If you are aiming to improve your financial life, smart investment can help you significantly. Investing in the right places can provide you with excess funds and thus fulfil your dreams. But to invest in the right places you need proper planning. Today there many options in the market and most of you must be having various investment vehicles in your portfolio. Thus, it becomes even more important to plan them depending on risks, returns, and other such factors.
What does investing planning mean?
The process of identifying financial goals and backing them with a plan is called investment planning. Investment planning forms the foundation of financial planning. The first step of the process is to identify goals and objectives, these are then to be matched with the financial resources you own. There are various investment vehicle options available in the market, you need to find out the best suitable option depending on your available funds. Some of the common investment plan options are cash, bonds, equity and property.
How to do right investment planning?
- Start saving early – The mantra to have good savings is ‘the sooner, the better’. We suggest you start saving as soon as you get a job, this will help to save for a longer period and be ready to face unforeseen emergencies and retirement. Decide the amount from the salary you want to save and start to invest it in a good saving product. There are many saving plans that allow you to start saving from a very little amount so that even if your salary isn’t high, you can afford it.
- Set goals – When we talk of setting goals, we mean deciding the purpose of investment, if it is a short term goal or something for the future. Short term goals are financial needs like saving for a vacation, purchase of gadget, etc. This requires savings for around 12 months.
There are medium term goals like savings to meet payment of home loans, these are usually for a term of 3-4 years. Then there are long term goals like supporting your child’s education or marriage.
- Analyse your risk appetite – Analysing your risk appetite is one of the crucial steps as it can determine the effect of loss you may suffer. For example, if you have just started earning your risk appetite is less pertaining to a small amount of fund. You must consider investing in lesser risk-oriented investment vehicles such as Fixed Deposits.
Whereas, if you have enough corpus already then, your risk appetite can be higher, and you must consider investing in risk-oriented investing vehicles such as mutual funds and index stocks. Before investing, you must go through all the risks associated with the investment plan you choose.
- Develop a savings portfolio – The next step is to create a strong savings portfolio. It means having a diversified portfolio that has different investment vehicles like bonds, gold, stocks, fixed deposits, real estate, etc.
- Research about options available – This is one vital step, which may sound a bit tedious but shouldn’t be skipped at any cost. There are various investment vehicles, and they all vary in terms of rate of returns and risk involved. To be assured that you do not regret or suffer any major losses, you must research all the options available in the market thoroughly. Today availability of information on websites has made research and comparison of different plans as easy as online shopping.
- Allocate assets – It is necessary to allocate your assets in such a manner that they achieve maximum diversification. You can assign a percentage to different assets depending on the volatility of the portfolio. The asset allocation must be done keeping in mind the financial status and goals of the investor.
- Build a strong portfolio – After successfully completing the whole planning process, it important to make sure that the implementation happens in sync with the plan. Not just that, but you must consider monitoring the performance of the plan at least quarterly to know what’s working for you and what’s not. Also, remember to review your plan once a year and make necessary changes wherever required.
And this is how you plan your investments to achieve desired results.