A strategic investment plan can make goals like children’s college education or a secure retirement a reality. A comprehensive plan is different from haphazardly chasing returns. Some considerations to help develop a plan:
- Target dates: Investing works for goals with target dates of five years or more. Short-term (5 or less years) can be risky and savings accounts may be a better option.
- Financial position: Take a close look at your cash flow and debt situation. Is some money going for non-essentials that could be used to build wealth, or is debt reduction a higher priority?
- Risk tolerance: Understand the level of uncertainty you can handle. It is possible to build a low risk investment portfolio but it will likely earn a lower return. If goal target dates are years away you may be able to ride out market downturns and handle more risk.
- Cash: An emergency fund in a safe, accessible account is an essential cushion. Closer to retirement you may want to increase that amount so you can outlast market downturns.
- Tax advantaged accounts: Tax deferred or tax exempt IRAs shrink tax liability and earnings grow tax free. A 529 college savings plan allows for tax free growth and tax free withdrawals for education expenses.
- Professional help: Registered Investment Advisors can provide investment advice and manage your investments. Use the Financial Industry Regulatory Authority’s (FINRA) online BrokerCheck database to find out about a financial adviser’s history http://brokercheck.finra.org
- If working directly with a financial professional is not feasible, consider index mutual funds or exchange -traded funds. They can be purchased commission free from no-load mutual fund companies.
Start your planning and investing as soon as possible so your money has more time to grow.