How to plan an investment budget?

Financial stability and growth require a smart approach. Planning your investment budget is a key step to financial success and achieving your dreams. Let’s figure out how to calculate the investment budget and where to start. 

Financial airbag 

Before you start investing, make sure you have an airbag. This is a financial reserve that will allow you to deal with unexpected situations such as job loss or medical expenses.

Determine the amount you would like to have as an airbag, usually between three and six months of spending. Create a separate account and regularly save money to it so that you are prepared for unforeseen circumstances.

It is recommended to form a safety airbag and a portfolio of securities in stages: first accumulate the necessary cushion, then start investing. Otherwise, in the event of force majeure, you are left without full insurance. For example, the airbag has not yet been accumulated, and the portfolio of securities has gone negative.

Investing with incomplete airbag 

It is psychologically comfortable to start investing when the airbag is already in place. But if you are ready to take risks, then you can act according to the indicated scheme: save 10% for a pillow, and invest 20%. In this case, it will be possible to accumulate a bag the size of three salaries in 2.5 years.

At the same time, it is necessary to purchase liquid instruments in your investment portfolio – those that carry a large intraday trading volume. These should be first-tier securities – then there will always be buyers in the order book, and if necessary, you can quickly sell the asset.

It also makes sense to start with conservative instruments, such as bonds, and move on to more risky ones as the cushion accumulates. Conservative instruments are less volatile. They draw down less often and not so much, which means that if you urgently cash them out, you will return the capital with minimal losses.

The decision to invest with an incomplete airbag depends on your financial goals and your level of comfort with risk. Remember that investments carry risks but can offer high returns. It is important to strike a balance between keeping enough money on the airbag and being able to make a profit on the investment.

Diversification of the investment portfolio 

Investment diversity is a strategy that allows you to allocate your capital among different asset classes such as stocks, bonds, real estate and commodities. This helps reduce risks and increase potential returns. When one sector can go badly, another can flourish, allowing you to smooth out fluctuations and protect your portfolio.

The breakdown of the portfolio is made according to different criteria. Here are some of them:

• by instruments: for example, bonds, stocks, gold, commodities, real estate
• by types of bonds: state, municipal, corporate, they can also be with a variable or constant coupon, etc.
• by duration of bonds: long-term — from 10 years, medium-term — from a year to 5-10 years, short-term — up to a year, ultra-short — up to 3 months.

Tips for planning your investment budget 

Define your financial goals and timelines

For example, how much profit do you want to get from your investment and for how long. This will help you choose the most suitable investment tool and draw up an action plan.

Calculate your income and expenses

Create a budget that includes your income and expenses. This will help determine how much you can set aside for investing and how much risk you can afford.

Explore different investment tools

Choose the tool that best suits your financial goals and timing. 

Break your budget into chunks

Allocate portions of the budget to different investment instruments. This will help reduce risks and maximize profits. 

Don’t let your emotions control your decisions 

Investing can trigger emotional reactions, especially during market ups and downs. However, making decisions based on emotions often leads to unfortunate outcomes. Try to remain objective and rational based on facts and data analysis. 

Watch the market

Watch the changes in the economic situation — read the news, expert blogs, watch expert videos (for example, on the LBC Capital Income Fund, LLC channel). This will help you make the right decisions and respond to changes in a timely manner. 

Don’t forget taxes 

Take into account the taxes that you will have to pay on the profits from investments. Optimize your investments to reduce your tax burden. 

Invest in education 

Never stop learning and growing in finance and investing. The more you know about various investment strategies, tools and markets, the better you will be able to make informed decisions. Invest time and resources in learning and gaining new knowledge. 

Do not panic 

Investing is a long-term strategy. Don’t panic about short-term market changes and don’t make hasty decisions. Trust your plan and strategy. 

Invest in what you know and understand 

Before investing in a certain asset, study it, understand its principles and market trends. This will help you make more informed decisions and reduce your risk. 

Use the help of professionals 

If you find it difficult to understand investment issues or you do not have sufficient experience, contact financial advisers or asset managers. They will help you develop an investment strategy based on your financial goals and risk level. 

Conclusion

Budgeting for investments is a necessary step to achieve financial freedom. Remember to consider your goals, risks, and changes in the market. Diversify your portfolio and don’t panic about short-term changes. By following these tips, you will be able to plan your investment budget effectively and maximize your return.

Don’t be afraid to take a step into the world of investing, but be prepared for possible setbacks as well. Remember that investing is a long term process and you must be prepared for market fluctuations and temporary losses.

At LBC Capital Income Fund, LLC we help our partners find the best investment options. We invest in real estate, which provides a stable and guaranteed income of 8%. Sign up for a consultation and we will evaluate your investment opportunities.