Coming up with a plan to identify your goals and the best way to reach them should be part of your financial planning. Sticking with a well-thought-out investment strategy can help you ride out any bumpy markets on the way to reaching your goals.
Step 1 - Define your goals
Some common ones are:
- Build a retirement fund
- Launch a business
- Buy a home or vacation home
- Pay for a child’s or grandchild’s education
- Pay for a child’s wedding
- Have a fund set aside if you become sick or disabled
- Grow money for a special vacation
Step 2 - Identify your time horizon
When do each of your objectives need to be met? Generally, the more time you have before you will use the money, the greater your ability to handle the ups and downs of the market.
Step 3 - Measure your risk tolerance
The investments you make should reflect your risk tolerance – how much risk you’re willing to take in exchange for possible returns. For example, stocks typically have higher risk – and historically higher returns – than bonds.
For the average investor, determining your risk tolerance isn’t easy. Our risk profile questionnaire will address your timeframe and your ability to deal with market volatility. Your evaluation will give you an idea of an overall asset allocation strategy for your situation.
Step 4 - Select your asset allocation
Depending on your degree of comfort, you could use the suggested asset allocation for your investment plan based on the questionnaire, or you may adjust the suggested allocation to better fit your scenario. As you finalize your asset allocation strategy, remember that holding investments in several investment categories helps reduce your overall risk. Poor performance in one area can potentially be offset by performance in another area.
Step 5 - Decide how to invest
Now you need to decide how existing investments fit within your asset allocation. You also need to decide what additional investments to use to fill the different percentage allocations to achieve your objectives. Mutual funds may be a better choice for beginning investors. These types of accounts make sense because it’s difficult for beginning investors to get adequate diversification with individual stocks and bonds. Our JOURNEY series of managed accounts can take all of the investment decisions off your shoulders by having our investment professionals invest your money for you.
Step 6 - Put your plan into action
Just a little time is required to develop your investment plan. It will save you time and ensure that you’ve covered all of the significant issues. Best of all, it’s customized and there’s no cost or obligation.
Just contact your local COUNTRY Financial® representative for more information.
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