Why HNIs Need Financial Planning | My Money Sage

Is making your wealth grow so difficult? Of course! It is a lot of hard work, especially if you have a huge surplus. Being a High Networth Individual and having a lot of money to handle is common. When you have a lot of money, it will not be easy to re-arrange the mix of assets that you may invest in as the years go by. This will include investment products like stocks, MF, ETFs, fixed-income options, structured products and commodities such as gold, silver, as well as Real estate and private equity, among others.

Why HNIs Need Financial Planning
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As you may know, the conditions in the different investment markets such as stock or bond markets, keep changing dynamically. So, when you have too many investments, it is not easy to manage all of them. Also, if you have hit it big in one asset class and take it easy, you might miss checking out the loss-making investments that need to be got rid of. This is where a financial plan might help. Having a financial plan will help you earn income, minimise losses and maximise returns for your portfolio. The financial plan will ensure that your portfolio is aligned to your risk profile and financial goals. Here are more reasons why HNIs need financial planning.

Using money to make more money

As you try to progress from handling a few crores to hundreds of crores, doing the same thing over and over again may not be enough. You need to figure out the best investments that will boost your portfolio. You need to revisit your asset mix and goals more frequently.

The more money you make, the more will be the need for a better financial plan. As you make money, your portfolio mix will keep changing. For instance, your asset allocation was 70:30 where 70% is in equities and 30% in debt. If you make more than 50% profits in equities, your asset allocation will have more equities. This is why a financial plan will help you stay on top of your finances.

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Having adequate insurance policies

While you should increase your investment contributions as your salary and savings go up, you also need to keep increasing your insurance covers. This is because you will be spending more due to improvement in your lifestyle and your insurance cover may not be adequate.

Understand that with the increase in your salary, the addition of family members (read children) and new loans, your approach to finance will not remain the same. You need to keep making adjustments to your investments. A financial plan will help you step up your investments, link them to your goals and look at the implications of taking increased investment risks.

Also read: Guide to choose the right Debt Fund for your Portfolio

Managing equities

Stocks are a great investment for the long term and are known to beat inflation if you stay invested for more than 5 years. However, diversification is key for an equity portfolio. You will need to allocate money to different companies and sectors. Since there are risks associated with stock investments, diversification will help reduce these risks. A financial plan will help you diversify your stock investments. With a financial plan, you can manage investments across companies and sectors to ensure that there is no concentration of stocks in a sector or a company.

Managing mutual funds

Before investing in mutual funds, you will need to set your goals right and determine your portfolio mix. Linking your mutual fund investments to your goals will help you ensure that you use the money only for that goal. A financial plan will help you set your financial goals and link them to your investments.

Another point is that you need to have diversification among mutual funds. You need to decide the allocation for equity and debt funds based on your goals, risk profile and time horizon to reach the goal. Long term goals will need equity mutual funds. You should choose debt mutual funds for short term goals. A financial plan will help ensure that your mutual fund investments remain diversified.

Get your financial plan done by a Registered Investment Advisor. Its FREE, but spots are limited… Register now.

Diversified portfolio

An investment portfolio needs to be balanced and diversified. You should invest across asset classes to minimise losses. A financial plan will help you have the right portfolio. The financial plan is a comprehensive document that includes details about your cash flow, savings, loans, investments, insurance and other elements of your financial life. A good financial plan takes the stress out of setting and prioritizing goals, and shows clear strategies for achieving them. A financial plan should help ensure that you are saving enough money and your wealth is increasing at the right pace to achieve your financial goals.

A financial plan is a personal balance sheet that shows what you own and what you owe. It will reveal your assets and liabilities. The difference between your assets and liabilities shows your personal Net Worth. To increase your net worth, you should have a financial plan that shows how much to invest and which financial products will help you. It’s a pretty powerful tool to take your finances to the next level.

Sounds like hard work? Then, you will need the help of a financial planner. Planners always look at the personal profile, risk profile, dependents and finances of the investor before they make a financial plan for the investor.

Here’s another reason why a planner will help. As your portfolio grows along with your wealth, handling your investments will be tough. Unless you have some time to handle all that financial information on your own, you surely need a finance expert’s help. In this fast-paced day and age, most investors do not have the time or resources to spend hours and hours to take care of their finances. It is easy for a financial planner to take care of your finances because he will already have the knowledge and expertise when it comes to investments.

A planner may be needed to handle your equity investments too, especially if you are looking to book profits often. Why? Because if you set a very high target for an investment, you may not be able to book profits. A planner will know when you should buy and sell your investments to make profits. With a high target price for your investment, you might lose out on gains while you wait for the investment to go up. Selling too often could hinder your portfolio and may delay your gains. A planner can help you stick to your financial plan.

It takes time and effort to identify the right stocks, bonds or mutual funds. This may be why a finance professional will help and they will do it for a small fee. With investment platforms such as My MoneySage, you don’t even have to worry about commissions. Just get on board and we will take care of your portfolio.

Also read: Role of Correlation in Portfolio Diversification

About the author

KishorKumar Balpalli, believes that financial literacy and discipline is the key to one’s financial freedom. KishorKumar is a Certified Financial Planner, Personal Finance Blogger & the Founder of myMoneySage.in an award-winning Wealth Management platform. myMoneySage simplifies investing for individuals and amplifies business growth for Registered Investment Advisers by leveraging Artificial intelligence and machine learning. The AI of the machine plus the intellect of the human advisor enables comprehensive & client-centric advice at a fraction of the cost of a conventional adviser.

myMoneySage.in is an award winning personal finance platform. It helps you aggregate all your personal finance accounts like FD, Equity, Mutual Funds, PPF EPF, NPS including, Credit Cards & Loans etc. It's one place where you can track, plan and invest seamlessly. myMoneySage.in empowers you to invest in zero commission direct plans of mutual funds thereby helping you generate higher on investments. The best part is it comes with a lifetime Free plan.


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