Every person, regardless of their age or stage in life, should know how to make an investment plan. A budget and good financial management are a core part of this process, but long term success in life requires more than a traditional investment strategy.

How to Make an Investment Plan People Crosswalk

Spoiler alert: the first and most important step to creating a personal investment plan is to start investing. Before there is a plan?! Yes. Start now. Invest your time, energy and money (preferably in that order).

No One Starts With Nothing

The world was left with many fascinating and insightful ideas, thanks to Ralph Waldo Emerson. But I usually don’t quote him when I’m writing about investment or personal finance. This quote, however, was a good fit.

“Without ambition one starts nothing. Without work one finishes nothing. The prize will not be sent to you. You have to win it.”

Everything is an Asset When You Reinvest

Success in life is only partly tied to wealth, but most things do require some money. Yet having a job or business or side hustle is only part of how we get and keep money, when we do have it.

Like most people, you probably want to invest financially. But long term success and financial security is connected to many other aspects of how you manage and live your life. We will get to investment apps, index funds and growing your investment portfolio below.

How to Make an Investment Plan Money in Hand

A crucial part of the investment planning process, however, is about investing in yourself. And our long term success in life has less to do with how we gather financial assets, and more to do with how we leverage the life assets we all start with.

Personal (Life) Assets & Advantages

We all come into the world with the same basic tools. Like startup capital for life, we are all born with certain (very valuable and important) starting assets.

The most essential of all these resources is time. While health conditions can both increase and decrease our years of life, we all pretty much have the same amount. You might say that newborn babies are the wealthiest of all, since they possess more of this most limited resource.

Make an Investment Plan Kid Play Learn

The other precious and powerful asset — more manageable but far less appreciated — that we all have is energy. This asset determines what we do with the time we have. 

Certainly it is true that some people start with advantages and others with very difficult challenges. Most of us have a mix of both. But outcomes are not simply the result of privilege or problems. Success ultimately comes from how we leverage or deal with them.

Experience is an Asset

Regardless of the era or environment we are born into we can all channel our natural power to survive and thrive. Growing from our experiences (and then ‘reinvesting’ that growth) is not just a nice idea.

Our experiences and circumstances, both positive and negative, are assets that can generate compounding returns in our lives. When applied properly, the core capital we all are born with (time and energy) and the experiences we have along the way are the foundation stones on which we can build and grow.

Make an Investment Plan Experience Man Walks

Yes, money is needed for many things. But it is an abundant resource and trivial in comparison to our natural born assets. No one starts with nothing, and these under-appreciated resources are the keys to long term success.

Compounding Returns (on Capital and Experience)

So, just like financial instruments, these other life assets have value that can and should be leveraged. One’s whole life with all its experiences, whether positive or not, can be treated as a portfolio of assets. And when we use the knowledge or insight gained in future efforts, we are leveraging those assets.

In this context, the time and intentional effort we put into improving ourselves through education or training, for example, is also part of our (self) investment strategy. And the output and results of those efforts — the successes and failures — should be considered returns on investment.

Monitor Manage Woman Mobile

Developing Good Investment Habits (and Plans)

All of this is to say that we really are learning to manage assets and make investment decisions before we even have our first job. Most of us just don’t know it. If you are wondering how to become a successful investor in the stock market or real estate, look at how you invest your time and energy into the rest of your life.

The habits of successful investors can be seen not just in their investment ideas, capital allocation and risk management decisions. They manage their time, energy and other precious resources just as carefully as they do their investment capital.

Good Investment Habit Decide Commit

What makes a good investor is that they have clear goals, understand how to leverage available capital and assets, have a workable strategy and plan, and then maintain the consistency and discipline to execute on it.

Create an Investment Plan

Beginning investors might not realize it but they have more capital and investing experience than they know. The challenge is to translate good life skills and habits into a good investment strategy. The basic steps to do this are actually quite simple.

First, a quick note on personal responsibility… Success in anything comes from both taking action and taking ownership over the results. We can get value in the ideas and opinions of others but we must make our own financial decisions. We wouldn’t let someone make major life choices for us. Nor should we blindly follow someone else’s investment advice.

Create Investment Plan Chart Blur

Start with Easy and Repeatable

In the last twenty years there has been an explosion of innovation in the financial industry, which makes it easier and cheaper than ever to get started. New apps, tools and services abound. And the internet puts a wealth of investing information and know-how at your fingertips.

Beginning investors should keep things simple, but the most important thing a first-time investor must do is start. The second most important thing is to continue (learning, contributing, investing, reinvesting).

If you are new to investing (or just feel like you are) then consider this simple goal: start monthly contributions to an investment account now. This month. Just start.

Start Easy Repeatable Man Laptop

For the average 20-something in the US today, putting aside less than 5% of their salary would mean contributing $100 per month to a retirement or investment account.

For others that might be hard and that’s OK! Make it $50 or $25 per month. There are great investment tools out there for every need. The most important thing to do is start.

Diversify in all Dimensions

Excess is bad. Too much gaming, too much ice cream, too much weed..and too much of the “good things” is also bad. Many people work (or work out) too much. It’s true in life and also with an investment portfolio. This is why successful investors seek to diversify their portfolio.

Putting all your money (even if it’s a small amount) into one company stock is risky. This is why many people start with an investment fund (such as an ETF or index fund). These funds make it easy to invest in a group or basket of stocks instead of just one.

Diversify Finance App

This means that no one part of your investment mix will impact your overall portfolio value too much. Funds like this are an easy and common choice for new investors, and this is a good start.

But diversification should be considered in multiple dimensions. Diversification is part of risk management and, as one grows their portfolio (and progresses in life), it is important to adjust our defenses to meet changing needs.

Monitor and Adjust. Repeat.

When you get on a bike and start peddling do you put your head down and stare at the road under your feet? How far would you get if you never looked up at where you were going? This is why we must periodically monitor and review our investment plan and portfolio.

Most kinds of investing involve a degree of trust. Trust in the fund manager of that ETF, in the CEO of a company or just trust in “the system” and the almighty dollar. But, just as you go over your paycheck details and review your credit card bill, it is up to you to monitor and track your investment portfolio.

Monitor Adjust Measure Twice

If you are like most folks you will be contributing and investing each month. Especially if you are starting earlier in life, the evidence shows that the best thing you can do is buy and hold, and let the market lift your portfolio with it through the years.

But this does not mean you should ignore your investments. Even if you chose to take the simple path of investing in a single index fund, you should make a point of tracking your investments.

As the market moves up and down, read up on why. Make it as mechanical as paying your bills. Take 10 minutes away from doom scrolling each month, check your portfolio and learn something new about personal finance.

Investment Planning for Life

It is impossible for me or anyone to tell you precisely what you need to do to plan for your financial future. Everyone has different goals and needs, so there are as many types of investment plans as there are people.

But, regardless, you are not starting from zero. You can set simple goals and take that all-important first step and start. And then you will do what you have done all your life: learn and acquire new knowledge and skills.

Investment Planning for Life Man Sunset

You can treat your financial education as you do your investment account — adding a bit each month. The compounding effects of this are just as powerful as with reinvested interest and earnings.

Personal Investment Plan Scenario

Let’s consider what this might look like in real life….

You started with a simple index fund, contributing $100 per month; you chose the S&P 500 because those were the ‘big US companies you’ve heard of’. You checked every month when you added more money and your account was growing, but you didn’t do much more.

But then you were thinking about some tech companies that make products you use and love, and realized they weren’t in that S&P 500 fund. You still didn’t want to buy individual stocks so you found another ETF that has those stocks and some other companies in the same industries, which you felt had a good future. For the next few months you split your $100 investments between the two funds.

After speaking with a friend, you read about risk management and started using allocation rules. A few articles and searches later and you decided to keep a little of your monthly contribution in cash and use it to buy individual stocks.

You still diversified across 5 or 10 different companies because your brokerage app lets you get fractional shares, small portions of each. It’s still a small percentage of your total investment account so you are limiting your risk.

Over time, you started thinking about other investment options. You bought a little crypto a while back and started looking at some gold funds, to add more diversification. You are also learning about real estate and changed your budget to start saving for a down payment.

Then recently you remembered how it began with just a very simple investment plan. And taking the first step.

The key takeaway here should be that you started small and kept it simple. Then you slowly and steadily learned, and took small, careful steps as you progressed.

Investment Planning Woman Mobile Laptop

And that critical, first step in how to create an investment plan is actually to just start investing. Most of us were not taught about finances or investing in school, or even by our parents. The good news is that most people learn best by doing.

So, DO IT. Begin. Start making your investment plan now by investing. And then do it again next month. And then again.

by Jason Paul Hendricks

Jason’s experience ranges from bootstrapped solo startups to corporate roles with publicly traded Fortune 500 companies. On Digital Downshift he shares what he has learned over three decades of entrepreneurship and career-hood, both his mistakes and successes. With an obsession for business building and continuous learning, Jason seeks to apply these lessons (and help others do the same) to achieve more happiness and security.

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