Creating a Personal Investment Plan That Works

personal investment plan
If you’ve been thinking about creating a personal investment plan, it’s not too late. In fact, it’s never too late to start investing and trying to better yourself financially. So, what is a personal investment plan and how do you create one?

What is a Personal Investment Plan?

A personal investment plan is pretty much what it sounds like. It is a plan that you and your financial advisor work out that will help you maximize your investments. It is a formalized document that details your needs and constraints regarding your investment. These plans only pertain to individual investors but it a critical step in the investment process.

Why Are You Investing?

Before you jump into creating a personal investment plan you’ll want to decide why you want to begin investing. Are you jumping into the world of investing to plan for retirement? Or maybe you’d like to secure a financial future for your loved ones? Whatever your reason may be, the type of investment may change based on your end goal. Smaller savings goals would need both a high and short return, while saving for something large (like retirement) would be better suited for long term, stable investments.

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How to Create a Personal Investment Plan

Once you’ve decided what your personal finance goals are you’re ready to create your own personal investment plan. Here’s how…

  1. Have a full understanding of your financial situation. Yes, you have personal finance goals to invest for your future but you may have to pay off some debt or create an emergency savings account before you’re able to invest.
  2. Establish goals and set a timeline. Once you’ve got a full understanding of your finances and how much risk you’re able to take, establish some goals and set timelines. For instance, if you’d like to grow your portfolio, set a measure (20%, for instance) and set a timeline (within two years).
  3. Develop a risk profile. Remember, the less risk you take, the less you make. However, a more stable investment may make more sense for older investors.
  4. Make sure your risk profile and goals line up. Once you’ve set goals and developed a risk profile, make sure your goals and risks match up. You won’t want to make a ton of risky investments if you’re trying to save for retirement.
  5. How do you want to diversify? Lining up your risk profile and goals will help you decide on how you want to diversify (whether you’ll have higher risk accounts or lower risk accounts, bonds vs. stocks, etc).
  6. Consult a financial advisor. Now that you’ve got a basic personal investment plan, it’s time to call a financial advisor. You can usually find a financial advisor nearby through a Google search. Or you can use some of the online advisors, such as Personal Capital.
  7. Look at all your options. After consulting with a professional, take time to assess all your options before making a final persona investment plan. Make sure there is plenty of diversity in your investment portfolio while also making sure it is adhering to your personal finance needs.
  8. Continue to monitor progress. Investing isn’t a “sit it and forget it” thing. You’ll want to monitor your investments regularly and adjust your personal investment plan accordingly. For instance, if a certain investment isn’t working in your best interest you’ll want to remove it from your overall investment plan.

Don’t Give Up

Lastly, don’t give up! Investing can be difficult when you’re just getting started but hundreds of thousands of people have been able to be extremely successful with their investments. If you’re having trouble, contact a financial advisor and get back on the right track. Your finances will thank you!

Have you created a personal investment plan? Was it successful?

Photo: Tokio Marine

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  1. “Stick with it” is perhaps the most important part of an investment plan. It can be tempted to change things around when the market is doing GREAT – or POORLY! But, if you’ve taken the time to work out a plan, that plan should work through ups and downs. Set it and forget it!

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