How to create a personal investment plan for 2022
Everyone’s investment profile is different, and there are many factors to consider before starting to invest. Here are some ways you can get a head start on your personal investment planning in 2022.
Consider your budget and financial health
Before you begin, list down your current liabilities, as well as the future expenses you have to save for. Make a comprehensive note of your financial needs to better understand how to make a budget for your investments.
Investing requires a sum of money out of your disposable income, so it would be good to determine how much you want to invest by setting aside a monthly budget. Establishing your budget can also help you determine the types of investment you want to make.
Although investing is important, it shouldn’t take priority over your current financial needs. Be practical about your budget so you don’t compromise on savings and necessary expenses.
Write down your financial goals
Think about your financial goals. Are you trying to earn enough money to afford big-ticket items or aiming for a comfortable retirement?
For example, a car could cost $100,000 to $200,000 depending on the type you want to purchase. A comfortable retirement by the time you retire could require any amount from $300,000, depending on your age and preferences.
After mapping out your financial goals, consider the period you would like to invest in an asset.
Investments are often time-based—you either hold or sell your investments depending on how the market is doing and on the time frame for your goals.
Some assets are more profitable in the short term, while others take time to reap returns. Set a reasonable timeline for yourself and align your investments with the time period you require to meet your goals.
Determine your risk tolerance
Every investment comes with a certain amount of risk. With the constant fluctuation of the economy’s health due to the pandemic, you may want to spend some time writing down your financial outlook for 2021.
If the pandemic has heavily impacted your financial status, you might consider being more conservative in your spending this year and avoiding high risks. Your priority now might be to increase your emergency savings instead of making a long-term investment.
In this case, you can look towards investments that have lower risks and low upfront capital requirements. Gold and Exchange-Traded Funds (ETF) are assets that have low barriers to entry and are relatively less risky.
On the other hand, if you’re confident or have sufficient upfront capital to handle bigger potential losses, you might be more bullish and can consider taking on investments with higher risks.
You can consider investing in stocks and bonds, or cryptocurrency. These are riskier investments but may potentially bring about high market returns.
Do your research on each investment
Other than the most common investment assets like stocks and bonds, there are alternative investments that you can try out. Identify the type of asset that will align with your budget, risk appetite, and financial goals.
List down factors to decide on the type of investment that best suits your lifestyle and schedule preferences. Ask yourself questions to gain a better direction:
- How much time do you need to commit to each asset?
- What is the learning curve for each investment?
- Will you be able to take the risk and face the potential losses?
- Do you want an investment platform that allows you to reinvest a percentage of your profits automatically?
- Would you prefer hiring a professional trader to invest on your behalf?
Each investment type has its own prerequisites. For example, you need to set up a CDP account and choose a brokerage when investing in stocks and bonds. For alternative investments like Real Estate Investment Trust me (REITs), you may need to find a suitable brokerage platform.
Be sure to diversify your investment portfolio and avoid putting all your eggs into one basket. It’s not ideal to rely only on one asset for all your returns because all investments are vulnerable to economic volatility to a certain extent.
Monitor your investments regularly
These days, you can use apps to help keep track of your investments, and provide you with real-time share prices, insights and summaries.
If the brokerage platform already has these functions, be sure to use them. For example, Stocks trading platform Singapore allows you to trade stocks conventionality on a mobile app.
Remember that your financial goals might change along the way. It’s important to make sure that they continue to align with your investments so you can determine when to sell or hold certain assets.