Create your investment plan

Step 4 to investing is creating a plan that will help your reach your financial goals.

4 steps to creating your plan

1. Set specific and realistic goals

For example, instead of saying you want to have enough money to retire comfortably, think about how much money you’ll need. Your specific goal may be to save $500,000 by the time you’re 65.

2. Calculate how much you need to save each month

If you need to save $500,000 by the time you’re 65, how much will you need to save each month? Decide if that’s a realistic amount for you to set aside each month. If not, you may need to adjust your goals.

3. Choose your investment strategy

If you’re saving for long-termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition goals, you might choose more aggressive, higher-risk investments. If your goals are short term, you might choose lower-risk, conservative investments. Or you might want to take a more balanced approach.

4. Develop an investment policy statement

Create an investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition policy statement to guide your investment decisions. If you have an adviser, your investment policy statement will outline the rules you want your adviser to follow for your portfolioPortfolio All the different investments that an individual or organization holds. May include stocks, bonds and mutual funds.+ read full definition.

Your investment policy statement should:

  • specify your investment goals and objectives,
  • describe the strategies that will help you meet your objectives,
  • describe your return expectations and time horizonTime horizon The length of time that you plan to hold an investment before you sell it. This may be a brief period of time or span as long as decades, depending on your financial goals.+ read full definition,
  • include detailed information about how much risk you’re willing to take,
  • include guidelines on the types of investments that make up your portfolio, and how accessible your money needs to be, and
  • specify how your portfolio will be monitored, and when or why it should be rebalanced.

Key point

6 steps to investing:

  1. Set your goals
  2. Know your investing personality
  3. Create your plan
  4. Choose your asset mixAsset mix The percentage distribution of assets in a portfolio among the three major asset classes: cash and cash equivalents, fixed income and equities.+ read full definition
  5. Choose your investments
  6. Track your progress

Take action

If your goal is retirement, use this RRSP calculator to help you create your plan.

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