The Importance of Having an Investment Plan

Most people are well aware that they need to invest and most are keen to do it. After all the prospect of seeing your money grow is appealing to almost everybody. The problem is that few people actually take the time to create an investment plan. Instead the just make random investments, this rarely works out well. Having a plan will make sure that you stay on track and that you are able to reach your financial goals.

The first thing that you have to do if you are going to create an investment plan is to determine what your goals are. There is no way that you can have a plan unless you know what you are trying to achieve. It is important that the plan be as specific as possible. Most people just have a vague idea that they want to see their money grow, this is not nearly enough. You need to decide on what you are saving money for and determine how much you are going to need. You will have to think about both the short term and the long term, it is all well and good to want to buy a house but your plan does have to include saving for retirement as well.

Once you know what your goals are you will also need to set a time frame for achieving them. This is important because the amount of risk that you will be able to take with your investments will depend on how soon you will need the money. David rocker atlanta recommends that any money that will be needed in the next ten years should be in investments that are fairly low risk, money that you will not need for more than ten years can be in riskier investments since you will have time to ride out the ups and downs of the market. In general safe investments would include things like bonds and certificates of deposits, things like stocks are in the risky category even if you are investing in large stable companies.

The next thing that you are going to have to make sure of when you are creating your investment plan is that you are building a diversified investment portfolio. This is where a lot of people get it wrong as they don't really have nearly the diversification that they need. You need to have your money spread out in investments that are not related so that if one investment goes down you will not lose all of your money. One of the challenges that a lot of smaller investors face is that it can be hard to get enough diversification if you don't have a lot of money to invest, mutual funds can be a good solution to that problem.