Planning Process

Build a Good Investment Plan in 6 Steps

Having an Investment Plan Can Improve Your Long-Term Results

To make a solid investment plan, you have to know why you are investing. Once you know the objective, figuring out which choices are most likely to get you there becomes easier. The six steps below will help you build a sound investment plan based on your goals.

1. Understanding Your Financial Objectives. 

Which purpose are you pursuing? Investments must be chosen with a main goal in mind: safety, income or growth. The first thing you need to decide is which of these two characteristics is most important.

Is growth your focus to provide for a future income, or is safety (preserving your principal value) your top priority?

2. Review Your Current Needs, Cash Flow and Ratios.

How Much Can You Realistically Set Aside for Investing? Many investment choices have minimum investment amounts, so before you can lay out a solid investment plan you have to determine how much you can invest. Do you have a lump sum, or are you able to make regular monthly contributions?

4. How Much Risk Should You Take?

Higher returns require more risk.  Depending on your timeframe you may consider a portion of your assets to be placed into a more aggressive type portfolio.  However, understanding the amount of risk you’re willing to accept depends on your timeframe, purpose and results you’re trying to achieve.

5. What Should You Invest In?

Take the time to understand the pros and cons of each investment strategy presented to you. Will the strategy presented meet your financial goals and risk tolerance?  Navigating the investment world and myriad of choices can be overwhelming.  Working with our team can alleviate the pressure of managing your own retirement which can be a full time job.

6. Putting It All Together

Let’s say you are 50 years old and have $100,000 saved in an IRA. Your plan may look as follows:

  • Purpose: Growth for age 65 retirement.
  • Amount to invest: $100,000 plus $15,000 a year to my 401(k).
  • Time-frame: First anticipated withdrawal at age 65, for $10,000. Then $10,000 each year thereafter.
  • Risk level: Mid-level investment risk focused on growth is fine, but as you get within 10 years of retirement, each year you will shift a portion to safe investments.
  • What to invest in: Index mutual funds in your 401(k) or IRA will make the most sense. They have low fees and fit the objective we have outlined.

Once you have a plan, stick with it! That is the key to investing success.

We’d Love to Help You With Your Financial Plan