Introduction to investment planning

I am adventurous. So, when I hear of an investment opportunity, I want to jump right in and try it out. Believe it or not, this is NOT the way to go. We’ll end up with a lot of random stuff and no actual return. Don’t jump between different ideas without a sense of direction. We need a plan.

The goal of investment planning is to identify appropriate and tax efficient investment solutions that match our objectives and risk profile.

Let me start with a quick disclaimer. I am not a financial planner. Looking for a financial planner? Click Here. Citadel also have some nice financial tools available on their website. Check it out!

Steps in the planning process

  1. Start by gathering information on your current financial situation.
  2. Determine your objectives and future financial needs.
  3. Determine your risk profile
  4. Decide on an asset class breakdown
  5. Identify and evaluate suitable products and underlying securities
  6. Implementation
  7. Review and monitoring

Current financial situation

First take stock of what you currently have.

  • You need a list of all your assets and liabilities. A balance sheet is a useful way to present this information.
  • You also need a list of income and expenses. It is a good idea to keep a budget and to compare your actual income/expenses against your budget. In other words keep a cash flow statement.

Objectives and future financial needs

  • Put some thought into your objectives. For example, income generation, wealth creation or wealth protection.
  • Think about your income and expenses over the long term. For example, when will you need to replace your car? Or when will your child go to university?
  • Also determine the time horizon for these objectives. Should you start earning an income from your investments a year from now, or only in ten years time?

Risk Profile

There is a relationship between risk and return. The higher the risk, the higher the possible return but also the possible loss. Before you invest anything, determine the level of risk you can take. This depends on your risk tolerance as well as your risk capacity.

Asset Class Breakdown

At this point, you should have an asset class breakdown in mind. You need to decide what percentage of money to invest in cash, bonds, equity and others. You should also spend some time deciding how much to invest local v.s. offshore.

Identify Products and underlying securities

Once you have an asset breakdown in mind, you can start evaluating different investment products as well as the underlying securities. Take into account fees and tax implications.


This is the stage where you will open accounts at financial institutions and put some money in. There are many regulatory requirements involved.

Review and monitor

Investment planning is not a once-off exercise. It is a process that needs to be repeated at least once a year. Also review your investment plan with every significant life change.


M Botha; L Du Preez; W Geach; B Goodall; L Rossini; South African Financial Planning Handbook, 2019,   Chapter 12

D Hands; S Cloete; C Williams; J Le Roux; C Muller; G Peter; T Naidoo; Premiums & Problems, Edition 103, 2011, Section B

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