The virtuous quadrant of planning and the relationship with portfolios at inbestMe

The vision/mission of the inbestMe team is not only to help our clients invest better, but our objective is to provide our clients with tools that allow them to plan their financial life both for immediate savings, but also for their goals. In the short, medium and long term in a complete way, constituting a virtuous quadrant of efficiency that allows them to optimize their money without having to give up their preferences, that is, with a high degree of personalization.

The virtuous quadrant of financial planning

In the following scheme that we call the Virtuous Quadrant of Planning, we try to capture the relationship between income, savings, and investment in the short, medium and long term. The quadrant tries to show the interaction between our income, savings, and investment for objectives that have an intrinsic relationship with our different horizons to achieve our objectives or until what moment we can be invested without needing the capital.

Just as we cannot invest without first saving and creating an emergency fund, it makes a lot of sense to think about our different objectives or deadlines for which we invest and “fill in” these different objectives/horizons in the order that best suits us according to our financial situation.

An effective strategy would be to start by establishing an emergency fund (Save), following a logical sequence similar to clockwise movement following the dial: start with savings intended for short term/capital preservation (top right), then move towards medium-term investments/capital accumulation, and finally, move towards long-term investments, including retirement planning (ending at the top left).

But this formula must be adapted to each person’s circumstances. Someone may prefer to think about retirement right after building an emergency fund.

There is no single formula, and this quadrant must be adapted to each person according to their preferences and depending on which objectives are the most priority for them or their family.

When you sign up for inbestMe we ask you about your first financial goal. To the extent that you can, try to think about it. If this is the case, try to at least be as precise as possible in your horizon. This objective can change, answer what you know at that moment, it is normal that it can change, in fact every year we will ask you to review your answers precisely for this reason.

At inbestMe, by combining our Savings Portfolios with our Target Portfolios, our Index Fund Portfolios, or Pension Plan ETFs or ETFs, a saver or investor can cover that entire quadrant. An investor at inbestMe can even think about the financial life of her offspring with our accounts for minors.

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The virtuous quadrant of financial planning and its relationship with the portfolio offer at inbestMe

Since we first published the inbestMe financial planning virtuous quadrant, we have released several portfolio options.

In the following diagram, we relate the virtuous quadrant of financial planning (in the center) and the offer of portfolios and profiles in inbestMe at the end of April 2024, surrounding the quadrant.

  • To save or establish an emergency fund, savings wallets are a great option. When investment horizons are clearly defined, target portfolios are particularly suitable.
  • For investments focused on capital preservation, target portfolios are ideal for well-defined time frames, while bond portfolios are better suited for open-ended or flexible time frames.
  • To invest prioritizing capital accumulation, our portfolios of index funds (or ETFs) (10 profiles) combining different proportions of fixed income/variable income are the most appropriate.
  • To complement retirement, our pension plan portfolios are the most appropriate. Let us remember that they have limited liquidity (retirement, serious illness, disability, or from the age of 10). Now, only €1,500 per year can be contributed and deducted from the tax base to individual pension plans. For both reasons, we can decide to complement our retirement goal with index fund portfolios or company pension plans, if we have access to them.

The relationship between objectives and portfolio types is neither fixed nor mandatory, although it is usually the most logical and natural. We can decide to invest to accumulate capital with bond portfolios (for example, with the daring portfolio).

It is best to know your risk profile to have the best recommendation for the portfolio that best suits you according to your personal circumstances.

If you want to know more about financial planning, we often talk about it, and you may be interested in reading:

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