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Investment Plan: Tips & Advice for Short and Long Term Returns

Creating and following a sound investment plan is the best way to achieve your financial goals. To help you format your investment plan, we here at Moneyfarm have published this blog post.

🤔 What is a short term investment plan?An investment plan that is up to 5 years
❓ What are some of the short-term investment options?Savings accounts, fixed deposits, treasury bills, short-term bonds, etc
💭 What is a long term investment plan?An investment plan that is over 5 years
ℹ️ What are some of the long-term investment options?Stocks and shares, ISAs, bonds, UK gilt, SIPPs, etc

What is an investment plan?

An investment plan can help you to meet specific goals in life, such as:

  • Ensuring your kids get the best education possible
  • Saving a deposit to get your foot on the property ladder
  • Going on that cruise you’ve always dreamed about
  • Retiring early
  • Ensuring you can have a comfortable standard of living when you retire

These are just a few of the reasons. There are many more depending on personal circumstances and life goals. You need to create the best investment plan possible according to your means to meet them. Once you’ve created an initial plan, you’ll need to keep revisiting it from time to time to update it in accordance with your current circumstances.

Sorting your short and long-term financial needs

You can only create an investment plan by first identifying your short vs long financial needs. One of the key things to having the best investment plan possible is to make sure you can stick to it. If you are forced to keep digging into your investment to pay unexpected bills or because you want to treat yourself, you will be defeating the object of the exercise.

When setting money aside for short-term needs, many people resort to easy-access savings accounts or things like NS&I premium bonds. You probably aren’t overly worried about the interest, which is just as well. Interest on easy-access cash savings vehicles is pretty low anyway, and in the case of premium bonds, it is non-existent.

It’s what you do with any disposable income after you’ve covered your living and emergency expenses that we now need to address.

The different types of investments open to you

There is a wide range of funds and investment vehicles open to you. They include:

  • Bonds
  • ETFS
  • Equities and equity funds
  • Index funds
  • Investment funds
  • REITs
  • SIPPs
  • Trust funds.

Some overlap and there are more besides, but as you can see, there is a wide range of choices. Of course, the best investment options depend on your circumstances and the level of risk you are prepared to take – for yes, you must bear in mind; investing always carries an element of risk.

Once you’ve completed your financial planning, next comes your investment plan. As mentioned earlier, even the best investment plan needs periodic reviewing, so you should consider constructing a 5-year and 10-year savings plans to cover your short- and long-term investment goals. Before you begin, you might like to check out this “How to invest money” guide on the Moneyfarm website.

Tips on long and short-term investments

Here are a few tips to help you make the best decisions about selecting your short- and long-term investment vehicles.

Tips for your short-term investment plan

  • First, before looking at any investment options, ensure that your accounts are in order. Also, ensure you have cleared as many debts as possible and have a “rainy day” fund set aside for emergencies.
  • Choose less risky investments such as bond ETFs, cash management accounts, high-yield savings accounts, money market funds, short-term bonds, and stocks and shares.
  • Make sure the vehicle you choose has good liquidity. In other words, ensure you can change the assets into cash quickly.
  • Choose a vehicle that has low transaction and management fees.

Tips for your long-term investment plan

  • Choose an investment strategy and keep to it.
  • Keep your focus on the long-term view – don’t allow knee-jerk reactions to the stock market’s volatility to take over.
  • Build a diversified investment portfolio.
  • Be aware of current tax rules and take full advantage of “tax-wrappers.”

How to begin investing and what to invest in, in 2023

Before you start investing, you need to do some in-depth research. Having done so, you may conclude that the best way to get started is to choose a financial advisor to talk to. If you are happy with the outcome of your research, choose an online platform that guides you through opening an account and selecting an investment plan.

Future investment performance is never 100% predictable, hence the risk. According to csimarket.com, some sectors that have performed well in 2022 include energy (up 77.01% year to date), Utilities (up 4.86%), and Consumer – non-cyclical (up 2.72%).

The Russian invasion of Ukraine with the far-reaching ripples on the energy markets has been well publicised, and many investors are now looking at ESG investments and alternative energy in particular.

Now, let’s take a quick look at the one indispensable investment plan – your retirement savings plan.

The importance of having a good retirement investment plan

Sound financial retirement planning is essential. It’s something that is recognised the world over. Americans have IRA investment accounts outside their national state pensions, and Canadians have RRSPs. The closest equivalent we have here in the UK is the stocks and shares ISA.

You will likely need more than your state pension to give you the lifestyle you wish for in your retirement years. Having recognised that, the UK government made it a legal obligation for employers to offer their employees a workplace pension, most of which rely on asset allocations in the stock market.

Not satisfied that their state and workplace pensions will suffice, many people also make additional investments in private pensions or SIP investment schemes. Otherwise known as a SIPP or self-invested pension plan, this type of pension fund investment is widely adopted. However, you must never forget that any investment carries risk. Fund values can decrease and increase, but don’t get caught out.

Regrettably, there are several scams around. Make sure you only take retirement advice or enter into financial retirement planning with a financial adviser you know you can trust 100%.

Final thoughts

Whenever you invest your money, it will always carry an element of risk. So you need to identify your investor profile and invest accordingly. If you are taking advice from a firm of independent financial planners, ensure they are FCA approved and that any investments you are planning are covered under the FSCS (Financial Services Compensation Scheme).

FAQ

What is an investment plan?

An investment plan is a set of financial objectives and an investment approach to achieving them. People often shy away from investing for fear of having no idea what to invest in. Investing without a strategic plan could lead to losing some or all investments.

How do I make a good investment plan?

To have a good investment plan, there are several things to consider. They include having a review of your finances to determine your debts and assets. Create a budget by reviewing your income and expenses. Set your financial goals to help you determine the type of investment that will fit each goal.

Understand the type of investment risk and return associated with each various type of asset class and your risk tolerance to each investment. Do your due diligence and research your investment options to find the right fit. Build your portfolio according to your financial goals, timeframe, and risk tolerance. Finally, keep track of your investments regularly to see their performances.

What are the types of investments to include in your investment plans?

The types of investments to include in your investment plan are equities, debt, commodities, and mutual funds. Equities include stocks and shares, while debt instruments include government bonds and corporate bonds. Commodities are gold, silver, copper, crude oil, agricultural products and more. Mutual funds include index funds, stocks and bond funds, money market funds, funds of funds (FoF), etc.

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*Capital at risk. Tax treatment depends on your individual circumstances and may be subject to change in the future.