Benjamin Franklin, one of the Founding Fathers of the United States has been attributed as saying; “If you fail to plan, you are planning to fail!”

Whilst foresight is blind and the best-laid plans often go awry, it makes a lot of sense to have a plan, or at least some idea or intention on what you are going to do, or where you want to be in the future, and how you are going to get there.

An ‘Investment Plan’ lays down the pathway or strategy/ies for your finances to provide you with the greatest potential for getting you to your desired destination over the short, medium and long-term.

Before the plan can be implemented however, you need to:

  • Understand your current finances: establish where and how much of your money comes from, and where it goes, thereby leaving you with an idea of what surplus cash you have at your disposal. You may also want to establish what you own and what you owe.
  • Develop your objectives and goals: what do you hope to achieve over the next 1-3 years, 4-6 years and beyond that? This allows a strategy to be developed, that if it plays out as planned, gives you the greatest prospect of being where you want to be at the end of the short, medium and long-term timeframes.
  • Understand the relationship between ‘risk vs return’: the two are directly correlated in that the lower the risk, the lower the potential return; and conversely, the greater the risk, the greater the potential return. It is crucial you understand this concept and that you are aware of your level of tolerance to risk, because this must align with your objectives and goals.  For instance, if you have no tolerance to risk, but have a high growth return objective on your investment portfolio, there is a mismatch in the ‘risk vs relationship’ which will need to be addressed.  You will need to either: trim your return expectations or take on more risk in order to achieve your desired objective.

Once the above concepts have been grasped and documented in writing, you have started your ‘investment plan’.

The next step in the process is developing the strategy/ies to be implemented over the respective time frames.  This will be driven by the goals you want to achieve for each timeframe.

The above advice is provided as general advice and is not intended to be taken as personal advice. It has not taken into account your personal circumstances, objectives, financial situation or needs. You should therefore discuss with your financial adviser before implementing them to your current financial position. If you would like to discuss options and get more personal advice that is tailored to your current financial situation, please contact and make an appointment with an adviser at Capricorn Investment Partners and the Pentad today.

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