How to Make an Investment Plan: The Ultimate Guide

There are many different reasons and ways in which people invest their money. Read on to learn about investment plans and how to create one.

January 27, 2023
How to Make an Investment Plan: The Ultimate Guide

Whether you’re working on financial planning for retirement or just beginning down a new career path, learning how to invest your earnings can be a key part of financial wellness. When you invest, you’re no longer working for money—your money works for you instead. Using your hard-earned money to make more money—without really lifting a finger—is at the heart of investing.

Despite the importance of creating investment plans and investing, only 58% of Americans have money invested in stocks—either directly or through their IRA or 401(k).1 A slightly larger number of Americans have invested in real estate, with around 65% of households owning their home.2 Still, these figures would be much closer to 100% in an ideal world.

That’s because investing is one of the best family financial planning strategies. But before you open an account or call up your financial advisor, it’s wise to have an investment strategy plan.

Step 1: Set Realistic Investment Goals

First, it’s helpful to know why you want to invest. Are you hoping to build enough wealth to retire comfortably? Are you working on college financial planning? Once you have a financial goal in mind, you can work backward to make it a reality.

Here are some questions to ask yourself when setting investment goals:

  • Where do you see yourself in 10 years? 20? 30?
  • When do you want to start pulling from your investments?
  • How much do you (realistically) want to earn?
  • How much are you willing to invest?
  • How much are you willing to lose?
  • What are your overarching life goals?

These questions should help you identify a few goals for the future. However, it’s not enough to simply say, “I want to retire and live comfortably.” Anytime you set goals (financial or otherwise), it’s worth following the SMART framework. If you’re not familiar with SMART goal-setting, the gist is that all objectives should be:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-bound

To put SMART goal-setting into practice, you might take an objective like “I want to retire comfortably” and change it to, “I want to set aside $750,000 by the time I retire at age 67.”

Step 2: Look at Your Current Finances

The next part of any investment plan should involve some self-reflection and number-crunching. After all, you need to examine your current financial situation to determine how much you can afford to invest.

Start by assessing your finances, either independently or by seeking investment advice from a financial advisor. Making a monthly budget is an excellent way to lay out your options.

To create a budget, begin with your total monthly income. From there, write out a chart or spreadsheet and calculate the average for the following expenses:

  • Housing (mortgage payments or rent)
  • Utilities (electricity, gas, water, internet, and phone bills)
  • Car payments, insurance, and gas
  • Home and car maintenance
  • Groceries
  • Entertainment
  • Short-term savings (emergency fund)

Subtract your expenses and emergency fund from your monthly income, and you’ll be left with your disposable income. That figure should be a decent indication of how much you can invest each month. Depending on your long-term or short-term financial goals, you may want to earmark some or all of those funds for investing. Either way, knowing where you stand financially is essential.

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Step 3: Identify Your Risk Tolerance

Next, you’ll want to determine your risk tolerance. A financial advisor can work to help you understand your tolerance to risk, but it’s worth having a general idea of your preferences before you set a meeting.

When investing, your risk tolerance will point you toward the stocks, funds, or assets you should invest in. Of course, all investments carry some risk—but some options are riskier than others.

Broadly speaking, the levels of risk tolerance are divided into three categories:3

  • Conservative – If you shudder at the thought of your investment portfolio trending downward, you’re probably a conservative investor. Conservative investing tends to involve putting money into low-risk or no-risk options such as bank certificates of deposit (CDs), Treasury bonds, or high-yield savings accounts.
  • Moderate – If you can tolerate some risk in exchange for modest growth, you’re probably a moderate investor. Moderate investment portfolios often include a mix of low-risk bonds and riskier stocks.
  • Aggressive – If the phrase “more risk, more reward” speaks to you, you’re likely an aggressive investor. An aggressive investment portfolio typically focuses on higher-risk stocks that can deliver impressive results—but more investment risk can also lead to a significant loss of money. 

Another factor to consider when determining personal risk tolerance is your time horizon—the date you want to start pulling from your investments. For most people, this is their expected retirement date. Ultimately, the longer your time horizon, the more you can “afford” to take risks. The reason is simple: Historically, markets have trended upward in the long run, even if significant dips happen along the way.

Step 4: Start (Or Continue) Saving Money

By now, your investment plan is starting to take shape. However, to put your plan in motion, you’ll need the cash to invest. With that in mind, most investing begins with saving.

Contrary to popular belief, saving is different from investing. To make sure we’re on the same page, let’s quickly look at the differences between these two terms:

  • Saving – Saving involves putting cash away for the future. With super-low interest rates and practically no risk, saving ensures that the same money you put in is there when you take it out—no more, no less.
  • Investing – Investing involves putting money into a specific fund or portfolio and hoping it will grow over time.

With that said, you don’t need a huge lump sum of savings in your bank account to start investing. When we say “save money to invest,” we mean “track spending and start cutting back on expenses to have more leftover each month.”

From there, you can invest that disposable income. Putting even a small amount of money each month into your investments is better than not investing at all. And if you already have some money set aside, consider investing it as soon as possible. Otherwise, inflation only makes  every dollar you save worth less each year.4

Step 5: Choose Your Investments

Finally, it’s time to invest your money. While you can tackle all the preceding steps on your own, you’ll likely benefit from working with a financial advisor from here on out.

Still, before you make an appointment, you can spend some time researching which investment options align with your goals. Some of the investment vehicles to consider include:

  • Certificates of deposit (CDs)
  • Corporate bonds
  • Dividend stocks
  • Exchange-traded funds (ETFs)
  • Government bonds
  • High-yield savings accounts
  • Index funds
  • Individual stocks
  • Money market funds
  • Mutual funds
  • Real estate
  • 401(k) plans

You'll be much more informed and prepared when you research these options ahead of your appointment with an advisor. From there, your financial advisor can account for your preferences, risk tolerance, time horizon, and financial situation to help you decide how and when to invest.

During this process, consider asking your advisor for an investment policy statement (IPS). An IPS formally outlines your goals, risk tolerance, and the makeup of your portfolio—in other words, it’s a useful document to have.

Lastly, it’s worth noting that working with a financial advisor is recommended, but it isn’t strictly necessary. These days, more and more self-serve options are available. You may be able to invest in stocks or bonds yourself through your bank, your employer, or even an app on your phone. However, you should only invest if you understand the potential risk—and partnering with an advisor is the easiest way to do this.

Step 6: Review Your Plan Frequently

Investing is a relatively hands-off process, but your work doesn’t end when you buy a few government bonds. For the best results (and the best understanding of your finances), you’ll want to set aside time to go over your investment plan at regular intervals.

Every few months, you should take time individually or with your financial advisor—to look over your investments. Taking a more active investment approach can quickly rebalance your portfolio when it's underperforming, change strategies, or raise or lower your contributions as needed. 

Ultimately, don’t be afraid to make adjustments to your plan—just be sure to seek professional advice before you do.

Tap Into the Investment You Already Have with Truehold

While “investing” often conjures up images of government bond certificates and bar graphs, there’s another form of investment that can often be left out of the picture: Real estate. If you own your home, you’ve already made an investment—quite possibly the biggest one you’ll ever make.

Because you’re living in your home, you might think that the money you’ve invested in it is tied up and untouchable. But there’s another option.

If you’re ready to unlock the value of your home, Truehold’s Sale-Leaseback option may be right for you. Rather than sell your home and move elsewhere, you can receive your home’s equity and keep living in it. With more liquidity, you can invest your hard-earned cash elsewhere—without worrying about relocating or dealing with home maintenance.

To find out more, get in touch with one of our advisors. We can help review your goals, finances, and credit score to see if Truehold is right for you.


1. Gallup. What Percentage of Americans Own Stock?

2. Pew Research Center. Amid a pandemic and a recession, Americans go on a near-record homebuying spree.

3. Investopedia. What Is Risk Tolerance, and Why Does It Matter?

4. CNBC. Do you want to know how inflation impacts your savings? The ‘rule of 72’ may help.

Nicolas Cepeda headshot
Written by
Nicolas Cepeda
Financial Analyst at Truehold - A Specialist in Real Estate Finance
Nicolas Cepeda specializes in financial analysis and strategic portfolio management, with a keen focus on innovative residential real estate solutions. He leverages this expertise to cover pertinent topics in the real estate and financial sectors.
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Truehold's blog is committed to delivering timely and pertinent insights in real estate and finance, purely for educational and informational purposes. Crafted by experts, our content is thoroughly reviewed to guarantee its accuracy and dependability. Although designed to enlighten and engage, our articles are not intended as financial advice and should not be the sole basis for financial decisions. Our stringent editorial practices ensure the integrity of our content, empowering our readers with valuable knowledge.

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