Recently I was asked to conduct a workshop regarding family investing. I immediately thought the most inviting topics would be which stocks and/or mutual funds were performing well and which weren?t. Yet after further consideration, I decided the most important characteristic with respect to family investing and wealth planning is in fact discipline and adhering to a specific plan or mandate.

In my opinion, the individual stocks and bonds are simply the vehicles of a larger plan.

That larger plan is discipline, budgeting and a lifestyle change towards savings.

My first recommendation to families is simple: Define your goals. Create an objective for the year. When individuals or families have clear and well-defined goals in mind (saving for a down payment on a home, school fees and so on) they are more likely to stick with the required savings plan and or discipline required to in order to meet their goals.

Once your goals are defined, sit down with your investment professional and discuss your risk objectives. Are you an individual who can?t sleep at night if part of your portfolio is down five percent? If so, certain types of investments may be better suited for you than others. If you are a ?casino? type of individual, who likes to ?bet it all? perhaps you and your investment professional should consider a defined amount designated for ?higher? risk investments while maintaining a safe and stable portion of your portfolio.

The third step once objectives and goals are defined is to consider the creation of the ?investment policy statement?. The investment policy statement is the framework that provides structure to the investment process. This plan or strategy wraps all the planning (objectives and risks) together and forces families and individuals to understand their own needs and constraints and to articulate them with respect to achieving stated goals. This investment plan or strategy is designed by both investment advisor and client and is based not only on the client?s objectives and risk profile, but also considerable influence is placed on the current and future forecast of economic conditions.The asset allocation model is a consideration of how one?s portfolio is divided up into equities (stock), fixed income (bonds) and cash (or cash equivalents such as money market instrument CDs and so on).

Generally speaking when economic times are poor, individuals have a greater affinity to bonds and fixed income products because of their surety and also because the equity markets are performing poorly. In times such as these, individuals generally have an equal amount of bonds as they do stocks, and tend to have larger cash reserves as they attempt to weather the storm of poor economic conditions.

When economic times are promising, individuals tailor their portfolios to be slightly overweight in equities and therefore have a greater exposure to stocks. Families and individuals need to consider how much exposure to have in each asset class, considering of course how the market is performing, and then have the discipline to adhere to the ratios (within reason) until their investment professional recommends a change.

Now to further subdivide your stock holdings, the market is theoretically divided up into four categories: interest sensitive, consumer, industrials and resources/basic materials.

Again it is within these categories or industries that you and your investment professionals choose individual stocks/funds that you feel offer the greatest probability of future-earnings performance.

Keep in mind, the stocks or industries that you and your investment professional select should reflect the stability of the greater economy.

As mentioned earlier, when instituting a balanced investment portfolio the individual stocks and bonds are simply vehicles for the asset allocations objectives. The greater consideration is how you and your investment advisor align your asset allocation model and industry exposure.

Whether your goal is to save for an education, home or retirement income, proper planning and adherence to the plan is the key to achieving financial empowerment and success.

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