How to create an investment plan

02 July 2021

3 minute read

Before you invest, it’s helpful to have a clear plan of what you are investing for, and how you might achieve your goals. Here are some tips.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.

What you’ll learn:

  • Why it’s important to consider your investment goals.
  • How to decide on the level of risk you want to take.
  • Why it’s important to create a diversified portfolio.

A simple investment plan can serve as a useful guide to building long-term wealth, but it can be tricky knowing where to start.

Here, we take a look at some key considerations that may help you decide where to invest, and develop a long-term strategy, depending on your personal goals.

Bear in mind, though, that whatever your investment plan, there are no guarantees of making gains. The value of your investments can fall and you may get back less than you paid in.

Consider your investment goals

As a starting point, consider what you want to get out of your investments. For example, is your aim to achieve long-term growth, or would you like to receive an income? This will usually depend on the reasons why you’re investing. For example, you might be focused on investing for long-term growth to pay university fees, or, alternatively, you may be investing in order to supplement your income in retirement.

Discover three ways to invest for income

You may receive interest or dividends paid out from your investments, as a regular income. However, if your goal is growth, you will be hoping for a long-term gain and therefore may decide to reinvest any income generated.

Learn more about investing for growth

Think about your investment timeline

Considering your goals should help clarify your investment timeline. You may not need the money for several decades, or you may need to achieve your goal within a shorter timeframe, perhaps in five to 10 years.

However long you have until you need the money, you should ideally aim to hold your investments for at least five years to give them the best possible chance of riding out any market downturns, and potentially giving them time to recover from any setbacks.

Find out more about staying invested

How much risk are you willing to take?

Any investment involves risk, but you can control to an extent how much risk you take on, with the timeframe you have until you need the money playing an important part in this decision.

Generally, the younger you are, and the longer you have until you need the money, the greater the risk you can take, as your money has time to potentially ride out any market downturns or loss from a particular investment.

Your approach to risk will help clarify your asset allocation, which is how much you hold in different investments, such as shares, bonds, cash, commodities, and property.

You have a huge choice of investments, and make sure you understand the risks before investing. Fixed-income investments, for example, such as government bonds, are typically considered less risky than share investments.

Understand about risk and return

The basics of your investment plan

Creating a basic investment plan involves setting out what you want to achieve from investing, and how much risk you are willing to take on. At this stage, you are focusing on these considerations to act as a starting point from which to consider asset allocation, or how much you will hold in so-called lower risk assets, such as cash, or bonds, compared to those that are considered higher risk, such as shares.

Once you have the basics down, you can start thinking about the actual investments you might want to choose.

Create a diversified portfolio

A golden rule of any investing plan is that you should spread your money across a range of different asset classes. If one or more rises in value, you will make gains, but conversely, if they fall, the hope is that gains from other investments may help offset any losses. This means holding some of your investments in all the main asset classes – cash, fixed interest, property and company shares. In theory, this should help manage the overall volatility of your portfolio.

Learn more about why diversification matters

Investing in funds rather than individual shares is one way that may help to diversify your investments. Funds are made up of a mix of investments – for example, a UK equity fund may hold a wide range of shares of companies from different industry sectors, with a manager who makes the investment decisions on your behalf. Investing in funds also make it easier to simply invest in a variety of assets, such as fixed income, and non-UK investments.

It’s possible to invest in a single fund that invests across a particularly diversified portfolio. For example, Barclays offers Ready-made Investments as a simple solution to remove the complexity from investing, with a range of funds that can be matched to your risk profile and financial goals. These funds are made up of a mix of investments across different asset classes, with global exposure. Please remember that we're not recommending Ready-made Investments as being suitable for you based on your personal circumstances, nor do we offer personal financial advice.

If you’re not sure where to invest, seek professional advice.

Find out about how Ready-made Investments work

Ways to invest

Always remember that investments can fall in value. You may get back less than you invest.

Smart Investor

To choose and manage your own investments from a range of funds, shares, ETFs and bonds, get started today by simply opening up an Investment (Stocks & Shares) ISA, Investment Account or SIPP Account with Smart Investor.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

Investment ISA

A simple and tax efficient way to start investing

Boost your savings by investing up to £20,000 in our Investment (Stocks & Shares) ISA per year completely tax-free.

If you've used your ISA allowance this tax year, you can open a regular Investment Account or transfer in another ISA to us.2

Your first steps

Once you’re confident your finances are in order, you need to start planning your investments. Get started by setting financial goals. Are you investing for growth? Or income? We'll help you answer these questions and more in this section.

Principles of investing

If you’re new to investing, knowing where to start can be a daunting task. Here, we guide you through your investment journey, from what to consider before you start, the different types of investment account, which might suit you, and the various asset classes. You’ll also learn why it’s important to focus on the long-term as an investor, and create a diversified portfolio which includes a range of different investments.