Getting Started with Investment Planning

Jul 3, 2014 11:01:35 AM / by Jason Shaw


The wide variety investments and ways to invest that are available today can be overwhelming to newcomers.  If you are thinking of investing and are not sure how to begin, ask yourself these questions:

What Are My Goals?

What do you hope to do with the money you earn on investments?  Are you trying to boost your assets for a better retirement lifestyle or for your kids’ college expenses?  Are you hoping to increase your income in the short term?  Before you can make smart investment decisions, it is important to clarify what, exactly, you hope to get out of your investments.

Understanding your goals will help you to understand your risk tolerance and time horizon.  How much risk you can tolerate in your investments will depend largely upon you time horizon, or how long you can keep your money invested before you need it.  If your time horizon is long, then the time available to ride out market fluctuations increases your risk tolerance.  In fact, investments that are too conservative can drain your funds over time by failing to outpace inflation.  For short time horizons, on the other hand, risk tolerance is lower because losses are more difficult to recoup in a more limited timeframe.


How Much Can I Invest?

Before you begin investing, you should already have a budget in place and know exactly how much of your income you can reasonably allocate to investment.  Be careful not to invest more than you can afford to live without, and have an emergency fund set aside so you are not forced to sell investments prematurely to cover unanticipated costs.

How much you have to invest will influence what kinds of investments make sense for you.  If you are investing a small amount, then mutual funds are a simple way to begin.  Mutual funds contain a variety of investments, allowing for diversification without the expense associated with separately purchasing several different types of stocks.  Those with more to invest, on the other hand, may value the added customization of a separately managed account (SMA).  SMAs allow for a higher degree of tax planning in your investment decisions, since each account is managed separately with attention to the individual needs and goals of each investor.  SMAs have much higher minimum balances than mutual funds.  While mutual funds typically carry minimum balances of $1,000- $5,000, you generally need an investment of at least $100,000 for an SMA.

Dollar cost averaging (DCA) is an effective way to gradually increase the amount you have available for investment and to cultivate the discipline necessary for a sound investment strategy.  DCA simply involves setting aside a certain amount each month to add to your investment account.  This allows you to build your portfolio over time and to take advantage of additional buying power when prices are low.


What Other Values Influence My Financial Choices?

For many investors, return on investment (ROI) means more than just how much money their investments earn; it also includes social, environmental, or other benefits they provide.  Socially responsible investing (SRI) is a way of using your investment dollars to reap these non-monetary benefits as well as increasing your personal wealth.  Forbes reported in 2013 that SRI is a fast-growing part of the financial industry, accounting for $1 of every $9 under professional management in the U.S. An SRI strategy can include investing in companies that reflect your values, influencing corporate decisions through shareholder advocacy, and/or investing in underserved communities to provide low-interest loans that can fund development and services such as health care and housing.  SRI can be accomplished through a variety of vehicles, including mutual funds, exchange-traded funds, individual stocks, and SMAs.  Forbes suggests enlisting the help of a fee-only advisor to avoid the cost of commissions when you purchase your investments.

Considering your goals and limitations is the first step in developing an investment plan.  Asking yourself these questions will help you to decide what types of investments make sense for you.  Once you have a general idea of your goals, limitations, and what types of investments appeal to you, a professional financial advisor can help you better hone your strategy.  Boelman Shaw Capital Partners provides knowledgeable guidance for a variety of financial planning goals, including retirement and education planning.  We also specialize in tax services, allowing us to pay special attention to your tax planning needs while helping you to choose investments.  Contact us today for a free financial consultation, and find out how we can help you get started on your investment plan.


Material discussed herein is meant for general illustration and/or informational purposes only.  Because individual situations will vary, the information shared here should be used in conjunction with individual professional advice.

Topics: Financial Planning

Written by Jason Shaw