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If your idea of a successful investing strategy begins with picking the right investments, you’re doing it the hard way. Smart investors start with creating a plan based on their goals, time horizon and risk tolerance, among other factors.

“Most people in America do not have a good plan,” says Robert Mann, a financial advisor at Advisor’s Capital Investments. “It is just like flying an airplane to a destination. For every one degree you are off course, over [every] 60 miles you will [get] one mile away from your destination.” Before you spend your life savings chasing the next hot stock, follow these four steps to create a sound investment plan.

Step 1: Define Your Goals

If you know you’re investing for retirement more than 30 years out, you will be — or should be — less likely to react if the stock market tanks on any given day. Thirty years is plenty of time to recover those losses. If, on the other hand, you were investing just to make money, that short-term blip could prompt you to make a bad investment choice.

“Goals dictate your risk,” says Brad Bernstein, senior vice president at UBS (UBS). Earmarking each investment account towards a specific goal will help you determine how those accounts are invested.

Your goals will roughly fall into one of three groups: short-term goals, which you want to meet in a year or less; intermediate goals, which are one to three years out; and long-term goals, which are at least ten years off. If retirement falls into your long-term bucket and you are looking at a career lasting decades, you’ll be more aggressive with those investments than with the ones you hope to use a year from now to buy a new home.

Step 2: Determine Your Risk Tolerance

The next step in creating a sound investment plan is figuring out how much risk you can stand. With longer life expectancies, Americans now need to plan to live in retirement for 30 years or more — and should invest accordingly. “You have to remember this isn’t our grandparents’ retirement strategy any more,” says Jeff Reeves, author of “The Frugal Investor’s Guide to Finding Great Stocks” and editor at Washington-based InvestorPlace.com. “If you get too conservative and live to 95, you’ll run out of money.”

Don’t let the risk pendulum swing too far the other direction, though. In an analysis of the risk tolerance and portfolios of more than 30,000 investors, investment firm SigFig found that investors across all age groups are underweighted in fixed-income investments. Only 3 percent of investors in their 50s and 60s — and barely 3.6 percent of investors in their 40s — had an optimal bond portfolio. For help determining an appropriate asset allocation based on your risk tolerance, age and investment horizon, among other factors, try SigFig’s risk questionnaire. The tool’s recommendation will look like this:

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Step 3: Review Your Accounts to Optimize Investments

Now that you’ve set your goals and understand your risk tolerance, it’s time to review your accounts. “You want to make sure you are using the right vehicles,” says Bernstein. For instance, are you using a tax-advantaged college savings plan like a 529? Are you getting your full 401(k) match from your employer? Do you need to take more risk to meet your long-term goals? Or are you taking too much risk, tying up a chunk of your worth in a single stock? Make sure you are diversified across multiple asset classes, but within each asset class, as well.

Step 4: Keep Fees in Check

It’s no secret that high fees can directly impact investment performance. Mann says that many investors own mutual funds with expense ratios as high as 2 percent, and if they go with an adviser, a 1 percent fee of assets on top of that. Overpaying for your investments is bad enough: research shows those who pay more have lower returns. “Don’t go after those complex pricey investments expecting a big return,” says Reeves. “Not only do you not get it, but you still pay all the fees.”

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