Top 4 Key Steps to Create a Great Investment Plan (2016 Update)

4 Key Steps to Create a Great Investment Plan
4 Key Steps to Create a Great Investment Plan

4 Key Steps to Create a Great Investment Plan

It is easier to keep track of your investment if you have an investment plan. You can easily identify a problem and rectify it based on your plan, and in turn, reach your financial goal. It is important to have your financial planner when making an investment plan. He will help you understand your financial situation at that time and advise you on which investment to choose. He will also help you decide to what extent you can risk your investment, asset allocation and investment cost.

A clearly defined investment plan is a platform that helps both you and your advisor to achieve the set goal. In making the investment plan, your advisor will ask you the amount you want to invest, over which duration and the expected returns. He may also ask the amount of risk you are comfortable with. Your financial advisor will be reviewing your portfolio periodically to check the progress. The four key steps in creating a good investment plan are as follows:


1. Have a Specific and Realistic Goal

It is easier to work a specific goal rather than a general one. For example, you can decide that in 10 years time you want to have two million dollars in your account. It is more specific than saying by that time you will be a millionaire or rather have enough money in your account. With that goal in mind, you will have to come up with a plan to implement.

2. How Much Are You Willing To Save Per Month?

This will depend on your salary and the goal to be achieved. Work out the amount needed in order to achieve your target. Decide how much money you will be putting aside for it. If the money is not enough for your goal, then you will have to adjust it to suit your situation.


3. Decide On the Investment Strategies

Long term goals attract high risk investment. Short term goals on the other hand need conservative, low risk investments. It is important to compare with medium risk investments before making final decision.


4. Create an Investment Policy Statement

This helps in making vital decisions. The policy statement shall also include rules you want your advisor to follow throughout the process. The investment policy statement should specifically state your investment goals and objectives.

Secondly, it shall contain strategies to follow to realize your goals.

Third, it shall mention how much you are expecting within a given time frame.

IPS (investment policy statement) will show how much risk you are willing to take.

Lastly, it shall state how your portfolio will be monitored and under which circumstances will it be re-balanced.

IPS helps one to make objective decisions since it contains rules to be followed by your advisor. An IPS is effective for the long term as it ensures that your plan stays on track. In addition, it provides the guidance to be followed. It is advisable to answer the questions honestly and comprehensively in order for the information to reflect your personal needs and expectations. It is also important to save a copy of this fully answered questionnaire for future reference.

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