| Creating a financial investment plan is arguably the | | | | someone else to do it for you.Define your investing |
| most important step in an investor's timeline. Your plan | | | | profile: This is the breakdown of your investment type. |
| is the road map which will assist you in achieving your | | | | To give you an idea, here's my investment profile. |
| long term financial goals and aspirations. The old adage, | | | | Remember that I'm a college student, so you'll have to |
| "if you fail to plan, you plan to fail," relates 100% to | | | | devise your own plan based on your age, level of risk |
| successful investing. If you haven't created a plan or | | | | tolerance, and time horizon.* 70% Domestic Stock |
| don't know how, here are the basic steps you need to | | | | investment* 15% Foreign Stock investment* 15% |
| take:1. Determine your time horizon (the amount of time | | | | bonds investment* 0% Short Term cash (I have some |
| you can sit on your investments) and write it down. | | | | cash in high yielding online savings accounts like |
| You'll use your time horizon to choose which | | | | Emigrant Direct)To find out which investments are |
| investments are most attractive to you. It also helps a | | | | riskier than others, refer to the risk volatility pyramid |
| ton when deciding between small, mid, and large cap | | | | below.Risk Pyramid from low to high risk - cash, bonds, |
| stocks because you have already devised your own | | | | stocs, speculative holdingsCash carries low risk |
| investment strategy.2. Gauge your level of risk | | | | because of it's face value and liquidity. Speculative |
| tolerance. Some investors like to gamble more than | | | | investments carry high risk because investors |
| others. Determining your risk tolerance early on will | | | | "speculate" on the future of an investment without |
| save you any unexpected moments of pain if | | | | effectively analyzing data or similar resources.Need to |
| followed correctly.3. Let your age play a role too. The | | | | find out your risk profile? It's simple. You're either |
| younger you are, the easier it is to rebound from | | | | risk-adverse or risk tasking, but your time horizon |
| losses. This part of the equation is vital for baby | | | | ultimately determines your risk aversion.Time Horizon < |
| boomers. DO NOT INVEST YOUR RETIREMENT IN | | | | 30+ yearsGoal = Aggressive Growth* small and mid |
| ANYTHING BUT YOUR RETIREMENT. Baby | | | | cap growth stocks* mid cap growth and value stocks* |
| Boomers want low risk, capital preservation stocks | | | | a few large cap growth stocksTime Horizon < 20 |
| and/or funds. Remember: you can take out a loan on | | | | yearsGoal = Growth* small cap growth and value* mid |
| a car, education, house, or vacation, but cannot take | | | | cap growth* large cap value and growthTime Horizon |
| out loans for retirement.4. Add the proper investments | | | | < 10 yearsGoal = Conservative Growth* mid cap |
| that agree with your investment plan. There's no point | | | | value and growth* large cap value and growth* |
| in devising a plan if you do not choose to follow it. | | | | bondsTime Horizon < 5 yearsGoal = Capital |
| Discipline is probably the most important aspect of | | | | Preservation* mid cap value* large cap value* bonds* |
| investing. Learn it early on and it'll never be a problem in | | | | short term cashFollow these steps and you'll be well |
| the future.5. Balance your portfolio at least annually so | | | | on your way to financial success. Just remember: Plan |
| it constantly reflects your investment plan. Always | | | | your moves first, then Execute them.What's your |
| stay on top of your investments unless you rather pay | | | | investment strategy? |