Building An Investment Plan



AK Equity Group
An investment plan is like a map, guiding you towards your financial goals. However, you can’t begin to create this map until you’ve defined the destination, or goal, you want to reach.
If you haven’t yet clarified what your personal financial goals are, you can start here:

Setting Financial Goals: First Dream, Then Plan

Solo or Team?

Some investors choose to build and manage their own portfolio. Others prefer to partner with an advisor who can help with choosing the right mix of investments and provide ongoing portfolio management. Creating an investment plan is something you can do either on your own or with a trusted professional.

Key Points To Consider

When crafting your personal investment plan, you can begin by answering these questions:

1. What’s your financial goal?

2. How much will you invest? Not only initially, but each month and year. Will the amounts you invest increase over time?

3. Are there any special limitations that will affect your investments? This could include a time frame deadline (Ie. 10 years until you need to begin college tuition payments for your child), or limitations regarding how much you have available to invest to begin with.

4. How risk-averse are you? This will affect your investment portfolio choices.

Market fluctuations can spark strong emotions in risk-averse investors.

About Risk Tolerance

Knowing your personal risk tolerance is an important part of your investment plan. There’s no one right approach when it comes to investing; those who are market-savvy may favor a higher-risk, aggressive approach. Others want to achieve minimal volatility in their investment portfolios and so will need to take a conservative approach. Moderate investors accept some degree of risk, and often choose to balance their portfolio with longer time horizons and a 50/50 structure.

Why does aligning your investment plan to your risk tolerance matter? Well, as the market naturally fluctuates, higher-risk investments can take major swings in value. This can spark strong emotions in investors. Those with a lower risk tolerance may be tempted to make hasty decisions or suddenly abandon a well thought out plan. These kind of sudden investment decisions can lead to costly mistakes.

So if market fluctuations keep you up at night, this could be a sign that your portfolio is not quite balanced to match your personal risk tolerance. In this case, you could talk with your financial adviser about how to gradually rebalance your portfolio towards lower risk investments.