—  WHAT ARE YOU LOOKING TO ACCOMPLISH?  —

When you meet with an investment advisor for the first time, you may spend a good portion of the time getting to know each other. It’s important to distinguish between an investment advisor and an investment salesperson, however, as the latter is mostly looking to just sell you products while the former is much more likely to become really engaged with what you are saying in order to develop a strategy which will meet your specific goals. As your own investment advisor, however, you need to almost have that conversation with yourself and other close family members and friends in order to get that same level of service.

The first thing you need to identify is your time horizon. The time horizon is the amount of time you have to plan to hold an investment per goal. That last part is very important, as many people will have multiple time horizons. If you and your partner just recently got married, for example, your first investment goal may be to become homeowners within five years. Your investment objective is to save enough money for a down payment, and your time horizon is the five years. After that you may set other goals to save for your first child’s university education in 18 years and ultimately retire at age 60 and still have enough money leftover for a comfortable retirement. Begin by asking yourself the following:

At what point do you think you will have to withdraw a substantial portion of your portfolio (eg. 25%) Less than three years, between 3 and 6 years, between 6 and 10 years, or longer than 10 years?

This should give you a pretty good idea what your first investment time horizon should be. It also gives us the first piece of information we can use when determining how aggressive we can be with our investments, but we’ll get to that later. For now, focus on writing down your goals and mapping out when you’ll need the money to fund them.

— HOW KNOWLEDGEABLE ARE YOU? —

The next step is getting an idea about how much you actually know about investing and in addition, you should document your interest level and how much time you are willing and able to put into investing. This information is extremely valuable as it is going to help determine the types of securities in which you should invest. With that being said, which statement best describes your investment knowledge?

1. I work in the investment industry and am very familiar with various investment products and the markets on which they trade.

2. I do not work in the investment industry but I follow the financial markets closely and am familiar with multiple investment options available to me.

3. I have done some investing in the past but am not really familiar with my options.

4. I have never invested before but I do follow the financial markets and have a basic understanding for how they work.

5. I have never invested before, and I’m not sure where to begin.

As you can see, there are different levels of investment knowledge and being honest with yourself as to where you fall is an important step in the Investment Management Process. Next, choose a statement which best describes your interest in investing.

1. I routinely check the financial markets and reading up on various investment strategies. I enjoy taking a deep dive into a company’s earnings reports.

2. I wish I could learn more about the financial markets, but my career and family life is so demanding that I only have a chance to look at things on weekends.

3. I’m interested in the financial markets, but I’m not willing to keep track of my investments on a monthly basis. At most I’d be willing to look at them a few times per year.

4. The financial markets stress me out and I’d rather not be involved with them, but my friends tell me that I have to if I want to be able to retire early.

5. I don’t want anything to do with the financial markets. I’d rather be placed in riskless investments to ensure I don’t lose any of my money.

—  WHAT IS YOUR WILLINGNESS TO TAKE ON RISK?—

Next, we want to find out what it is you hope to get out of your investments. This question is designed to assess your willingness to take on risk. Some people are risk-takers by nature while others prefer to play it safe. Choose the statement below which best describes you:

1. I am not prepared to lose any money, even if it's short-term. I would prefer to stick to safer investments even if it means my portfolio size won't grow much.

2. I am not focused necessarily on growing my portfolio but would like my assets to generate regular income that I can use to fund my regular expenditures.

3. I would like some combination of regular income and portfolio growth.

4. I do not need my investments to generate any income. I want to design a portfolio that will generate long-term growth which I can use to fund my retirement needs.

The first statement describes a person who does not want to take any risk, while the second statement describes a person who is more of a risk-taker and wants to grow his/her portfolio size substantially. If you are having trouble deciding between two answers, choose the more conservative one.

—  WHAT IS YOUR ABILITY TO TAKE ON RISK? —

Many people are willing to take on a large amount of risk, but they shouldn’t for various reasons. These may include a low annual income, the likelihood of high upcoming health care costs, poor spending and savings habits, current debt situation, and age. The following questions will help assess your ability to take on risk.

1. What is your annual income before taxes?

   1. Less than $25,000

   2. Between $25,000 and $50,000

   3. Between $50,000 and $100,000

   4. Between $100,000 and $200,000

   5. Over $200,000

2. What percentage of your total savings is in your investment portfolio?

   1. Less than 25%

   2. Between 25% and 50%

   3. Between 50% and 75%

   4. More than 75%

3. How many years do you have before you would like to retire?

   1. Less than 5 years

   2. Between 5 and 10 years

   3. Between 10 and 15 years

   4. Between 15 and 20 years

   5. More than 20 years.