The Investment Planning Process

Our discussion of investment planning will set out the basic principles of our recommended process. This process is meant to be as simple and understandable as possible. But, because it is a process, it assumes that you will go through certain preliminary steps that focus on your personal situation, goals, and investment preferences before you move forward to focus on selecting appropriate investments for you.

Many successful business owners are basically impatient people: they want the responsibility of success in their own hands, and they want to succeed now. When it comes to looking at a process for building an investment plan, they may balk, thinking: "Why the big deal? I just want to make some money in the market! I know plenty of people who do this—even Uncle George. That's it! I'll just ask Uncle George how he does it."

To such business owner/investors, we have a few words of caution. First, even if Uncle George is a successful investor, he may not be a good investment coach. He may have mastered all of the skills necessary to successfully invest in a particular market, but may never have mentally listed and categorized everything he does to pick a good investment. If this is so, he may unintentionally give you an incomplete picture of how he succeeds.

Second, more than a few of the Uncle Georges of the world are like habitual gamblers in one respect: they are much more likely to talk about their investment successes than their failures. Accepting the advice of such a person may be dangerous to your wealth: Uncle George has a way of picking good and bad investments, but you won't know about the bad investments until you follow his advice!

So, we recommend picking investments in a manner that is consistent with the investment planning process that we will describe. This planning process will have a dual focus: on you and on your potential investments. The act of choosing the right investment certainly is of great importance. Because of this, before you select an investment, we urge you to spend some time looking at yourself, by considering these topics:

• Identifying your current holdings and liabilities
• Identifying your goals
• Identifying your personal risk tolerance
• Implementing and monitoring the investment plan