Investment Planning – Defining and Measuring Goals

Investment Planning involves taking a position in the stock market and holding it long enough to make a profit. Most investors use a financial advisor to help them put together a comprehensive Investment Planning Strategy. Once the strategy is finalized, it becomes part of the investor’s retirement planning agreement. This agreement details when the investor must sell off assets, if and when he/she can borrow from, and other important terms.

An investment plan is an investment vehicle provided by most individual mutual funds to individual investors, enabling them to invest small sums periodically in their portfolio instead of all at once. The frequency of such investment plans generally ranges from once a year to about six times a year. This may depend on the health of the overall portfolio, the financial security of the investor, as well as his/her age. It is best that investors not commit to long-term investment planning during younger years, as significant losses may be incurred due to immature investments. Long-term goals in investment planning should also be realistic, such as earning a lifetime average of ten percent per year on investments.

In addition, while retirement goals in investment planning should include earning a lifetime average of ten percent per year on investments, short-term goals should be realistic as well, such as achieving success in a single portfolio investment over the next one to three years. Therefore, a five-year term goal would be ideal for an investor nearing retirement age. When an investor is developing his/her Investment Planning Strategy, it is important to ensure that each asset being managed is fit for purpose, and that there are no risks to the investor in doing so. If the portfolio is not a strong fit for the investment goals, then the investor will not achieve the results desired.

All investment vehicles, whether they be stocks bonds, mutual funds or other investment vehicles, have risks and rewards. As with any investment activity, knowledge and experience are both needed to ensure long-term success and avoid costly mistakes. However, even when managing investment vehicles effectively, there are still consequences to be addressed in the event of a loss of investment, such as the liquidation of some or all of an investor’s assets, and incurring fees for inventory purchases and/or sales, depending on which assets were purchased in what amounts. Additionally, in the event of a portfolio loss, what may have been a strong, steadily earning portfolio can quickly be depleted as all of the investments in it are liquidated, causing the loss of potential returns.

An important step in developing an Investment Planning Strategy is to understand how various investment tools and / or products might fit with the overall portfolio. For instance, when using the stock option strategy, which allows investors to purchase stock at a set price within a set period of time, it is important to determine if the selected stock or stocks represent a good buy or a bad buy. Other strategies such as index funds, mutual funds, and real estate investing accounts should all be examined for suitability with the overall investment plan. Once this step is complete, the next step is to decide how to protect and grow the portfolio over time. Protection for retirement accounts and short-term investments should be included in the overall portfolio plan while growth measures should be used for creating an asset allocation plan that will eventually become the backbone of the portfolio.

Once the Investment Planning Strategy has been developed and a plan developed, it must be monitored and updated on a regular basis to ensure that objectives are met and that management of financial resources is effective. It is important to remain actively involved in the process of Investment Planning to ensure that its effectiveness continues throughout the years. Investment Planning Tools and Products can also be utilized to achieve the desired results. These products and services include investment newsletters, educational books, as well as investment-specific tools and software. While these may prove to be helpful in providing information and in implementing strategies, they should not be relied on to define and reach financial goals.

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