Investing without planning is like burning the money, hoping that some gods double them the next day. There’s no secret that investing in any financial instrument is more or less risky. Fortunately, a well-considered investment plan can make any instrument grow under your control. Let’s specify why and how you should plan all your investments instead of spending your income day by day.
What Are Your Objectives?
Any type of investment is a step towards a specific goal. Here are the main classes of objectives:
- Capital Growth – if this is your priority, it’s important to learn how to deal with securities and involve long-term strategies.
- Safety – when the safety of your family assets is at the top, your choice generally shrinks to low-income instruments with lower liquidity.
- Tax Minimization – this objective requires you to target your portfolio on instruments with the lowest income taxes possible;
- Income – based on the income size you wish to receive, you can evaluate the level of risks that you have to manage. For instance, you can choose to trade Forex to generate income fast or make a diversified long-term portfolio with obligations, bonds, stocks, etc., for step-by-step, non-aggressive capital growth.
- Liquidity – the benefit of liquid investments is the simplicity of cash withdrawal. At the same time, it cuts a certain part of your income.
Planning Your Investments
Now that you are aware of the abstract objective, let’s integrate them into a real planning route with specific steps and goals.
1. Plan your savings
Given that you are employed or run a business, you should start saving a part of your income for two purposes. The first is to create a safety cushion for retirement and emergencies, and the second is to feed particular investment products.
2. Set goals
It’s rarely possible to set a single goal, so you have to choose goals from the following categories:
- Short-term – vacations, gadgets, etc.;
- Medium-term – house downpayment, gap year travel, vehicles, etc.;
- Long-term – retirement, capital growth, children’s education, etc.
3. Select investment options & evaluate the risks
Having clear goals on paper, you have to match them with financial vehicles that can help you to reach these goals timely and with reasonable risks. Having a diversified portfolio is the best way to manage risks.
Depending on your goals, you should adopt specific risk-management strategies to get the most out of the selected instruments. Consider all the risks and realize whether you are able to bear them before making an investment.
4. Allocate assets
At this step, you should assign parts of your assets to balance your portfolio and achieve the needed return with acceptable risk levels. At this step, you balance out the portions with exact percentages.
Although investing doesn’t tolerate hurry, the earlier you start implementing your plan, the faster you will figure out how things work in practice. Making investments is the only way to learn which of them works out for you the best, so don’t hesitate.