Post A CommentMany people have heard the expression Failing to Plan is Planning to Fail. While I tend to agree, it seems to turn off most people rather than motivate investors to Take Responsibility for Your Investment Returns. I was reading an investment update produced by an asset management group that I liked. It explained the importance of having a plan to help an investor focus on what is important over the long-term. The article included a six step investment checklist for you to personalize. Now this seems useful to me:
Your Investment Objective
What are you trying to accomplish with your investments? Try completing the following statement: I am saving for . Now the key here is to be specific. Are you saving for retirement, to build an emergency fund, for your children’s education, for a dream trip to Hawaii, etc. And it’s OK to have more than one goal, just remember that the investments and accounts used may vary for each of the goals.
Investment Time Horizon
Once you have figured out what goals you want to achieve, it is important to set a date in the future when need to cash out your investments. Completing the next statement: My investment time horizon is ## years. Are you retiring in 20 years, want to have an emergency fund by the end of this year, for your child’s university in 10 years or that magical trip to Hawaii at Christmas.
It is important to feel comfortable with the risk you can take while maximizing you potential for good returns. This is most often achieved through a mix of assets (cash, fixed income and stocks) that matches your investor profile. Complete the next statement: I have determined my tolerance for risk and the mix of assets that’s right for me ( % cash, % fixed income and % equity). Click on the link above to verify the importance your ideal asset allocation.
Selecting Specific Investments
Depending on your Relationship With Your Advisor you may want to seek their guidance to complete the next statement: I have selected specific investments that meet my needs in terms of target asset mix and investing preference (strategic vs. tactical styles). If your advisor is not the only person who decides how to invest your savings, other sources of information such as Morningstar may help you determine the volatility and track record of investments. It is important to note that past performance does not predict for success.
Periodic Investment Plan
Along with Buy Low & Sell High and Stick to Your Asset Allocation, having a regular schedule by which cash is added to your investments is a key to your success. Therefore confirming that you are engaged in regular investing and have set up a pre-authorized periodic investing plan to help your investments continue to grow is a huge step forward. You will benefit from a cost averaging strategy, you will be fully invested earlier and can remove the subjectivity that can be greatly affected by the negative mass media messages we are bombarded with on a daily basis (another pet peeve!)
Commit to Your Plan
Finally, it is important to complete the next statement: I am committed to my plan and will review it annually. This last step is where many folks go awry. Self-discipline and effort is required on your part if you want to reach your objectives.
It is not the level of detail in your plan nor what software was used to create it that is most important. What really counts is that the plan is Yours and you Do Not Wait to start it!
Please share your success and let us know what we can do to support you.
Author: Robert
Pingback: Post Thanksgiving Roundup - Buy Like Buffett
Pingback: Carnival of Financial Planning #168