How to Create an Investment Plan: 13 Steps (with Pictures)

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How to Create an Investment Plan

Explore this Article parts 1 Assessing Where You're At 2 Establishing Your Goals 3 Creating the Plan 4 Evaluating Your Progress + Show 1 more... - Show less... Other Sections Questions & Answers Tips and Warnings Related Articles References Article Summary Co-authored by Erin A. Hadley, CFP®

Last Updated: September 3, 2020 References Approved

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This article was co-authored by Erin A. Hadley, CFP® . Erin A. Hadley is the Managing Partner at Occidental Asset Management, LLC in California. Erin is a Certified Financial Planner with over 10 years of experience in investment management and financial planning. She has a Certificate in Personal Financial Planning from the University of California, Berkeley and is a member of The National Association of Personal Finance Advisors (NAPFA).

wikiHow marks an article as reader-approved once it receives enough positive feedback. In this case, 100% of readers who voted found the article helpful, earning it our reader-approved status.

This article has been viewed 231,768 times.

Creating a viable investment plan requires a little more than simply establishing a savings account and buying a few random shares of stocks. In order to structure a plan that is right, it's important to understand where you're at and what you want to accomplish with the investments. Then, you'll define how to reach those goals and select the best investment options to reach them. The good news is that it is never too late to create and implement a personal investment plan and begin creating a nest egg for the future.

Steps

Part 1 of 4: Assessing Where You're At

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Part 2 of 4: Establishing Your Goals

{"smallUrl":"https:\/\/www.wikihow.com\/images\/thumb\/0\/02\/Calculate-Profit-Step-6.jpg\/v4-460px-Calculate-Profit-Step-6.jpg","bigUrl":"\/images\/thumb\/0\/02\/Calculate-Profit-Step-6.jpg\/aid1336155-v4-728px-Calculate-Profit-Step-6.jpg","smallWidth":460,"smallHeight":345,"bigWidth":"728","bigHeight":"546","licensing":" div class=\"mw-parser-output\" p License: a target=\"_blank\" rel=\"nofollow noreferrer noopener\" class=\"external text\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/3.0\/\" Creative Commons \/a br \n \/p p br \/ \n \/p \/div "} 1 Set goals for your investments. What do you want to do with the money you make from your investments? Do you want to retire early? Do you want to buy a nice house? Do you want a boat? [4] X Research source As a rule of thumb, you're going to want a diversified portfolio no matter what your goal is (buying a house, saving for a child's college education, etc.). The idea is to let the investment grow over a long period of time so that you have enough to pay for the goal. If your goal is particularly aggressive, you should put more money in the investment periodically rather than opting for a more risky investment. That way, you're more likely to achieve your goal rather than lose the money that you've invested. {"smallUrl":"https:\/\/www.wikihow.com\/images\/thumb\/6\/6c\/File-an-Extension-for-Taxes-Step-8-Version-2.jpg\/v4-460px-File-an-Extension-for-Taxes-Step-8-Version-2.jpg","bigUrl":"\/images\/thumb\/6\/6c\/File-an-Extension-for-Taxes-Step-8-Version-2.jpg\/aid1336155-v4-728px-File-an-Extension-for-Taxes-Step-8-Version-2.jpg","smallWidth":460,"smallHeight":345,"bigWidth":"728","bigHeight":"546","licensing":" div class=\"mw-parser-output\" p License: a target=\"_blank\" rel=\"nofollow noreferrer noopener\" class=\"external text\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/3.0\/\" Creative Commons \/a br \n \/p p br \/ \n \/p \/div "} 2 Establish a timeline for your goals. How soon do you want to reach your financial goals? That will determine the type of investments you make. If you're interested in getting a great return on your investment quickly, and you are prepared to take the risk that you could also see a great loss just as quickly, then you'll select more aggressive investments that have the potential for significant return. These include undervalued stocks, penny stocks, and land that might quickly appreciate in value. If you're interested in building wealth slowly, you'll select investments that generate a slower return on investment over time. {"smallUrl":"https:\/\/www.wikihow.com\/images\/thumb\/8\/8d\/Get-Rich-Step-19-Version-4.jpg\/v4-460px-Get-Rich-Step-19-Version-4.jpg","bigUrl":"\/images\/thumb\/8\/8d\/Get-Rich-Step-19-Version-4.jpg\/aid1336155-v4-728px-Get-Rich-Step-19-Version-4.jpg","smallWidth":460,"smallHeight":345,"bigWidth":"728","bigHeight":"546","licensing":" div class=\"mw-parser-output\" p License: a target=\"_blank\" rel=\"nofollow noreferrer noopener\" class=\"external text\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/3.0\/\" Creative Commons \/a br \n \/p p br \/ \n \/p \/div "} 3 Determine the level of liquidity you want. A "liquid" asset is defined as an asset that can be easily converted to cash. That way, you'll have quick access to the money if you need it in an emergency. [5] X Research source Stocks and mutual funds are very liquid and can be converted into cash, usually in a matter of days. Real estate is not very liquid. It usually takes weeks or months to convert a property to cash. Advertisement

Part 3 of 4: Creating the Plan

{"smallUrl":"https:\/\/www.wikihow.com\/images\/thumb\/6\/62\/Become-a-Millionaire-Step-20.jpg\/v4-460px-Become-a-Millionaire-Step-20.jpg","bigUrl":"\/images\/thumb\/6\/62\/Become-a-Millionaire-Step-20.jpg\/aid1336155-v4-728px-Become-a-Millionaire-Step-20.jpg","smallWidth":460,"smallHeight":345,"bigWidth":"728","bigHeight":"546","licensing":" div class=\"mw-parser-output\" p License: a target=\"_blank\" rel=\"nofollow noreferrer noopener\" class=\"external text\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/3.0\/\" Creative Commons \/a br \n \/p p br \/ \n \/p \/div "} 1 Decide on how you want to diversify. You don't want to put all your eggs in one basket. For example: Every month, you might want to put 30% of your investment money into stocks, another 30% into bonds, and the remaining 40% into a savings account. Adjust those percentages and investment options so that they're in line with your financial goals. {"smallUrl":"https:\/\/www.wikihow.com\/images\/thumb\/e\/e8\/Get-Rich-Step-13-Version-5.jpg\/v4-460px-Get-Rich-Step-13-Version-5.jpg","bigUrl":"\/images\/thumb\/e\/e8\/Get-Rich-Step-13-Version-5.jpg\/aid1336155-v4-728px-Get-Rich-Step-13-Version-5.jpg","smallWidth":460,"smallHeight":345,"bigWidth":"728","bigHeight":"546","licensing":" div class=\"mw-parser-output\" p License: a target=\"_blank\" rel=\"nofollow noreferrer noopener\" class=\"external text\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/3.0\/\" Creative Commons \/a br \n \/p p br \/ \n \/p \/div "} 2 Ensure that your plan is in line with your risk profile. If you put 90% of your disposable income into stocks every month, then you're going to lose a lot of money if the stock market crashes. That might be a risk that you're willing to take, but be sure that's the case. {"smallUrl":"https:\/\/www.wikihow.com\/images\/thumb\/b\/b8\/Negotiate-an-Offer-Step-6-Version-2.jpg\/v4-460px-Negotiate-an-Offer-Step-6-Version-2.jpg","bigUrl":"\/images\/thumb\/b\/b8\/Negotiate-an-Offer-Step-6-Version-2.jpg\/aid1336155-v4-728px-Negotiate-an-Offer-Step-6-Version-2.jpg","smallWidth":460,"smallHeight":345,"bigWidth":"728","bigHeight":"546","licensing":" div class=\"mw-parser-output\" p License: a target=\"_blank\" rel=\"nofollow noreferrer noopener\" class=\"external text\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/3.0\/\" Creative Commons \/a br \n \/p p br \/ \n \/p \/div "} 3 Consult a financial adviser. If you're uncertain about how to set up a plan in line with your goals and your risk profile, talk to a qualified financial adviser and get some feedback. [6] X Research source {"smallUrl":"https:\/\/www.wikihow.com\/images\/thumb\/c\/c0\/Find-a-Job-in-Dubai-Step-6-Version-2.jpg\/v4-460px-Find-a-Job-in-Dubai-Step-6-Version-2.jpg","bigUrl":"\/images\/thumb\/c\/c0\/Find-a-Job-in-Dubai-Step-6-Version-2.jpg\/aid1336155-v4-728px-Find-a-Job-in-Dubai-Step-6-Version-2.jpg","smallWidth":460,"smallHeight":345,"bigWidth":"728","bigHeight":"546","licensing":" div class=\"mw-parser-output\" p License: a target=\"_blank\" rel=\"nofollow noreferrer noopener\" class=\"external text\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/3.0\/\" Creative Commons \/a br \n \/p p br \/ \n \/p \/div "} 4 Investigate your options. There are many different accounts you might use for an investment plan. Familiarize yourself with some of the basics and figure out what works for you. Set up a short-term emergency savings account with three to six months worth of living expenses. It's important to have this established to protect yourself if something unexpected happens (job loss, injury or illness, etc.). This money should easy to access in a hurry. Consider your options for long-term savings. If you are thinking about saving up for retirement, you may want to set up an IRA or 401(k) . Your employer may offer a 401(k) plan in which they will match your contribution. [7] X Research source If you want to start an education fund, think about 529 plans and Education Savings Accounts (ESAs). Earnings from these accounts are free from federal income tax as long as they’re used to pay for qualified education expenses. [8] X Research source Advertisement

Part 4 of 4: Evaluating Your Progress

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Community Q&A

Search Add New Question Question Is 400, 000 dollars enough money to retire on? Community Answer If you own your own house and a new car, then possibly. If not, then no. Try to retire on 900,000 to a million at least. Thanks! Yes No Not Helpful 16 Helpful 27 Question As a young investor, where can I find a reasonably priced, honest financial advisor? Donagan Top Answerer See Hire a Financial Advisor and Select a Financial Advisor . Thanks! Yes No Not Helpful 0 Helpful 3 Question Is it possible to invest with $500? Donagan Top Answerer Yes. See Invest Small Amounts of Money Wisely and Invest a Small Amount of Money Online . Thanks! Yes No Not Helpful 0 Helpful 3 Question Where do I start investing my money? Community Answer Ask this question of a professional, fee-based financial advisor. If you don't want to pay for advice, open an account with a large mutual fund company. Fidelity, Vanguard and T. Rowe Price are excellent choices among many others. Thanks! Yes No Not Helpful 0 Helpful 1 Question Can a kid make an investment plan? Donagan Top Answerer Absolutely. Use the above suggestions. The younger you are when you start saving and investing money, the better off you will be later in life. Thanks! Yes No Not Helpful 0 Helpful 1 Question Which business is less risky and more profitable? Community Answer Profit follows risk. That means that any business that's quite profitable probably involves considerable risk. To address your question specifically, "blue chip" companies typically represent the chance for profit at less risk. They are large, well-established firms such as those on the Dow Industrials index or the S&P 500 index. Thanks! Yes No Not Helpful 0 Helpful 1 Question Is it good to embark on an investment where $200,000 is needed as capital, while in return I get $100,000 as profit in a year's time? Donagan Top Answerer It's not possible to say whether such an opportunity is "good" without knowing a lot more about it, but you're talking about a 50% annual return, which is probably not a realistic possibility. Thanks! Yes No Not Helpful 0 Helpful 1 Question How do I select the kind of business I want to invest in? Community Answer Most people choose a business that they want to invest in based on what their gut instinct is telling them. Risk takers will most likely want to invest in stocks or assets that will yield more significant returns. "Safer" investors will stick to low-risk investments, wishing to gain what they will over a more extended period. Overall, identify the type of investor that you are and then do a bit of research about companies that offer you the returns that you are looking for. Thanks! Yes No Not Helpful 0 Helpful 0 Question How can I create an account for a simple investment plan? Donagan Top Answerer It is very easy to open an account with any brokerage firm or mutual fund company. Call them, and they will lead you through the process, or go to their website, and they will have all the instructions you need. Thanks! Yes No Not Helpful 0 Helpful 0 Unanswered Questions If you want to invest small business what do you must do? Answer Ask a Question 200 characters left Include your email address to get a message when this question is answered. Submit
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Tips

Even the best investment plan may need tweaking as changes in the economy occur or your personal circumstances shift in some manner. See those situations as opportunities to rethink your strategy while still keeping your goals uppermost in your mind. Doing so will lend direction to your investment activities and make it easier to see the big picture even as you deal with what is happening today. Thanks! Helpful 0 Not Helpful 0
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References

http://www.investopedia.com/articles/pf/07/risk_tolerance.asp http://classroom.synonym.com/investing-stocks-bonds-riskier-saving-money-bank-16121.html http://www.investopedia.com/terms/r/riskreturntradeoff.asp http://www.schwab.com/public/schwab/investing/retirement_and_planning/how_to_invest/investing_basics/set_your_goals http://www.investopedia.com/terms/l/liquidity.asp http://money.usnews.com/money/personal-finance/financial-advisors/articles/2014/02/26/how-to-find-a-financial-advisor-if-youre-not-rich http://www.schwab.com/public/schwab/nn/articles/Saving-for-Retirement-IRA-vs-401-k http://www.schwab.com/public/schwab/investing/retirement_and_planning/saving_for_college/college_savings_plans

About This Article

Co-authored by: Erin A. Hadley, CFP® Certified Financial Planner® This article was co-authored by Erin A. Hadley, CFP®. Erin A. Hadley is the Managing Partner at Occidental Asset Management, LLC in California. Erin is a Certified Financial Planner with over 10 years of experience in investment management and financial planning. She has a Certificate in Personal Financial Planning from the University of California, Berkeley and is a member of The National Association of Personal Finance Advisors (NAPFA). This article has been viewed 231,768 times. 17 votes - 100% Co-authors: 22 Updated: September 3, 2020 Views:  231,768 Categories: Featured Articles | Investments and Trading Article Summary X

Creating a solid investment plan will help your assets mature at a rate that suits your personal needs. If you’re young and prepared to take more risk, invest in more aggressive assets like stocks in growth-oriented and small-cap companies. For a safer option, allocate more of your portfolio to less aggressive investments, like fixed-income, and large-cap value companies. If you only want the money for retirement, consider investing in an IRA or 401(k). It’s always a good idea to diversify your portfolio to minimize your risk. For example, split your investment money between stocks, bonds, and savings accounts. You should also keep an emergency savings account with 3 to 6 months of living expenses in case of a big financial hit like losing your job. For more tips from our Financial co-author, including how to adjust your investment portfolio over time, read on! Did this summary help you? Yes No

In other languages Español: crear un plan de inversión Русский: создать инвестиционный план Português: Criar um Plano de Investimento Italiano: Creare un Piano di Investimento Print Send fan mail to authors Thanks to all authors for creating a page that has been read 231,768 times.

Reader Success Stories

Magdalena Cooper-De Neuze

Mar 8, 2016

"Very informative article. This helped me learn more on how to be objective when I am discussing personal investments. Additionally, the article helped me to distinguish my personal savings from my personal investments. Thank you to my son who encourages me to do the research on these important subjects." ..." more

Trevor Khuzwayo

Aug 23, 2018

"It has helped me to know more about the risks associated with the investment plan, so I am grateful to come across such information." ..." more

Ben Anyanah

Aug 20, 2016

"It is brilliant, insightful, useful guidance for investment endeavors."

Christine Awandu

Sep 1, 2016

"Awesome. Saved time searching for information."

Saalah Abshir

Dec 14, 2016

"Thanks a lot, it's so helpful." More reader stories Hide reader stories Share your story

Did this article help you?

Yes No Advertisement Cookies make wikiHow better. By continuing to use our site, you agree to our cookie policy . Co-authored by: Erin A. Hadley, CFP® Certified Financial Planner® Co-authors: 22 Updated: September 3, 2020 Views: 231,768 100% of readers found this article helpful . 17 votes - 100% Click a star to add your vote % of people told us that this article helped them.

Magdalena Cooper-De Neuze

Mar 8, 2016

"Very informative article. This helped me learn more on how to be objective when I am discussing personal investments. Additionally, the article helped me to distinguish my personal savings from my personal investments. Thank you to my son who encourages me to do the research on these important subjects." ..." more

Trevor Khuzwayo

Aug 23, 2018

"It has helped me to know more about the risks associated with the investment plan, so I am grateful to come across such information." ..." more

Ben Anyanah

Aug 20, 2016

"It is brilliant, insightful, useful guidance for investment endeavors."

Christine Awandu

Sep 1, 2016

"Awesome. Saved time searching for information."

Saalah Abshir

Dec 14, 2016

"Thanks a lot, it's so helpful." Share yours! More success stories Hide success stories

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