You’ll need to determine where you are in the investment life cycle, what your goals are, and how much you need to invest to get there. Reminding yourself why you are investing your money will inspire you to invest effectively and consistently.
As a moderately-cautious risk investor, your financial strategy is that you are willing to accept some moderate losses in capital, on occasion, but maintain a balanced approach by evening it out with conservative and low-risk assets. If this sounds like you, we have a few insights for you to consider.
How to create an investment plan
A well-thought-out investment plan is an important tool to help you reach your financial goals, such as buying your first home or getting ready for retirement. It can also help prepare you for the ups and downs of the market and benefit from opportunities as they present themselves.
Set realistic goals
Consider how much money you’ll need to fulfil specific goals and make a plan to work towards them. If you have multiple goals, divide them into the short and long term to help you choose the right investment products to meet your goals.
Do the math
Calculate exactly how much you need to set aside each month to achieve your goal within a set time frame. Assess if that’s a realistic amount for you to set aside each month. If not, you may need to modify your goals.
Identify your investment strategy
You will need to determine your risk tolerance and the investment lock-in period. You could choose a more aggressive investment for long-term goals or a more conservative investment for short-term goals. Or you might want to opt for a more balanced approach.
Review your plan frequently
Your investment strategy, risk tolerance, and goals may change as your circumstances change. It is a good idea to review your investment plan at least once a year to make sure you are on track.
Lack of a clear goal
Failing to diversify
Risk is unavoidable when it comes to investments, but it can be managed through diversification of your portfolio. Spreading your money across different asset classes, including cash, shares, and bonds, as well as across different sectors and regions, can help to minimise your losses when one type of investment underperforms. As a rule of thumb, do not allocate more than 5% to 10% to any one investment.
Excessive focus on short-term performance
The market can be unpredictable, with prices moving up and down from one day to the next. Investing for the long term gives your money the chance to recover from stock market downturns and grow in value over time.
Letting emotions take over
Emotions and investment don’t mix. You should not let fear or greed control your decisions. When markets fall, fear and panic set in and you might be drawn to sell or when they skyrocket, you might be tempted to put too much capital into one investment. Instead, you should shift your focus to the bigger picture and ride out the volatility for gains in the long run.
Over-monitoring your investments
The habit of looking at your portfolio a little too frequently may result in you becoming addicted and emotionally attached to market movements. You should allow some time for your investments to grow and then reap the benefits.
*Disclaimer: All the information / options provided by FAB are for the purposes of the customers’ informed decision making and will not be deemed as a specific advice or recommendation.