Creating a viable investment plan requires a little more than simply establishing a savings account and buying a few random shares of stocks. In order to structure a plan that is right, it is important to understand what you want to accomplish with the investments, define how to reach those goals and evaluate different types of investment options to decide which ones will aid in the achievement of those goals. The good news is that it is never too late to create and implement a personal investment plan and begin creating a nest egg for the future.
Steps
- Determine your goals for the future. A carefully structured investment plan can be a means of achieving long-term or short-term goals. For example, one goal may be to generate funds for a child's college education, using returns from certain types of investments. Alternatively, another goal may be to create a portfolio that generates income for use during retirement. Knowing what you want to accomplish will make it easier to tailor the investment plan to fit those needs.
- Decide how much you can initially use for investments. Depending on your goals, a broker can assist in deciding how much you would need to initially make available for investments. Keep in mind that most brokers will recommend that you have at least that same amount of money set aside in a savings or other interest bearing account, rather than sinking all your money directly into stocks and bonds.
- Consider your comfort level in regard to taking risks. With most investments, assuming a greater degree of risk does hold the potential to generate higher returns, but it also means a greater chance of losing your investment. For people who are more conservative with money, beginning your plan with a focus on bonds and stock options that carry less risk or volatility is good place to begin. You can always try a riskier investment at a later date, once your understanding of market projections and trends increases.
- Diversify your selection of investments. Rather than focusing strictly on stocks associated with a given industry, secure options that encompass several different industries. Also consider investing in bond issues and other relatively safe investments as part of the personal investment planning. Diversification helps to insulate you from incurring staggering losses when one industry experiences a downturn, since there is a good chance losses created by a couple of investments will be offset by gains realized with the other investments.
- Learn the marketplace. Even if you have an excellent broker, make it a point to learn how to read market reports, project movements with different stock issues, and in general, how to predict what will happen with your investments in the future. Doing so can often help you avoid losses and even make it possible to discover a new investment with a great deal of potential.
Tips
- Make it a point to review your investment plan from time to time. Focus on how well your current holdings are advancing toward your goals, and make changes in those holdings when necessary. Keep in mind that as circumstances allow, you can always broaden the range of your investment portfolio, hopefully generating greater returns that make it possible to reach your goals sooner rather than later.
- Even the best investment plan may need tweaking as changes in the economy occur or your personal circumstances shift in some manner. See those situations as opportunities to rethink your strategy while still keeping your goals uppermost in your mind. Doing so will lend direction to your investment activities and make it easier to see the big picture even as you deal with what is happening today.
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