Do you have an investment plan? According to the latest research, more than half of today’s young adults invest their money and report that they are confident in their financial future. Are you one of them?
If not, it’s never too late to create an investment plan. Older adults can also benefit from thoughtful financial planning.
In this post, we will show you how to make an investment plan. We’ll even show you an example of what a typical plan might look like.
What is an investment plan?
First, what is an investment plan? There is no single definition of an investment plan, but in general, investment planning helps you chart your financial future.
Investment plans can help you take stock of your current assets and take action to achieve your short- or long-term financial goals.
Why make an investment plan?
If you haven’t made any investment plans, there’s never been a better time than now. Having a plan for your future can help you achieve important life goals, such as:
- Settle the debt
- Buy a house
- Savings for marriage / family
- Pay for early childhood education
These financial goals will not occur overnight. Creating a realistic and achievable investment plan can ensure that your future is secure and will allow you to have confidence in the decisions you make today.
How to make an investment plan
Formulating an investment plan may seem daunting, but it doesn’t have to be complicated. Here are some of the questions you need to ask yourself when creating your investment plan.
What are your current assets?
What is your current financial situation? If you haven’t made a monthly budget yet, now is the time.
Your budget should include your net monthly income, as well as your regular debts and other expenses. The money you have left over can be used for investments.
Don’t sweat it if it’s not much. The goal here is to accumulate money over time. You can always increase your monthly investment as your finances improve or as you start paying off debts.
What are your goals?
What are your financial goals? Some goals may be short-term, such as buying a home. Other goals are long-term, such as retirement planning.
These goals will determine your investment history. For short-term goals, you will want to look for opportunities that provide rapid growth as well as the ability to liquidate the investment at the right time.
What is your risk tolerance?
How do you feel about risky investments? Young people are increasingly willing to make riskier investments and have had a great profit.
When you are young, you will have plenty of time to recoup a loss if the selection of your shares does not yield a favorable return.
This is not to say that, of course, you should only invest in high-risk stocks. Higher risk is suitable for long-term financial investments, but short-term goals can be managed more securely through more stable investments, such as real estate.
You can always balance high-risk stocks with stable stock selections by diversifying your portfolio.
When you hold a diverse portfolio, you can reap the benefits of high-yield stocks while maintaining the stability of low-risk stocks.
You can even invest in an index fund, which is a type of fund that tries to match the performance of a market index (for example, the Dow or the S&P 500), instead of trying to select stocks to win the market. .
What do you want to invest in?
Next, you will want to decide which financial vehicle to invest in. This task can be daunting, given the number of options available. A good place to start is to talk to your employer. Some companies offer 401 (k) plans, IRAs and other investment vehicles. Some will even match your retirement contributions.
Other financial vehicles may be used for short-term purposes. Savings accounts and CDs can provide a limited amount of interest, but money can be recovered much more easily than a mutual fund or an IRA.
A 529 plan can save you money for your child’s education and also offers some tax benefits. You can also consider investing in physical items such as real estate, property, art, or other high-value items.
Of course, if you ever find yourself a little lost, there’s no harm in talking to a financial advisor, who can give you information on the best ways to invest your money based on your current goals.
How will you monitor your investments?
Finally, you need to have a clear strategy for controlling your investments. You will need to check your investments at least once a month to determine if they are growing. If they are not, you may need to re-evaluate your investments. You may find that you need to invest more money in a particular stock or in a disused stockade to avoid losses.
You will want to review this investment planning procedure every 5 years to reassess your assets and financial goals. You may see your goals change or you have more disposable income, which may change the amount or type of investment you choose to make.
An example of a personal investment plan
Let’s look at a hypothetical scenario. Beth is about twenty years old and expects to buy a house in the next ten years. Review the above questions and find out that you can invest $ 250 a month. She chooses to invest in the stock market, creating a balanced portfolio that grows over time.
Beth is lucky and her investment grows over time. Rely on the latest software to control your investments. 10 years later, he can make an initial payment of $ 50,000 to the house of his dreams.
There are no guarantees of success, but building a plan like Beth can help you achieve your own dreams. Why not start today?
Make a plan with Gorilla Trades
Gorilla Trades helps people achieve their financial goals by providing the education and resources needed to succeed in the world of investing.
Our members have access to stock selections, newsletters and other tools to help them maximize their investments.
Register today for a risk-free 30-day trial. You’ll be better equipped to make a solid plan, while also overseeing the ways your plan moves you toward your goals.