Turn your goal into an investment plan

It might sound like a lot of work, but developing your investment plan is really just figuring out the answers to a few questions.


  • Having an investment plan is just as important as mapping a route and knowing your destination before you begin a journey.
  • Creating your investment plan isnt difficult, but as with all other aspects of investing, help is available if you want or need it.

The GPS to your investment destination

Imagine you want to visit a friend, but you dont know where she lives. Would you get in your car and start driving, hoping youll eventually find her? No—youd get her address and map your route there.

Think of your investment plan as a map to get you to your financial goal. It will help you set your destination and the route that will get you there. And like plotting out a road trip, investment planning doesnt have to be complicated, doesnt require the services of a professional, and doesnt need to take a long time.


Not comfortable behind the wheel?

Road trips are a great vacation for some people, but theyre not much fun for others. If youre not the kind of person who wants to put the time and energy into choosing investments and managing a portfolio, thats fine.

We still recommend that you have a basic understanding of how investing works. Its your money, after all. But an advisor can be your driver—or come along for the ride, if you just want someone to bounce ideas off of.

Mapping out your plan


Creating your investment plan starts with answering these questions:

  • Whats your final goal?
  • What limitations do you need to keep in mind? For example, you might have a hard deadline thats 10 years away, a small initial investment, or a particular concern about taxes.
  • How much will you invest each month or year? Will this amount rise over time?
  • How much risk are you comfortable with?
  • How often will you check to make sure your investments are still aligned with your plan?

Its a good idea to document your answers so that you have a touchstone for making future decisions about your portfolio.

Figuring out risk

Deciding how much money you want to have and when you need it is probably pretty easy. Knowing how comfortable you are with risk might be a lot tougher if youve never thought about it or experienced it yourself.

But dont just wing it. Your risk tolerance is one of the critical ingredients in deciding what youre going to invest in. Picking investments that are riskier than you can handle can lead to some pretty ugly outcomes.

But choosing investments that arent risky enough—that dont have the right potential for growth—can also be a roadblock in reaching your goal.


Think about risk in context

Your risk tolerance can and probably will vary depending on your goal.

If you have more time (or if your timeline isnt fixed), you have a greater ability to take risk—kind of like choosing a route youre not as familiar with.

On the other hand, if youre starting your journey a little late, you have less room for unexpected detours. In that case, youd be better off taking a safer route.

As you can see, your risk tolerance, time horizon, and ultimate goal all need to work together when youre deciding what to invest in.

Whats next?


Allowing yourself plenty of time to get to a destination is always a good strategy. When it comes to investing, the more time you have, the more you can benefit from compounding.


Saving for retirement or college?

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The sum total of your investments managed toward a specific goal.

Usually refers to investment risk, which is a measure of how likely it is that you could lose money in an investment. However, there are other types of risk when it comes to investing.

When earnings on invested money generate their own earnings. For example, if you invested $5,000 and earned 6% a year, in the first year youd earn $300 ($5,000 x 0.06), in the second year youd earn $318 ($5,300 x 0.06), in the third year youd earn $337.08 ($5,618 x 0.06), and so on. Over longer periods of time, compounding becomes very powerful. In this example, youd earn over $1,600 in the 30th year.

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