How to Develop an Investment Plan

Most investors would benefit from having an investment plan that specifies their investment goals, timeline, and annual progress markers. Having an investment plan makes it easier to know whether and when to sell an investment, as well as to track your progress in meeting your long-term goals.

A basic investment plan should answer these four questions:

(1) For what reason are you investing? College education, vacation home, retirement? This tells you your investment time frame – when you will need to sell that investment to convert it back into pocket money.

(2) How much and how quickly does the investment need to grow to meet your need? This will help you evaluate if your investment is still appropriate for you.

(3) How often will you review your investment to make sure it is still on track to meet your needs? Remember, you don’t have to beat the Dow, just meet your own goals.

(4) How much money are you willing to lose? This tells you the price at which you would sell the investment if it lost value to that point, to prevent additional loss.

If you do not have the time, temperament or confidence to develop your own investment plan, a full-service investment advisor can manage the entire investment process for you.