Investment planning. It’s not just about crunching numbers or picking the hottest stocks. It’s about crafting a roadmap for a potentially better financial life. Our goal is for you not just to survive, but thriving.
Think of investment planning like a trusty compass. It is meant to help you navigate the twists and turns of the financial world and helps keep you on track. Certainly. Please remember the following text: “Whether you’re just starting out or gearing up for retirement, an investment plan can be a strategic tool for helping to build the future you’ve always wanted.
What Is Investment Planning?
Investment planning is like the secret recipe to helping you reach your financial goals. It’s not just about picking stocks or mutual funds and hoping for the best.
It’s a strategic process of determining your current financial situation and your desired future state and creating a roadmap to help you achieve that goal.
Benefits of Investment Planning
Seeing how a good investment plan could help you:
- Get more clear on your financial goals
- Help make the most of every dollar by investing wisely
- Help you build wealth steadily over time with the goal of financial security
- Take control of your financial destiny
Without a plan, it’s easy to get sidetracked by shiny investment opportunities or make knee-jerk decisions when the market gets rocky. But with a well-thought-out investment, you can stay focused on what matters to you.
Steps in the Investment Planning Process
So, what exactly goes into crafting an investment plan?
Here are the steps:
- Taking stock of your current financial situation and goals
- Figuring out your risk tolerance and investment timeline
- Creating a diversified investment portfolio to match your objectives
- Periodically checking in on your portfolio’s performance
- Adjusting your plan as life happens and your goals evolve
Feeling a bit overwhelmed? Don’t worry, you don’t have to tackle this alone. A financial advisor at Riverbend Wealth Management can help simplify the process and make it more manageable.
Determining Your Current Financial Situation and Goals
Before you can create an investment plan, you need to get real about where you’re at financially and what you’re working towards.
Assessing Your Current Financial Preparedness
Wondering if you’re ready to start investing? First, evaluate your finances thoroughly. Make sure you’ve got a handle on any debt and have some savings set aside. This groundwork can help guide your investment decisions.
- Your monthly cash flow (money in vs. money out)
- How much you have saved for emergencies
- High-interest debt to pay off
- Your job situation and future earning potential
- Upcoming big expenses to plan for
Be honest with yourself. If you’re living paycheck to paycheck with no safety net, investing might need to wait a bit. That’s okay. The important thing is to start where you are and start making a plan to help get you financially ready.
Identifying Your Financial Goals
Now’s the time to dream about what you want from your finances. What’s on your wish list for where you’d like to see that cash go? Perhaps it’s:
- Having enough to retire comfortably
- Buying your dream home or vacation home
- Sending your kids to college debt-free
- Starting your own business
- Building generational wealth
Get specific about how much you’ll need and your ideal timeline for each goal. The more concrete, the better. These goals can be the foundation of your investment plan.
Determining Your Risk Appetite
How much investment risk can you stomach? Your risk tolerance depends on your age, timeline, income, financial obligations, and, honestly, your personality.
If the thought of your portfolio value dropping keeps you up at night, you might prefer a slow and steady approach over an aggressive, high-risk strategy. Generally, the younger you are and the longer your investment timeline, the more risk you can afford to take since your portfolio has time to ride the market waves and recover from dips. But it is ultimately up to you and what you feel comfortable with, and your financial planner should support your decision.
But if you’re closer to retirement, you’ll likely want to play it safer to help protect what you’ve built.
Establishing Your Investment Time Horizon
Your investment time horizon is basically how long you plan to keep your money invested before you need to cash out. Your risk tolerance matters a lot when setting financial goals. For instance, planning to buy a house soon requires different investments than aiming for something further off, such as retiring comfortably.
For money you’ll need soon, we recommend sticking with conservative, easily accessible investments. But for long-term goals, we recommend being more aggressive since you have time to ride out any market ups and downs.
Creating a Diversified Investment Portfolio
Alright, now that you’ve got a handle on your current financial situation and goals, it’s time for what we think is the fun part – building that investment portfolio. And the name of the game here is diversification. I like to think of it as not putting all your financial eggs in one basket.
Understanding Asset Allocation
Asset allocation means splitting up your investments between categories like stocks, bonds, and cash. Making this choice wisely can significantly impact how well you do financially over time.
There’s no one-size-fits-all approach here. The right mix for you depends on your goals, timeline, and risk tolerance. A basic rule of thumb is to subtract your age from 110 – that’s the percentage to allocate to stocks, with the rest in bonds and cash.
So, if you’re 30, that would be 80% stocks, 20% bonds and cash. But again, that’s just a starting point. You have to do what feels right for you and your unique financial situation.
Choosing the Right Investment Vehicles
After you’ve sorted out your asset allocation, it’s time to choose where to invest. There’s a whole bunch of options to pick from.
- Individual stocks
- Bonds
- Mutual funds
- Exchange-traded funds (ETFs)
- Real estate investment trusts (REITs)
- Annuities
It could feel overwhelming, especially if you’re new to investing.
Diversifying Across Asset Classes
Diversification isn’t just about picking different investment vehicles -it’s also about diversifying your money both within and across asset classes.
I believe a good investment strategy includes different types like stocks, bonds, and perhaps even real estate or commodities if deemed to be appropriate based on your personal circumstances. The goal of spreading your investments is that if one declines in value, the other could rise in value.
Regularly Reviewing and Rebalancing Your Portfolio
Your work is not done once you’ve built your dream portfolio. You have to keep an eye on your allocation. I recommend giving it a good once-over at least once a year to make sure it’s still aligned with your goals.
You might find that your portfolio has drifted from your target asset allocation. That’s normal with market fluctuations. When that happens, it may be time to rebalance by selling some of the investments that may have been appreciated and possibly buying more of the underperforming investments.
It might feel counterintuitive to sell investments that are doing well but trust the process. Rebalancing is all about sticking to your plan and attempting to buy low, selling high, and asking your financial advisor for help when you are unsure about your specific situation.
Long-Term Financial Strategies
Investing is like a marathon, not a sprint. It’s all about playing the long game and attempting to make smart moves for you now to help set yourself up for your financial goal. As you work on your financial plan, here are some strategies to keep in mind.
Investing for Retirement
Retirement is a big financial goal for most of us. Starting early with your savings and investments could pay off because compound interest works overtime.
Some retirement investing tips:
- Take full advantage of any employer-sponsored retirement plans like 401(k)s
- Open an individual retirement account (IRA) to save even more
- Choose an asset allocation that gradually gets more conservative as you near retirement
- Resist the urge to cash out early and derail your progress
Your future retired self will likely be so glad you started early and stayed the course.
Building an Emergency Fund
Before you go all-in on investing, make sure you’ve got a solid emergency fund in place. I’m talking 3-6 months’ worth of living expenses stashed away in a savings account.
Having this financial safety net can help give you confidence and keep you from having to tap your investments in a pinch. You don’t want to be forced to sell investments in a downturn because you need cash.
Considering Real Estate and Small Business Investments
Looking for ways to diversify beyond just stocks and bonds? Investing in real estate or a small business could be an opportunity to create more passive income streams.
- Rental properties
- Real estate investment trusts (REITs)
- Investing in a small business as a silent partner
- Starting your own side hustle or business
Investing in these areas comes with its own set of risks and challenges. Make sure you do your research to see if it’s the right move for you before jumping in.
Incorporating Life Insurance in Your Financial Plan
Life insurance isn’t exactly the most exciting topic. But if you’ve got people depending on your income, it’s an absolute must-have in your financial plan.
Think of life insurance as a safety net for your family if something happens to you. Term life insurance is often the less expensive option available. Make sure you have enough coverage to replace your income and pay off any outstanding debts. In addition, make sure the length of the term policy is sufficient to protect your family.
Thinking about financial security isn’t always enjoyable, but knowing your family is protected makes it all worthwhile.
Working with a Financial Advisor
Feeling overwhelmed by all this investment planning stuff? I get it. It’s a lot to navigate on your own, especially if you’re new to the game.
A financial advisor can be helpful. Think of them as your personal coach.
Benefits of Working with a Financial Advisor
A financial advisor could:
- Help you clarify your goals and create a personalized plan to help you reach them
- Offer advice to help guide your financial decisions
- Help save you time and possibly stress by handling the day-to-day details
- Access to investment products you might not have on your own
- Help keep you accountable and help to keep you on track
Think of it as having a co-pilot for your financial decisions. Let’s face it: handling money can be sometimes complicated, but we might all benefit from some additional guidance.
How to Choose the Right Financial Advisor for You
Not all financial advisors are created equal. When you’re shopping around for your ideal money mentor, we recommend keeping an eye out for someone who:
- Is a CERTIFIED FINANCIAL PLANNER™ professional or a Chartered Financial Analyst® professional
- Has experience working with clients in similar situations to yours
- Charges a transparent, reasonable fee (we recommend fee-only vs. commission-based)
- Communicates in a way that makes you feel heard and empowered
Trust your instincts above all. You need an advisor you feel at ease with, someone who genuinely cares about helping you succeed.
Questions to Ask Your Financial Advisor
It’s crucial not to be shy about grilling potential advisors. After all, it’s your hard-earned money. Make sure you cover these questions:
- How do you get paid?
- What’s your investment philosophy?
- What asset allocation do you recommend for me and why?
- How will you measure my progress?
- What fees will I pay?
- How often will we communicate?
- Have you ever been disciplined by a regulatory body?
- Can I see a sample financial plan?
You’re in charge here. Don’t settle for anything less than an advisor who meets all your criteria and feels like a true partner on your financial journey. You can learn more about our team at Riverbend Wealth Management by clicking here.
Final Thoughts
Investment planning isn’t a one-size-fits-all solution. It’s about understanding what makes you tick, what keeps you up at night, and what motivates you each day. It’s about creating a personalized blueprint that aligns with your unique goals, financial situation, and lifestyle.
Planning on traveling the world once you retire? Investment planning can help set the stage for achieving your dreams by preparing you financially for all sorts of situations.
Your financial journey is all about you. Embrace it and take charge, using investment planning as your guide. For more information, set up a free, no-obligation 15-minute phone call with one of our financial advisors today.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.
Investments involve risk, including loss of principal, and, unless otherwise stated, are not guaranteed. The investment returns and principal value of the portfolio will fluctuate so that the value of an investor’s account when redeemed, may be worth more or less than its original value. Please consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed here. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by (Stratos Wealth Advisors, LLC) or DBA Name) will be profitable or equal to any historical performance level(s). Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice or from any other investment professional. If you have any questions regarding the information on this website, please consult with your financial advisor. No strategy assures success or protects against loss.
