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Why you should have an investment plan?

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If you don't have financial goals, your finances are likely to end up on the wrong track. To be clear about your economic goals and how best to achieve them, you will need an investment plan.

Savings and investment plans are critical in achieving both short-term and long-term financial goals. There are many saving plans available out there, and you can pick one based on your objectives and financial capabilities.

Smart investing can substantially improve our financial lives. It will help provide us with sufficient funds to make our dreams come true. But it’s good to keep in mind that investment planning is critical before jumping into investing. 

But what is an investment plan and how to make one? We´ll tell you all about it here.

What is an investment plan?

An investment plan is a systematic model that is designed to guide your current or future investments in the right direction. In other words, they are strategies that allow investors to consider all variables. As an investor, you can measure the amount of capital you can invest while meeting your other financial obligations. In addition, investment plans recognise and weigh any risks. An investor with a plan will look at all corners of the market to decide what types of assets are appropriate for their situation.

Investment planning helps you identify financial goals and leverage them to your advantage. There are four elements to investment planning:

  • Financial goals
  • The parameters or steps to be taken
  • Timing
  • Selection of Investment products

The investment plan starts with identifying your goals and objectives. Then, you must match those goals with your available financial resources. Today there are many investment instruments in which to invest, the most common being cash, stocks, derivatives, bonds and real estate. So, according to your investment plan and available funds, you can invest in those instruments that will help you achieve your goals and objectives.


Why is it important to have an investment plan?

Financial planning is the process of drawing up a comprehensive, organised, detailed and personalised investment plan that guarantees the achievement of previously determined financial goals, as well as the deadlines, costs and resources necessary to make it feasible.

The importance of an investment plan lies in the fact that it allows us to have a road map that marks the path that the money will have to take within the financial management, i. e., through financial planning we define our goals (generally aimed at making our money generate additional income), time window, instrument/s to invest in, etc.

It is necessary to make calculations, formulate estimates and establish decision criteria, paying special attention to the risks of each investment.

This will dictate the investor's profile, the most suitable investment products, the time it will take to achieve the investor’s goals and other relevant aspects.

All in all, an investment plan serves to make better decisions and to be realistic in terms of profitability and the time it might take to reach the established goals.


How to make a simple investment plan in 5 steps

Financial planning is an ongoing process that really starts from a "zero" moment, namely the awareness of the need to plan and the willingness to carry it out. Every plan requires some measure of effort and sacrifice. However, the benefits of good planning far outweigh the potential sacrifices along the way.

We can distinguish five stages in a financial planning process:

  • Assess your personal and financial situation

Investments are not standard but are adapted to each person, varying according to certain aspects such as age, savings capacity or capital earmarked for investment.

If you are a young person in your thirties or even younger and do not have major family responsibilities, you may not be in a hurry and decide to let compound interest work its magic. Or, conversely, you may be more risk tolerant, as you will have more time and capital to recover.

On the other hand, your capital will also determine your options, as some investment plans in ETFs or CFDs of investment funds have a minimum investment amount, while other markets such as Forex or cryptocurrencies allow investments from very small amounts.

  • Establish your goals

What do we save for? Accumulating money without a clear goal is inefficient. Are we saving for retirement? To buy a second home? For our children's university? The implications of some objectives are completely different from others in terms of priority, investment time frame, liquidity needs or risk profile to be taken. The same goes for the vehicles used to channel investments appropriately: to save for retirement, we would be well positioned with a pension plan, but this is not the right vehicle if, for example, we want to save to change our car.

  • Determine your investor profile

Investor profile is associated with risk tolerance. The higher the risk, the greater the reward.

Always remember that "every investment involves risk".

However, investing in cryptocurrencies and promising startups is not the same as investing in indices made up of shares of companies that dominate the market.

In a nutshell, these are the investor profiles:

  • Risky or aggressive: the priority is to achieve high returns quickly, so they are prepared to lose money if something goes wrong. Investments in new technologies or in times of high market volatility fit this profile.
  • Conservative: if the priority is the security of not losing money, then it does not matter if the return is low. Usually applied by investors with time on their side.
  • Moderate: is somewhere in the middle. It can vary depending on the goal of the moment or the investment opportunity. It is possible to hold both risky and conservative investments at the same time to balance the risk.


  • Research the types of investments that fit your profile

Once we have defined our investor profile, it is time to make the important decisions. At this point, we will decide on the vehicles in which we are going to channel it: shares, investment funds, bonds, Forex, cryptocurrencies, etc. A fundamental element in proper financial planning is diversification, in other words - diversifying both in terms of assets and types of assets -.

  • Put your plan into action

Once the strategy is designed, it is time to put it in action. At this point, you will also decide whether you want to take an active part in your investments or whether you prefer to invest and let your money work for you: Set it and forget it.

Either way, the plan you have set up will be perfectly aligned with your financial goals, so you don't have to worry about anything.


Benefits of investment Planning

The following are the advantages of investment planning:

  • Family security: Investment planning is important in terms of family security. If the working member of the family dies, the other members of the family will be financially secure due to the detailed plan.
  • Income management: It is possible to manage one's income and expenses effectively with an investment plan. Managing income aids in the management of other expenses, such as tax payments.
  • Financial understanding: Understanding one's current financial situation is aided by investment planning. Being financially literate makes evaluating an investment or retirement plan much easier.
  • Savings: Savings should be invested in highly liquid investment vehicles. In case of an emergency, funds can be easily withdrawn from these investments.
  • Living standards: Investment savings are extremely valuable in difficult times. For example, the death of a working family member usually has a significant impact on the family's standard of living. At that point, the worker's investment can become a valuable source of income for the family.


How do I start building my investment plan?

The first thing to do, as mentioned above, is to define your financial objectives.

This can be a complicated task to do individually, so we bring you the perfect tool to help you formulate your investment plan, and achieve all your financial goals: RIZEAPP.

Let us help you meet all your financial needs!