Before putting your money in an attractive investment option, ask yourself: Will this really further my overarching financial plans, or am I just investing impulsively and hoping for the best? An indiscriminate haphazard approach to financial planning can lead to a chaotic portfolio in which significant gains with one asset might be eaten up completely by losses incurred with another investment option. Likewise, if you decide to put all of your money into one industry area because you have a good feeling about it, you're exposing yourself to many risks you could have avoided by diversifying.
Investment planning is important both to long-term and short-term investors.
That's why as an investor, you should look into investment planning as a way to reach your goals efficiently. You can use the following guidelines to develop a strategy before investing.
What Is Your Current Financial Situation?
Before you even start thinking about investing in the stock market, in hedge funds, mutual funds, or any of the other investment options available to you, you first need to assess your overall financial situation.
- How much money do you have saved?
- What's your regular income?
- What are your regular expenditures?
- How much additional money do you need for emergencies?
- The bottom line: How much money do you have to invest?
Assessing your situation is important to understand what you have to work with: How much money can you invest without impacting your day-to-day life significantly? If you're paying off a mortgage or you need money to pay the rent, you should take this into consideration.
One conservative and relatively safe way to assess your finances is to assume that all of the money you invest will be invested in highly illiquid assets. Naturally, you don't have to invest in this manner. Still, this thought experiment allows you to check how much money you can safely invest without causing yourself problems when it comes to your financial obligations.
If you're willing to take a more hands-on approach with your investments, you may also want to take note of how much money you can put into liquid and illiquid assets. This allows you to allocate more money for investing (potentially leading to higher returns) as long as you make sure you're able to withdraw enough equity to be able to react to unforeseen financial obligations such as medical bills. CARL's quants, for example, don't have a lock-up period, which allows you to invest your money and withdraw it on a monthly basis should you suddenly find yourself in need of cash.
Setting the Parameters of Your Investment Plan
Once you have a clear understanding of your financial standing, you should think about three crucial aspects that will shape your investment plan:
- Financial goals
- Risk tolerance
- Time horizon
Essentially, you should think about what you want to achieve with your investment plan, what risks you're willing to take, and how quickly you want to get there. These three parameters are intertwined. For example, you'll typically need to have a greater risk tolerance if your goal is to make as much money as possible as quickly as possible. Meanwhile, investing in low-risk opportunities over a long time might provide you with steady financial growth above the inflation rate – a good strategy in case your main goal is to prevent your money from losing value, and you don't expect higher returns than what's necessary to achieve this.
Finding Investment Options That Fit With Your Strategy
Once you've determined your financial resources and goals and how you want to reach those goals, it's time to find investment options that fit the bill. Are you looking for maximum returns? Then hedge funds or risky ventures like private equity are for you. Are you focused more on exposing yourself to a lower level of risk? Then bonds and stocks may be ideal for you.
In the next stage of your investment plan, you should take a look at what's available on the market, from individual assets such as stocks and bonds to mutual funds, ETFs, and hedge funds. You may also use asset allocation to diversify your portfolio – by investing in high-risk, high-yield opportunities and several low-risk opportunities, for example.
The most important part of financial planning is determining the potential returns and the risk level of the investment options you have and checking them against the levels you've set yourself as a goal. This isn't always easy, as alternative investments, in particular, require you to collect these data points by yourself. One exception to this rule is CARL: With our app, you will have access to all of the important facts about our quantitative hedge funds in the palm of your hand. The app can give you in-depth data such as historical performance analyses or a funds' annualized volatility, which is an important measure of investment risk. You also get a real-time portfolio overview, which is very helpful when it comes to sticking to your investment plans, checking on your assets, and making adjustments whenever necessary.
Actively Manage Your Investment Portfolio
After you've determined which assets to invest in and you put your money on the line, you shouldn't take your hands off the wheel and go into autopilot. If you want to stay within the parameters you've set for yourself, you should look into your investments every once in a while. When it comes to mutual funds, ETFs, and hedge funds, in particular, you should keep an eye on how they invest your money. If a fund you're investing in suddenly starts taking on more risk than you're comfortable with, you should be on top of it so that you can counteract this development.
To help you keep an eye on your investments, CARL provides you with a real-time portfolio overview – and you can withdraw money on a monthly basis, with no lock-up periods. This allows you to react quickly if you think one of our quants is no longer the investment vehicle you thought when planning your investment.
If you need help planning your investments, you might want to seek out the services of a freelance investment adviser or a firm that offers investment advice. Some of these may even provide active portfolio management. This means they will help you draw up your investment plan, and they may advise you on which specific assets you might want to invest in to reach your goals. A portfolio manager can even offer to actively do all of the investment work for you, effectively controlling all the daily activities regarding your investment portfolio.
Investment advisers don't work for free, though, so you should keep the cost of hiring a professional adviser in mind. The fees of a financial advisor may outweigh the benefits they offer. CARL, for example, can't give you any investment advice, but we can give you unprecedented access to quantitative hedge funds and make investing as easy as possible for you. So while you may want to pay a professional investment adviser for investment planning services, you might not need active portfolio management – the CARL app offers you all the tools you need to manage your investment in our quants.
All investments should be well-thought-out, whether it's long-term or short-term. That's because only investment strategies that are planned in advance can help you reach your goals. CARL can't help you draw up a plan, but the CARL app can help you achieve your goals once your financial plan is in place.
Our sophisticated quant hedge funds have 15%+ targeted returns at a minimum investment of only $20,000, so they're an excellent vehicle for any budget. And since our quants have no lock-up periods, your investment is highly liquid, allowing you to withdraw if you need cash quickly – an important factor in investment planning. Whether you're looking for a way to diversify your portfolio with hedge funds or if you want to benefit from the power of quants, CARL is the best tool at your disposal!