7 Rules of Investing: How to Craft an Investment Plan

7 Rules of Investing: How to Craft an Investment Plan

March 14, 2024

Investing can be overwhelming and confusing, even for someone who has some experience. There are a myriad of ways to invest: the stock market, retirement accounts, real estate, and cryptocurrency, just to name a few. Regardless of what, or how, you choose to invest, there are some essential rules of investing wisely. In this article we list the rules we as a team utilize in our investment process. Following these 7 rules can help you get started—or continue—on the path to financial success.

1. Prepare Your Finances

Before you begin investing, you want to feel confident that your financial foundation is solid. This includes paying off high-interest debt and having a small emergency fund of easily accessible liquid money available. If you begin investing before you’re prepared, it can backfire down the road.

2. Know Your Purpose

Once you’re financially prepared to invest, it’s time to set a purpose. Your reason for investing could be to save for retirement, put aside money for college tuition, or save for a down payment on a home. Knowing your purpose makes the journey more meaningful.  

Along with identifying your objective, you want to determine when you’ll need your money back. This guides you in deciding which type of investment to make since some are better for the long term while others are better for shorter periods. 

3. Determine Your Investment Amount

Now it’s time to determine how much you will invest. You don’t need to make substantial investments, but get in the habit of making contributions regularly. It can be as little as $100 a month going up to thousands of dollars per month depending on what you can afford. 

4. Educate Yourself

Investing isn’t a sprint, it’s a marathon. Most people don’t get rich overnight, so you don’t have to make spur-of-the-moment decisions about your investments. Instead, take the time to educate yourself about the choices you’re making. Also, don’t rely on someone else to tell you everything about investing. Even with a financial advisor giving you advice, you should have a general idea of how investing works. Reading books is a great way to jump-start the learning process. 

We recommend these books as a great resource: 

  • The 5 Years Before You Retire: Retirement Planning When You Need It the Most (Updated Edition) by Emily Guy Birken 
  • Berkshire Hathaway Letters to Shareholdersby Warren Buffett

5. Start Early

Since investing is a marathon, time is on your side. The longer you allow your money to sit in an investment account, the more money you usually make. Don’t delay investing once you’re financially prepared. Take maximum advantage of employer-offered retirement plans as well as individual retirement plans and education savings plans. These have tax benefits in addition to the savings benefit. Once you educate yourself on investing, get started. Your future self will thank you!

6. Diversify Your Investments

Have you ever heard of the phrase “Don’t put all your eggs in one basket”? Well, that’s especially true when investing. Since investing is never a guarantee, you want to invest in various formats and companies to reduce your risk of loss. That way, if a company goes down or an industry tanks, you don’t lose all your investment funds at once. 

7. Consult With a Financial Professional 

Whether you are just getting started or are a seasoned investor, it’s always best to have a plan. These essential rules of investing can help you lay a solid foundation when creating your investment strategy. While education is a good start, a knowledgeable advisor can help you create the best investment strategy for your unique financial status. 

At Wilkinson Wealth Management, our team serves a range of clients from young professionals to retirees, and everyone in between. If you’re ready to take the next step in your investment strategy, we would love to hear from you! Reach out to us at 434-202-2521 or use our Contact Us page to schedule an appointment.

About Tom 

Tom Antonelli is a Senior Wealth Advisor / Financial Advisor at Wilkinson Wealth Management. He joined our team in 2019, is a Chartered Financial Analyst®, and has over 40 years of experience in investment and portfolio management. He believes that an individualized, custom investment process coordinated with the clients’ overall financial planning and wealth goals creates an excellent opportunity for success.

Tom is married and resides in Lynchburg, Virginia. He enjoys traveling with his family and friends, especially when it involves his favorite outdoor activities of skiing, tennis, and mountain biking.