to your goals. As Robert Kiyosaki wrote, investment vehicles are called “vehicles” because they take you to where you want to be.

Step 3: Do.

This step is one of the most “not done” by Filipinos. They don’t get into the act of investing. Sure, you have had your goals and decided to invest, but for some, if not the majority, investing just remains a goal or a wish, and not an action.

After having the tedious assessing and designing of your portfolio, it is imperative that you actually get a dip and implement the investment plan. It’s time to get down and dirty and hit the ground running. Go to a bank, mutual-fund company, stockbroker, or government securities dealer and being to open your investment account.

If you have your professional financial planner or adviser with you, they may have scanned the market already and recommended a few. This would have, of course, already saved you time and the hassle of again researching by yourself.

Step 4: Review.

Investing is not a one-time, big-time thing. It is a process that involves regular review.

This last part is often neglected, sad to say. Reviewing your portfolio periodically, at least annually, enables you to reassess if your design is still on track in reaching your goals. Think of it as like checking your car’s tires, gas, oil and battery. If they serve you well, drive on; if not, it’s time to change them.

Periodic review also takes into account the assumptions, projections and any changes that might affect your investment returns. An upward change in the average inflation rate that is used as a benchmark may drive your portfolio to seek higher-yielding assets to beat it all the more. Also, a change in lifestyle or even life goals can affect the structure and content of your basket of investments.

With these four easy and simple steps: Assess, Design, Do and Review, I hope that you would be on your way to investing success.

About the author
Rienzie Biolena, RFP® is one of the pioneering Registered Financial Planners in the Philippines. Apart from this profession, he is also a writer, speaker, and trainer on financial literacy. He is currently the CEO of Wealth Arki, Inc.