Day 7: Final Investment Decision (FID)
FID is the final stage of selecting and overseeing a group of investments that meet your long-term financial objectives and risk tolerance . The first step is to formulate your investment goals and constraints. Your goals should be SMART: specific, measurable, achievable, realistic and time-bound. Investment constraints can be of different forms: liquidity needs (how quickly you might need to generate cash), time-bound (need return over a specific time period), tax concerns (capital gains, income tax), personal preferences (ESG rating, etc.) and unique needs arising from your personal situation (e.g. buying a property). The second step is to construct the portfolio by implementing the investment strategy and deciding how to allocate capital across geographies, asset classes (like equity, debt, real estate and gold) and securities (stocks, bonds). The main objective of portfolio construction is to meet investor needs by taking the minimum possible risk. The traditional ...