What is an investment priorities plan?

An investment plan is one of the cornerstones of good financial planning. Without one, it’s easy to drift – to chase performance, react to the headlines, or do nothing at all.

There are several ways to think about investment planning. Some people focus on risk levels and asset types, while others look at which regions or sectors might perform best. But perhaps the most effective approach to investment planning begins not with markets at all, but with yourself – your goals and what matters to you and your family.

It’s known as an investment priorities plan (or IPP) – a practical way to align your investment priorities with your life goals.

How an investment priorities plan works 

An IPP begins with writing down your financial goals – from immediate needs like building an emergency fund to long-term goals, like being able to retire comfortably. 

Once you know what you’ll need and when you’ll need it, you can divide your wealth into different pots and match each one to the right investment strategy.

Your short-term priorities should focus on stability and quick access to cash. Your medium-term goals can take on some calculated risk. And your long-term priorities – where time is on your side – can be left to ride through the occasional market downturn and period of slower economic development, aiming for stronger growth.

The benefits of an investment priorities plan

The main benefit of an IPP is that it keeps your investment strategy grounded in your personal goals, rather than being swayed by speculative, short-term market noise.

It allows you to work towards several goals at once, like saving for your child’s school fees while also investing for your own retirement. Each part of the pot is invested with its own time horizon in mind, so you can pursue multiple goals without them competing. 

An IPP also connects two key functions: financial planning, which looks at how your money supports you through the years, with investment management, which focuses on how that money is grown and protected. An IPP bridges both areas and keeps them in harmony. If your goals change, so does your investment plan. 

Investment planning for short-term priorities

When we say short term, we generally mean less than five years. When a goal is less than five years away, it’s more important that your money is accessible and secure – there when you need it and not exposed to short-term market swings. 

This often means keeping funds in cash-based accounts, money market funds or short-dated government bonds (gilts). While these options don’t always keep up with inflation over the long term, their short-term nature means erosion of value should be limited.

If you’ve been investing towards a goal that’s getting closer, your IPP should gradually de-risk those funds. Shifting money from higher-risk investments and into safer, more accessible ones is part of the natural rebalancing of an investment priorities plan.

Investment planning for medium-term priorities

Medium-term goals – typically five to ten years away – might include funding private school and taking the next step on the property ladder. 

It’s reasonable to take on more investment risk here, aiming to keep pace with inflation while achieving some growth. A mix of equities and bonds can work well. 

Within equities, your investment manager might focus on lower volatility companies and sectors that are resilient through the economic cycle. This includes businesses with little debt, strong balance sheets, and products that people rely on, day in and day out. 

In periods of higher interest rates, high-quality fixed income could be a bigger part of the mix. Government bonds (gilts) or investment-grade corporate bonds lock up your funds but keep them safe and offer steady income.

Investment planning for long-term priorities

Longer time frames give you room to take more investment risk, which means a portfolio mainly allocated to equities.

This is the asset class with the best long-term track record of growing wealth and outpacing inflation – which even at moderate levels can halve the value of cash over two decades. Stocks can be volatile in the short-term, but if you let them run and you can accept the temporary drawdowns, they are your best bet to achieve long-term goals.

Within that equity allocation, your investment manager might favour funds holding companies with genuine pricing power – businesses able to raise prices in line with inflation without losing customers. That ability allows them to absorb rising costs and protect margins. 

Build your investment priorities plan

Our wealth management services can help you set your goals, structure your wealth around them, and design an investment approach that grows with you.