Investment Plan: How to make it simple and effective
Having an investment plan is one of those tools that we know is important, but often put off doing. Between the time it takes, the difficulty of organising information and the feeling that "it's not the right time”, it’s easy to put it off. But the truth is that setting up an investment plan can be a lot easier than it seems, and the best time to get started may be right now.
Having a well-defined plan will help you reduce stress, make more confident decisions and have a clear vision of your assets, goals and profitability. This article explains in practical terms what an investment plan should contain, how to adapt it to your reality and why it is essential for better investing, with less doubt and more strategy.
What is an investment plan and what is it used for?
An investment plan is a formal or informal document that sets out how, where and for what purpose your money will be invested over time. It works like a personalised financial roadmap based on your risk profile, time horizon, goals and current financial situation. Rather that investing in a reactive way or on the spur of the moment, the plan will help you to give direction, discipline and coherence to the decisions you make.
As well as deciding how much to invest and in what types of assets (equities, funds, etc.), a good plan also covers issues such as diversification, liquidity, regular reviews and how to respond to adverse scenarios. By creating a plan, you are essentially building a strategy that will stick with you over time – avoiding rash decisions and increasing the chances of achieving your goals with less stress and more confidence.
Step by step guide to creating an investment plan
Creating an investment plan is a way of organising decisions, recording criteria and monitoring how your assets develop over time. It’s not about predicting the future or choosing specific products, but about creating a working basis to help you make clearer, less impulsive decisions. Here is a simple and practical roadmap to help you document your plan:
Understand your current financial situation and your goals
Start by taking stock of your assets (such as savings, investments or property), liabilities (such as debts) and monthly cash flow (income and expenses). You can include a simple table of values and estimated liquidity. Then define the objectives you want to achieve. You can set an estimated value and deadline for each goal. Identify which are short-term (up to 3 years), medium-term (3-10 years) and long-term (over 10 years). You can also set priorities.
Break down the allocation of assets
Asset allocation is the process of deciding how to split your money between different types of investments, risk levels, liquidity and time horizons. Even if you don’t have a specific product in mind, it’s a good idea to create a basic structure in line with your goals and profile. You can start by organising your assets into simple categories, such as:
• Liquidity: money available immediately vs. medium/long-term investments;
• Type of asset: term deposits, bonds, investment funds, shares, etc;
• Perceived risk: low, moderate, high;
• Purpose: short-term, specific goals, long-term/wealth.
This allocation acts both as a snapshot of the present and as a compass for the future. It will help you see if you are taking on too much risk, if you are investing in a balanced way, or if there are areas that could be strengthened or simplified. You can update this information on a regular basis and use it as a reference for the decisions you make.
Establish personal investment rules
Classify the assets you already have into categories such as "high/low liquidity”, "high/medium/low risk” or "current/long-term use”. Set limits to help you maintain emotional control and make more consistent decisions over time.
For example, "I’ll only add to investments with a return of more than X% after 12 months” or "I'll sell assets with accumulated losses of more than Y% after Z months”. You can specify maximum percentages by asset type or risk, such as "No more than 30% in illiquid assets” or "Up to 20% in high-risk assets”.
Document everything in one place that is accessible and up to date
Use a spreadsheet, digital document or personal finance application. The important thing is that you can easily consult and update the plan whenever you need to.
Focus on the key points:
1. Main objectives;
2. Current situation;
3. Distribution of assets;
4. Decision rules;
5. Next steps.
This document is ideal for quick reference and for sharing with those who help you manage your finances.
Document decisions to be made and future projects
Create a section for decisions to be made, such as "Review fund X next quarter”, "Investigate alternatives to term deposit Y”, or "Consult a tax expert on the redemption of pension savings plans”. Use this section to jot down investment ideas you’d like to explore later. You can include assets, personal projects, opportunities you’ve heard about, topics you want to study or investments you want to make when you have the budget.
Discuss the plan with an expert
A dedicated Account Manager or Private Banker can help validate the plan, explain any technical issues and assist you with any adjustments. Even if you don't need to see an advisor often, having this option available will help you feel more confident about what you decide to do. Decide when and how you will review the plan and your investment rules. This could be quarterly, half-yearly or annually. Specify what you want to analyse: progress against objectives, performance of assets, need to adjust allocation..
Common mistakes when creating an investment plan
Creating an investment plan is an important step, but to keep it useful and practical, you need to be aware of some common mistakes. Here are the most common (and easiest to correct):
• Too detailed (or too vague). A plan with too much information will be difficult to maintain. On the other hand, if it’s too general, it becomes less useful. Find the right balance: clear, objective and easy to update;
• Not putting it in writing. Having the plan "in your head” isn’t enough. Writing it down helps to clarify ideas, maintain focus and track decisions over time;
• Focusing only on the past or the present. The plan should be forward looking. Including goals, future decisions and open-ended ideas helps maintain a strategic vision, not just a reactive one;
• Forgetting to review it regularly. Life changes and the plan must change with it. Setting fixed times to review and adjust the plan will prevent it from becoming outdated or failing to reflect your current reality;
• Not sharing with anyone (if it makes sense to do so). Even if it's personal, sharing it with an expert, partner or family member can provide useful insights and help with future decisions;
• Following fads or "trending investments”. Choosing assets just because they are trendy or because "everyone is investing in them" is risky. The plan should reflect your goals, not trends;
• Not doing your own research. Even with specialist support, it is important to understand where you are investing and why. A plan based solely on third party suggestions tends to be less sustainable.
Create your investment plan with Banco Carregosa
A well-structured investment plan is a tool that can help you build a secure and prosperous financial future. The secret to long-term success is rigorous preparation from the outset, in combination with careful risk management and an adaptive strategy. Investing is an ongoing process – and consistency, strategic vision and the right guidance make all the difference. Contact us to find out how we can help you personalise your investment strategy.