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Financial Roadmap

Any good road map will tell you where you are and how best to get where you’re going. Your Financial Roadmap outlines your financial journey and helps you move towards your financial goals while being equipped with knowledge, clear direction, and confidence.

Why we should plan for investments?

Starting Out:
Investing In Your 20s And 30s

  • Investment Goal At This Stage Maximize Capital Growth
    (your most likely primary financial goal)
  • Investment Horizon Very Long (30 – 40+ Years)
  • Risk Tolerance High

At the beginning of your career you may have a hard time imagining life 15, 30 or 40 years from now. Chances are that you are more concerned about paying bills and saving money toward big-ticket items such as a car, a wedding or a house.

Your ability to reach your goals and achieve financial security, however, depends in part on maximizing your wealth through investments. You have the opportunity to create the important habits of saving and strategically investing now so you can enjoy its benefits in later years. The work that you’re doing now is laying a foundation for future financial freedom. For example, having money withdrawn from your paycheck and automatically deposited into an equity fund or a voluntary pension scheme can provide you with a solid nest egg when you leave the workforce.

Since you have a longer horizon for investing (the amount of time between now and when you want/need to access your money), you are in a better position to consider investing in higher-yield, higher-risk instruments.

Keep in mind, however, that even at this early stage of your investment journey, you want to aim for a well-blended portfolio to balance risk and market volatility with some strategically chosen lower- and medium-risk investments as well.

Investment Plan:

  • Magic of Compounding: For a young investor like you it is advisable to save and invest now, so that you can use your savings in the future. Compared to someone older than you, you’ll always have more number of years to maximize your returns. By investing money from an early age, you shall get the benefit of ‘Compounding’ where the earnings you realize are reinvested to further generate more earnings. Once the chain of compounding is initiated, the earnings keep on increasing at a lot faster rate. For instance, an investor who starts investing at 20 and invests Rs. 100,000 regularly per annum for next 30 years (annual compounding) will have a significant difference in the accumulated amount at the end of the term as compared to an investor who started investing at 35 and saves 200,000 regularly per annum for next 15 years (annual compounding) as given below:
    INVESTOR A INVESTOR B
    Age 20 35
    Annual Contribution (PKR) 100,000 200,000
    Years to GROW 30 15
    Assumed Annual Return (%) 8 8
    Investment Value at Age 50 (PKR) 12,234,587 5,864,857
    This is how the Magic of compounding works. So be wise and start investing for a brighter future ahead of you!
  • Little and Regular Savings! Did you know that curtailing some expenses today will help you accumulate wealth over a period of time? So go ahead and start building for your future financial freedom.
  • Grow capital through Equity Investing Equities are perhaps the best avenue that provide a high return potential and may be of interest to you as you look to grow your wealth or if you are saving money for a large future purchase—a car, a wedding, a house.
  • Supplement your income Maybe you’ve received an inheritance or other large sum of money. Investing it in fixed income instruments can help you preserve the principal for the future while generating a stream of regular income that you can spend now.
  • Develop discipline with Rupee-cost averaging One of the common myths about investing is that you need to have a substantial amount of money to start. Though the fact is that you can invest a small amount at regular intervals through a Systematic Investment Plan. It is a disciplined way to invest automatically on a regular schedule. This allows the benefit of Rupee-cost averaging by effectively lowering your overall cost of purchase by buying at varying prices and at regular intervals. Making small deposits over time will add up to consistent investments which can garner significant gains over the long term.

Mature Years:
Investing In Your 30s And 40s

  • Investment Goal Capital Growth And Preservation
    (your most likely primary financial goal for your principal)
  • Investment Horizon Long (20—30+ Years)
  • Risk Tolerance Moderate

The middle years—mid-30s to late 40s—are crucial to accumulating and investing wisely towards your retirement and long-term financial goals. Even if you didn’t, or couldn’t, start saving and investing earlier you need to begin making up for lost time.

If you’re between 35 and 55, you are probably earning enough to live more comfortably now than when you were younger, but are increasingly concerned about funding your retirement and paying for your children’s education. While you still have time in your investment horizon to be able to recover from a market downturn, you don’t want to have your portfolio so heavily loaded in high-risk investments that you could lose the bulk of your money if the stock market or your individual stocks decline significantly.

Because your investment horizon is somewhat shorter than when you were first starting out in your twenties, you should rebalance your portfolio to make sure that you have allocated your assets appropriately. It is usually recommended that at this point in your life, it would be prudent to shift your investments to focus more on medium-risk and low-risk instruments, while still maintaining a healthy, but smaller, percentage of investments in higher-risk instruments. Remember that the key is spreading, or allocating, your assets across investments of varying degrees of risk to blend the risk you’re taking and to maximize your earning potential.

Equity funds and Income/Money Market funds should be selected in a mix of portfolio with a larger portion of your asset allocation kept in Income/Money Market funds.

Investment Plan:

  • Take Advantage of Your Situation – In most cases, during these years you’re a little more established in your career. You still have plenty of time to put aside a significant amount of money for your future. Financial security, a less stressful life and a comfortable retirement are within your reach. You’ll just have to go about it a little differently than if you would have, had started earlier. The easiest way is to stop spending your hard-earned money on things you don’t really want or need. Start by setting aside a more modest amount of your income with a clear plan to ramp up your savings until you reach your ultimate goal such as building a house, making the holy journey for Hajj or Umrah, for your child’s higher education or their marriage.
  • Determine your priorities At this stage, you will have plenty of responsibilities that weigh in on your bank account. You won’t be able to invest your money into every product that strikes your fancy. Some things are far more important to you. So make a list of goals you have in life, and then take steps toward bringing these wishes to fulfillment.
  • Curtail your Expenses – At this age you are financially more stable however; the amount of expenses have also increased manifold from the time when you started working. Keep a tab on your expenses and know where your money is going. Make a monthly budget and try to ensure that your expenses are within this limit.
  • Start saving in earnest Although hopefully you have been saving before, now is the time to take this more seriously. If you plan to retire far in the future, you won’t need to save as much. If you want to retire earlier, you will need to save more, for longer.
  • Tax-advantaged investing If you’re in a high tax bracket, you can take the advantage of investing in collective investment schemes and voluntary pension schemes to allow you to enhance your Net returns. You can save taxes by investing Rs. 2,000,000 or more in our open-end funds as per section 62 of Income tax ordinance this year. Additionally by investing in MTPF (VPS) you can save upto 40% of your taxable income for the previous year as per section 63 of Income tax ordinance. For details click Here
  • Maximize your Investments During these decades you should seek wealth maximization and further plan for retirement. You are advised to maximize your investments at this time as per your risk profile.

Nearing Retirement Or Retirement:
Investing In Your 50s And 60s

  • Investment Goal Preserve Capital And Receive Regular Income
    (your most likely primary financial goal)
  • Investment Horizon Moderate (5 – 15 Years And Onwards)
  • Risk Tolerance High

This decade is perhaps the most important of all when it comes to retirement planning.

As retirement approaches, your investment horizon shrinks. In other words, the closer you are to retirement, the less chance you want to take that you could lose a sizable portion of your investments. You would want to protect your assets from the stock market’s volatility. Many investment advisors suggest that people at this point begin increasing allocation of their portfolio towards fixed income by up to 50% or maybe even more, in order to lower their overall investment risk.

Investment Plan:

Choose the right investments and allocations. You might be more inclined to put your money somewhere safer

  • Retirement Planning. Plan for retirement now if you haven’t already done so. With careful planning, you can make your retirement the most pleasant one. Every day you delay is another day where this opportunity is thrown away. Retirement may feel far away, but the earlier you plan for it, the more joyful it shall become for you, don’t procrastinate in planning for your retirement. 
  • Assess and Re-Assess Your Portfolio Asset allocation for your retirement nest egg should be reassessed periodically. This will give you the opportunity to determine whether you need to change your asset allocation. As you get closer to your retirement age, you may need to choose investments that are less risky, as there is less time to recover potential investment losses, if these are to occur.
  • Guarding against inflation Retirees living on a “fixed income” can lose purchasing power if inflation increases. Unfortunately Inflation generally outperforms any returns one can generate from Fixed Income funds. Therefore, to help guard against this risk, you may still want to consider including a small percentage of stocks in your portfolio, in order to seek a better yield.
  • Make YOURSELF a first priority -You have worked hard all your life in building a career, looking after your family and accumulating assets; However; now is your time to relax and enjoy life as it is, it is your time now to live those dreams that you always wanted to but never got the time amidst your busy working schedule. Of course, besides all the practical things like your child’s higher education, your retirement, medical expenses, etc you should now use your savings for all those cherished dreams. An early retirement, a second business or that holiday home, all this is still possible even at this age provided you plan for it carefully starting from now.
  • Work life balance. It is great if you have that work-life balance however if you haven’t been able to achieve that in your career span, this is your last chance before regretting it. Maximize those precious moments Allah has given you with your family and loved ones. You probably have aging parents or teenage children who really need you in their life at this stage, don’t deprive them from the love and time they need from you.
  • Set aside for more medical expenses Think ahead. We will all have out-of-pocket medical expenses in retirement. Realistically account for them in your financial planning now.

Need Help With Investment Planning?

Consult our Investment Advisors to find out the options that are available. You can start investing with as little as Rs. 5,000. To schedule an appointment with our Investment Advisors, call us at 0800-HALAL (42525) or SMS INVEST to 6655.