How to Make a Personal Investment Plan (Detailed Guide)

“Write it down!”

“It’s not enough to have it in your head”

These are snippets of a recent conversation I had with a very close friend of mine about investing and investment goals/plans. It all began when I asked him about his investment goals for the year and how far he is from achieving them.

He honestly told me that he doesn’t have a defined investment goal or plan whatsoever. He was basically just going through the year, paying the bills, and hoping to somehow be significantly worth more than he was last year.

For the past couple of years, I have followed through with defined investment goals and plans, and it has served me well.

Not a month goes by that I don’t have an investment goal to achieve or an objective to accomplish: It’s a norm for me. However, the reality is that for most people, that ‘serious and consistent investing’ lifestyle is abnormal.

According to a study by Ramsey Solutions, “nearly half Americans are not saving for retirement and even those who save aren’t saving enough… In fact, only one in 10 Americans save 15% or more of their income—the amount industry experts recommend individuals set aside in order to build adequate savings—for retirement”.

The report also reveals that “despite their lack of personal retirement savings, non-savers’ vision of their golden years is the same as that of savers. Both groups want to spend their retirement with their family and traveling for pleasure.”

Everybody wants to have the good life that comes with being wealthy, sadly, not everybody is putting in the effort to get it.

If you want to be wealthy, INVEST, own things that grow in value with time, and for that, you need a plan: an investment plan.

“If you fail to plan, you plan to fail”

Benjamin Franklin

What is an Investment Plan? An investment plan is simply documented investing goals and defined strategies to achieve those goals. It’s one of the major things to consider before you start growing wealth via investing.

If you are serious about growing wealth, here are 6 steps to create your investment plan:

1. Assess your Present Financial Situation

Every significant thing about your personal finance, you need to know, you need to state: COMPLETE AUDITING. I’m talking about your income, debt profile, overall personal expenses, emergency fund, credit score, and net worth.

The general idea is to understand where you are and how far you are from where you want to be. In my case, I started with no debt, a solid college education, a low-paying job, and a determination to be financially independent, in addition, I got time on my side.

Investing is a journey, and before one embarks on a journey, it is imperative to know the starting point.

If you’ve already, check out the 8 things you should consider before you start investing.

2. Define your Investing End Goals

As it is imperative to know the starting point of a journey so it is to know the endpoint of the journey. For most investors, it is the answer to the question “why do you invest?”.

What is your ultimate goal of investing?

What and what will it take to achieve your ultimate investment goal?

Is it a net worth of $10,000,000 comprising of 40% investments in real estate, 40% in the stock market, 10% cryptocurrencies, and 10% Treasury Bills?

These are questions you need to answer and not just within you, you’ve to WRITE THEM DOWN. The more specific the better.

Investing, especially for the long-term, is challenging and you need to know why you are going through the challenges investing will bring to your life.

This will help you follow through with your plans; it will keep you pushing when things are going south and help you keep your eyes on the ball at all times.

3. Choose your Investing Strategies

You know where you are and where you want to be, the next important question to answer is “how do you get there?”. And this is where investing strategies come to play.

Think about investing strategies as the principles that guide you as you structure/build your investment portfolio. As part of your overall investment plan, you should identify and stick with defined investment strategies that suit your personality.

There are different types of investing strategies depending on how you view it, some of which are value investing, growth investing, long-term and short-term investing, active and passive investing, and index investing.

And there are many factors that influence individual investing strategies, including:

  1. Goals
  2. Risk Tolerance
  3. Time to achieve those goals (mostly determined by age)
  4. Investing power (available capital for investing)
  5. Lifestyle

Check out this article on the balance about “The Best Investing Strategies” and on Investopedia about “Investment Strategies To Learn Before Trading.”

4. Set Realistic Short-term Goals

This is what has helped me the most as I journey through the murky waters of wealth building: SETTING REALISTIC SHORT-TERM GOALS.

As I write this article, I have yearly investment goals that are broken down into monthly goals and built upon each other.

I don’t have to worry about how difficult it will be to achieve my ultimate investment goals. All I have to do is to think about this month’s goals and that’s it: Investing Made Easy.

Based on the above tweet, you don’t have to worry about how difficult it will be to be among the top 3%, all you just have to do is invest $1,000 a month for 15 years and you are there.

Breaking up your long-term goals into realistic short-term goals that build on each other should be a critical part of your investment plans. You’ve to look at your end goals and figure out how they can be achieved via short-term (monthly or quarterly) goals.

5. Consider Possible Limitations (Set Minimum Goals)

A lot of people create investment plans without considering possible limitations and setbacks, and I think that’s a big mistake. I learned this the hard way.

In 2019, most individual investors didn’t anticipate that we would go through a global pandemic that will hit major economies hard. A lot of people lost their means of livelihood, and as such whatever investment plans they have were thrown out of the window. To make things worst, the stock market crashed in March 2020.

Sh*t happens and for that, you need a contingency plan incorporated into your broad investment plans. Investment portfolios go down in value significantly at some points, and even legendary investor, Warren Buffett has had to live with years of poor investment performance.

And you may have months that for some reason you are unable to achieve your monthly goals. Consider all these possibilities and ensure that you structure things in a way that come what may, YOU BRING THE TROPHY IT HOME.

6. Keep Track of Your Progress

Finally, keep track of your progress. Create the time to evaluate your overall performance and reflect on how far you’ve come.

At the end of every year, at the end of every quarter, make it a habit to check if you are sticking to the plan.

Monitoring your investment portfolio will also help you determine if you need to realign the weighting of assets in your portfolio, this is also known as portfolio rebalancing.

Growing wealth is a lot easy when you have got a plan, here are some tools to help you create your investment plan:

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