Before you invest a dime, it is imperative that you come up with a plan for your money. A written investment plan, known as an Investment Policy Statement (IPS), can be helpful in getting organized.
An IPS should address the purpose of your investment, such as;
- paying for a child’s college education or funding your retirement.
- This information will determine the amount of return you want on your investment and how soon you’ll need it.
- The IPS will also address your risk tolerance.
- Investors that need their money in the short term should shy away from volatile investments that tend to fluctuate up and down. If your goals are more long term, you can enjoy the rewards of riskier investments while having time to recover from the inevitable downturns in the market.
- There are several types of investment products available and each has its own set of benefits, risks and fees.