Investment Plan Template

Creating Your Personalized Investment Plan for Inherited Assets

Inheriting assets, whether cash, property, or securities, can provide a significant financial boost. But it's crucial to have a clear plan for how to manage and grow that inheritance over time. Creating an investment plan tailored to your unique circumstances is an essential step.

An investment plan serves as a roadmap, defining your goals, assessing your risk tolerance, and outlining your investment strategy. By thoughtfully allocating your inherited assets, you can work towards securing your financial future and building long-term wealth.

Use this template as a guide to develop your own personalized investment plan. It will walk you through the key decisions to make and factors to consider as you put your inherited assets to work.

Defining Your Investment Goals and Timeline

Start by clarifying what you hope to achieve with your investments. Are you aiming for long-term growth to fund your retirement? Seeking to generate income to supplement your lifestyle? Building a nest egg for a major purchase? Defining your objectives will shape all your subsequent planning decisions.

Consider questions like:

• What are my short-term (1-5 years), medium-term (6-10 years) and long-term (10+ years) financial goals?
• How much money will I need to achieve each goal?
• What is my investment timeframe for each goal?

For example, your goals might include:

• Retire in 15 years with a nest egg of $1.2 million
• Generate $40,000 per year in investment income
• Save $100,000 for a second home down payment in 7 years

Attach target dollar amounts and timelines to each goal to make them specific and measurable. Your investment plan will be designed to help you work towards these milestones.

Assessing Your Risk Tolerance

Your comfort level with risk is a key factor in your investment plan. Risk tolerance is your ability and willingness to weather market ups and downs in pursuit of higher potential returns. Generally, a portfolio with more stocks offers greater return potential but also carries a higher risk of short-term losses.

To determine your risk tolerance, consider:

• Your timeframe - Can you wait out short-term volatility to pursue long-term gains?
• Your experience - Have you weathered market downturns before? How did you react?
• Your need for the money - Is this money you can afford to lose?

You might identify as a:

• Conservative investor (cannot tolerate losses, prefer stable investments)
• Moderate investor (some market volatility okay in pursuit of returns)
• Aggressive investor (willing to take on significant risk for potentially higher returns)

Understanding your risk profile will help you choose appropriate investments. For many people, risk tolerance decreases as they near their goal timeline and have less time to recover from losses.

Designing a Diversified Portfolio

Armed with your goals, timeline, and risk tolerance, you can now design your investment portfolio. The core principle is diversification - spreading your money across different asset classes to manage risk while pursuing growth.

A diversified portfolio typically includes a mix of:

• Stocks - Ownership stakes in companies that offer higher return potential but also volatility
• Bonds - Loans to companies or governments that provide stable income but lower returns
• Cash - Savings accounts or money market funds for liquidity and stability

Your ideal mix depends on your unique investor profile. A common approach is:

• Conservative: 30% stocks, 50% bonds, 20% cash
• Moderate: 60% stocks, 35% bonds, 5% cash
• Aggressive: 80% stocks, 15% bonds, 5% cash

You can further diversify within each asset class, such as by company size, industry, or geography for stocks, and by issuer and maturity for bonds.

Mutual funds and exchange-traded funds (ETFs) offer pre-diversified baskets of securities that can simplify portfolio construction.

Exploring Different Investment Vehicles

With your target asset mix in mind, you can explore the universe of investment options. Common choices include:

• Individual stocks and bonds - You select specific securities to invest in. Requires the most research and monitoring. Best for larger portfolios and experienced investors.

• Mutual funds - Professionally-managed portfolios that pool money from many investors to buy a basket of securities. Offer broad diversification and a range of strategies. Often have minimum investments and transaction fees.

• Exchange-traded funds (ETFs) - Similar to mutual funds but trade on stock exchanges. Generally have lower costs and investment minimums. Offer wide variety of asset classes and strategies.

• Real estate - Ownership of physical property or shares in real estate investment trusts (REITs). Can provide steady income and long-term appreciation. May require significant capital, expertise, and hands-on management.

Consider your personal interests, expertise, and how much time you want to spend managing your investments. Many investors choose funds for the core of their portfolio and select individual securities around the edges.

Establishing a Schedule for Monitoring and Rebalancing

Once you've put your plan into action, establish a schedule to periodically review your portfolio. Aim to check in at least once per year or when your goals or circumstances significantly change.

During your review, ask:

• Is my portfolio performing as expected, net of taxes and fees?
• Have my goals or timeline changed?
• Is my portfolio still aligned with my target asset allocation?

Market movements may cause your asset mix to drift from its original target. For example, if stocks have been performing well, you may end up with a portfolio that has become riskier than intended.

Rebalancing is the process of selling investments that have exceeded their target and buying more of those that have fallen below, in order to maintain your strategic asset allocation. Many experts recommend rebalancing when an asset class has moved more than 5-10% away from your target.

Getting Professional Financial Advice

Investing an inheritance can be complex, both financially and emotionally. Don't hesitate to seek professional guidance to ensure your investment plan is designed to serve your best interests.

Sources of financial advice include:

• Financial planners - Help develop comprehensive plans covering investments, retirement, taxes, estate, and insurance. Ensure they are fee-only fiduciaries.

• Investment advisors - Provide focused investment management, often for a percentage of assets managed. Research their background and investment philosophy.

• Robo-advisors - Automated online investment management services. Low-cost option for basic portfolio management based on your goals and risk profile.

• Attorneys and accountants - Consult them for estate planning, tax efficiency, and real estate matters related to your inheritance.

Even with professional advice, make sure you understand where your money is invested and why. Stay engaged and ask questions until you are comfortable with your plan.

Putting Your Inherited Assets Investment Plan Into Action

With your plan established, it's time to put your inherited assets to work. Take your time and make deliberate decisions. Start by:

1. Opening necessary investment accounts (remember to update beneficiaries!)
2. Consolidating inherited and existing accounts as needed
3. Making initial investments according to your target asset allocation
4. Setting up automatic investments to maintain your strategic mix over time
5. Scheduling your first portfolio review within the year

Remember, investing is a long-term process. Stick to your plan, but be prepared to make adjustments as your life evolves. By being thoughtful and proactive with your inheritance, you can honor your benefactor and lay the groundwork for long-term financial security.