#154. 2009 Financial Plan

How To Plan And Grow Your Investment In 2009

Since it is the new year, isn't it a good time to plan for something? Whether it's your new year resolution, or something more important like your investment plan. Investment is like going for a holiday. You got to have a plan. You have to know where you want to take your investment to. And to have this investment plan, you would need to draw up a map. An investment roadmap to help you stay on course and grow your money.

A Great Story

Some years ago, I was working as a mortgage sales person at a big bank. There was this lady that year in and year out, she would win the Best Salesperson Award. She was asked to reveal her secret.

She admitted that in the beginning she was a poor sales person. Every month, she fails to meet her sales quota. Then one day, things change. She discover a way to be the best.

Now, in sales, every 1st of the month your sales quota is reset to zero. Then along the month, whenever you bring in some sales, your amount begins to grow. When it comes to the mid of the month, you supposedly should have achieved half of your sales quota. If you have not, you would work hard and start making more calls to achieve your quota before the month is out.

But the above is not the way if you want to be the best sales person.

The super sales lady shared with us: Always plan for the following month.

She explained further that you have to call your prospects and clients this month for the following month's sales. Don't expect that if you call them today, you will get the sales within the same month. It hardly happens.

She planned who she wanted to call this month. And then deliver the sales results the following month. That means she planned one month ahead. She was able to know roughly by the end of this month whether she could achieve her sales quota for the following month. If she could not, she would then still have time to catch up in the first two weeks of the following month. She was always ahead of the game compared to others.

How To Plan Your Investment Growth

So now you have read the above story, how can you apply what you have learnt? If you want to see your investment grow, you got to first have a plan.

The way I plan is simple. Let's say I target to grow my wealth by 20% this year, then I got to look for the best investment tool to make that kind of return. And to break it down into smaller achievable target, I can further divide 20% into 12 months. That means, on average we need to make a return of about 1.7% to achieve our yearly target.

Now, if you have read on my gold investment, you would have seen that I have made 11.9% return within less than 3 months of investment.

In this case, if you are able to achieve a good return, you ought to set your yearly target higher. Perhaps 20% is too low. Maybe let's target higher and aim for a growth of 50% in our investment this year. That means, an investment that starts with RM20,000 will see it become RM30,000 at the end of this year. Now, this is reminding me of my work in that big bank. The boss will always set your target higher when you are able to achieve your target.

OK, now 50% return in this year means you got to achieve about 4.2% per month. Doesn't it look more achievable when you break it down to 12 monthly targets? Now if I have achieved 11.9%, that means I am ahead by a few months. I just need to continue to make 4.2% each month now to achieve my target of 50%.

Another Way

Another way to look at and plan your investment growth is to have a target sum. Say you want to go for a holiday at the end of the year and it will cost your RM10,000 for your whole family; and you also would like to have RM10,000 extra from your investment. That means you want to make RM20,000 this year. This time we are looking at the sum amount instead of percentage.

So to achieve RM20,000 return, you should check how much money you have for investment. This money will also include all the money that you are going to get throughout this year either from your employment or other work that you do. That means the money that comes later in the year will add to your capital for investment and help you grow your investment even faster.

Once you have the amount that you think you can set aside for investment, you got to work out the percentage of growth that this RM20,000 is going to be for you. For example, if you have RM20,000 for investment and you want to make another RM20,000 from your initial investment, that means that is a 100% return. That also means you want to double up your money. Maybe 100% looks like a lot. But think again, maybe in the mid of the year you might get a bonus from your employment for the sum of RM10,000. That would mean you have RM30,000 for investment from the mid of the year onwards. That would mean your percentage will change. RM20,000 of RM30,000 is 67%. So you got to divide 67% by the remaining 6 months of the year. That's about 11.2% each month for the remaining 6 months.

Stay Focused

Staying focused in your target is important. However, don't be emotional when you don't achieve the targeted return. Some months things may not work out. Revise your plan accordingly if things do not go your way. Remember to know when to take your profit even when your target is not met. Remember that the market is bigger than your target. You need to yield to the market and follow the flow. Take profit when it is time.

Market will go up and down. When it goes up, make the most out of it.

When the market goes down, look for other investment to achieve your target. For example, when gold market is down, probably the Public Index Fund is going up. Place your money with the winner. Do not stick to just one kind of investment. Best to find two different investments that move in opposite direction. That way when one is down, you still can use the other to achieve your target. A good example is US Dollars and Gold. They move in opposite directions.

Just like the super sales lady that target different customers when her regular customers could not help her achieved her target, we should constantly look for different investment products to achieve our target.

Happy planning. Tell us how you make your 2009 financial plan and investment plan.