This question follows up with Q7 to re-inforce the “5 years” rule. Investing in portfolio should have at least 5 years which is approximately the duration of a business cycle. Therefore, it is important to re-affirm client’s lump sum needs in the near term.
For example, if the client intends to withdraw $25K in 2 years for his daughter’s wedding, it would be inappropriate to invest this sum in long term investments. FP can communicate to the client: “Let’s carve out the $25K and decide how to invest it later. I want you to be comfortable that you’re not likely to need any of the funds from your investment portfolio for at least the next 5 years.” FP then go back to Q4 to adjust the amount entered.
For example, if the client intends to withdraw $25K in 2 years for his daughter’s wedding, it would be inappropriate to invest this sum in long term investments. FP can communicate to the client: “Let’s carve out the $25K and decide how to invest it later. I want you to be comfortable that you’re not likely to need any of the funds from your investment portfolio for at least the next 5 years.” FP then go back to Q4 to adjust the amount entered.
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