Yuri Clav. How to create a feasible investment plan | Business

1. The beginning of the journey: Determine your goal and current level

The first step in the investment journey is to clearly define your current level and your desired goals. There are five basic living standards that describe different stages of financial health and set priorities and goals for long-term financial stability.

The first level is survival.

At this stage, it is too early to talk about investing, because the main goal is to accumulate a reserve of funds that will help survive in the event of unforeseen circumstances and the loss of the main source of income. At this stage, you should focus on accumulating a reserve for at least 3-5 months to ensure minimum financial security. Such reserve accumulation is also called a financial cushion.

The second level is security.

At this stage, a financial reserve has already been accumulated, reaching 3-5 months of living expenses, and free capital of at least 1000 euros is available. The focus is now on building capital for the future and investing to ensure continued financial stability.

The third level is welfare.

Once this level is reached, there is already a reserve of 6-12 months of living expenses and about 10,000 euros of free capital. At this stage, it is important to focus on investment tools that provide passive income and long-term wealth growth.

The fourth level is affluence.

It already has a reserve that exceeds 12 months of living expenses and a capital of 100,000 euros. The purpose of investments at this stage is to ensure that the return on investment covers all necessary expenses, providing even greater financial stability.

The fifth level is financial freedom.

At this stage, the reserve is replaced by constant cash flows from investments, and the accumulated capital amounts to about 1,000,000 euros. The main goal is to achieve such a stream of passive income that not only covers all needs, but also doubles them, providing complete financial freedom and independence.

In order to clearly determine which of the five levels of living you are in, it is important to assess your available funds reserve, the length of time you could survive without additional income, and the capital you have accumulated. For example, if you have enough funds to get you through three months and you’re just starting to stockpile, you’re probably at level one, the survival stage. After this assessment, you can determine what steps to take next: If you are in the first tier, your goal should be to focus on building reserves up to 3-5 months of funds.

Each level provides clear guidelines and priorities that help you set a specific, achievable goal to move to a higher financial stage. This systematic approach helps structure your investment plan, ensuring you’re taking steps toward long-term financial freedom and stability.

2. Determination of risk tolerance: How to understand your risk limits?

Investing always involves some risk, so it’s important to know your personal risk tolerance. This will help you make decisions that are in line with your financial goals and comfort level.

The basic formula: age and risk

One of the simplest formulas to help you determine your maximum risk level is this: 100% – your age = maximum risk portion of the portfolio.

For example, if you are 35 years old, then 65% of your portfolio could be allocated to riskier investments such as stocks. The rest could be invested in lower-risk instruments, such as bonds or cash alternatives, or investments secured by real estate.

Individual approach to risk: subjective factors

While the above formula is a good starting point, it’s important to also consider subjective factors that may change your risk tolerance:

How much loss are you willing to tolerate? If losing 5% of your portfolio doesn’t stress you out, then you can allocate no more than 20% of your maximum risk portfolio to higher risk investments. According to the above example, if you are 35 and your maximum risky portfolio is 65%, then only 20% of this part can be allocated to riskier investments. 65*20/100= 13% of the total active portfolio.

Risk can be diversified by spreading investments between different asset classes. For example, if you’re not prepared to lose more than 10%, a portion of your portfolio can be allocated to conservative investments such as bonds or real estate.

Based on your risk tolerance, you can decide what percentage of your portfolio will be lower-risk investments, such as government bonds or index funds. Medium risks – shares, real estate, investment funds with a diversified portfolio, crowdfunding. And high risk, such as startups, cryptocurrencies, options, derivatives.

3. Investment speed bands: How to choose the right investment speed

Each investor must choose an investment pace that is acceptable to him. In The Highway to a Million, author MJ Demarco identifies three main investing “lanes” that suit different goals and lifestyles. These bars help you understand what investment pace and strategy to choose to achieve the desired result.

Slow lane: life today

The slow lane describes those who live in the present and do not have long-term investment goals. In this band, people usually focus on daily needs and pay minimal attention to future financial goals. Most often, the funds are spent on consumption or used to pay for consumer credits. No active investment plan. If investments are made, it is in small amounts without a clear goal.

This option is for those who do not want to take on greater financial obligations and only care about their current financial needs. However, in the long run, this band can lead to a lack of financial security and failure to secure a retirement or other long-term goal.

Middle lane: balance between work and investment

The middle lane is for those who have a long-term vision and want to balance their current needs with their future financial goals. In this band, the goal is to retire with dignity after accumulating enough funds. Here, a person invests regularly in stocks, mutual funds, pension funds, aiming for long-term growth.

It is a strategy based on systematic investing, often through automatic periodic contributions to pension and investment funds. For those who want to secure their future but don’t want to take too much risk. This strategy requires consistency and a long-term perspective, but can be slower than active investing.

The Expressway: The Fast Track to Financial Freedom

The highway lane describes those who seek to achieve financial freedom as quickly as possible through the use of various investment and business tools. The main goal is to create passive income that covers all living needs and rapidly increase wealth.

Actively seeks to increase capital through business projects, real estate, options, bonds and other financial instruments. In this strategy, additional tools (leverages) are actively used to achieve the goal – good loans, teams of employees, partners and advisors. For ambitious people, ready to take riskier decisions and invest time and effort. This is the fastest lane, but also the most risky lane.

The investment path is personal, in each case one must first assess one’s financial situation, goals and desired standard of living before choosing an investment “lane” and determining the level of risk. A properly balanced plan will help you not only to protect your capital, but also to grow it efficiently.

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More information and tickets can be found on the forum on the website.