Develop an investing plan

Your game plan

'Plan your life, live your plan.' Yes, it's a cliché. But when it comes to investing your money, it makes a lot of sense to have a plan.

Putting a plan together involves developing strategies and choosing the right investments. The work you've already done on goals, timeframes and risk will help to shape your investment plan.

Steps to prepare

Be clear about your current finances

The starting point is getting an accurate picture of your current financial situation. Work out what you own, what you owe and your income and expenditure. For more information see starting with an adviser, as you are following the same process that an adviser would.

Confirm your goals

Goals will become the backbone of your investment plan. Write them down, with a timeframe for each goal. See our section on goals and risk tolerance for more information.

Understand risk

Understand how much risk you want to take to achieve those goals by reading our article on risk and return. Your plan will be the pathway you take to achieve your goals. The course you take will be shaped by where you are now and where you want to get to.

See how much you know about the risks of different types of investments.

Investing challenge

Planning for a short-term goal (1-3 years)

In our case study short term saving, Gayle wanted to save a big enough deposit to buy a house within 2 years. Here are some strategies that someone with a short-term goal, like Gayle, could consider:

Smart tip

Once you know how much you can afford to save, organise a direct payment to a high interest savings account - either from your pay or from your bank account after each pay day.

  • Pay off credit cards and personal loans first to free up additional cash to save
  • Save a fixed amount each pay period - do a budget to ensure your money is going towards the important things
  • Choose a cash investment with good security and easy access such as a high-interest savings account or term deposit

Work out how long it will take to meet your savings targets.

Savings goals calculator

Planning for medium-term goals (4-6 years)

David has just bought a new car for the first time in his life. Over the last 20 years he's bought a few cars that have ended up costing him a lot of money. David has decided he will buy a new car every 5 years, about when the new car warranty expires. He expects the changeover cost to be $25,000. David has decided to:

  • Invest in a managed fund that allows him to get started with just $1,000
  • Choose a balanced portfolio, as he wants better returns than a bank savings account without being too aggressive
  • Make weekly contributions of $100 to the fund

David has planned carefully and knows that in about five years time his investment will be enough to buy a new car. There will also be enough to pay any capital gains tax he incurs as a result of the investment. If markets are down at the time, he can wait until they pick up before buying the car.

Planning for long-term goals (7+ years)

In our case study capital growth, Dominic wants to retire in 15 years. The most tax-effective strategy available to him is to grow his super. Dominic has his own business so he uses the profits to pump up the balance of his super fund.

Smart tip

If you are considering an appropriate investment choice for your super, think about how long you have until retirement. If you cannot access your super for more than 10 years, consider investing in a growth investment option and turn an average retirement into a good one.

You can join the super fund of your choice and make extra contributions as it can be the best way to invest:

  • High and middle-income earners can benefit from making contributions out of pre-tax earnings - this is known as salary sacrifice
  • Lower-income earners can benefit from making after-tax contributions that attract government co-contributions
  • A balanced or growth option will grow your money faster over the long term, provided you can handle your balance taking a dive every now and then
  • If you are saving for a pre-retirement goal you will need to invest outside super - a balanced or growth option in a low cost managed fund would be a suitable investment

Planning for income in retirement

In our case study regular income, Dave and Brenda are self-funded retirees. They depend on investment income to cover all their living expenses. They use a mix of growth investments (shares and property) to grow their capital and provide a regular tax-effective income. They also have a mix of bonds and a term deposit for secure regular income. 

A good financial plan will outline your needs and goals and set out the best strategies for achieving them. Once you've developed your investment plan, your next challenge will be to choose your investments.

Related links

Last updated: 18 Oct 2017