How to Start Your Investment Planning?

Planning is one of the keys to investment success and creating a plan will help you find options that fit your risk tolerance and timeline requirements. In this guide, we offer planning tips that may help make goals more attainable.

Assess Your Finances

Before investing in anything, please review your finances. Make a list of everything owed (such as credit card debt and medical bills), your income, and all assets (like real estate, savings accounts, stocks, IRAs, and the like). By doing this, you’ll see what can be invested and how those investments may be diversified. With investment planning from, it’s easier to get a handle on your finances.

Set Some Goals

Next, write down a few financial goals. For each of these, list an amount and how long it will take to reach it. For instance, one could decide to save $10,000 for a dream vacation or reach a $750,000 superannuation before retirement. Then, divide those goals into:

  • Short term
  • Medium term
  • Long term

Setting financial goals and defining them clearly will help you choose the right investments to achieve each objective.

Understand the Risks of Investing

In investing, risk is the chance of losing some or all the funds you’ve put in. It may happen because of a decline in value or a performance failure. All assets, even the safest ones, carry some degree of risk. Some of the most common investment risks include:

  • Interest rates. Rate changes may reduce returns and cause investors to lose money.
  • Market risks. Investments often decline in value because of market fluctuations.
  • Sector risks. Some investments lose value because of issues in certain industrial sectors.
  • Currency risks. As currencies rise and fall in value, investments are also affected.
  • Liquidity. It’s impossible to sell an investment and get the funds without affecting market prices.
  • Credit. There’s always a risk that a government or company may default on a debt.
  • Concentration. If an investment portfolio is not diversified, low performance in one asset or investment class may affect others.
  • Inflation. Investment values do not always keep pace with inflationary rates.

Generally, the higher the projected rate of return on an investment, the higher its risk will be. Lower-risk investments are more stable, which means there’s a lesser chance of losing everything.

Research Investment Options

To find a good investment, think about:

  • Returns. What’s the projected return, and does it come from capital growth or income?
  • Time frame. How long will you have to hold out to realize the projected return?
  • Risk. What kind of risk comes with the investment, and are you comfortable with it?
  • Liquidity. How long does it take to sell and get your money?
  • Taxes. How much tax will you pay on the investment’s capital gains and income?

When choosing an investment, be sure its returns are realistic. Like most other things in life, if it sounds too good to be true, it probably is.

Build a Portfolio

The way an investment portfolio is built depends on the investor’s goals, timeline, and their risk tolerance. Lower-risk options, such as government bonds and savings accounts, are better options that are less likely to decline in value.

For long-term goals, high-return investments like property and stocks may be better. While these carry more risk, it’s easier to ride out short-term value decreases. An investment portfolio should cover various asset classes and sections within each class. This protects the investor from losing too much if one investment’s value drops.

There’s Help Available

If you’re building an investment plan for the first time—or if your current plan needs an upgrade—the experts at Affiance Financial can help. Request additional information online or call today to get started.

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