Investment Planning is among the main reasons of monetary Planning. The prospect of achieving your financial targets depends upon how good you intend your investment funds.
What’s Investment Planning?
Investment Planning is the procedure of placing your monies/funds into proper investment vehicles according to your financial targets and also the time period to attain them. Just how much risk you really can afford to consider can also be an essential point here.
We normally give more importance to RETURNS than goals. Example – You receive a bonus of Rs 1 Lakh then the initial question which might spring to mind is – ” Can One get 10% returns if the 1 lakh is committed to XYZ product?”
Rather it ought to be ‘for which goal must i invest this Rs 1 Lakh?’
Investment Planning Process:
So, how must i plan the investments? What is the better approach?
Identify your Financial Targets: These goals could be purchasing a house, planning kid’s greater education etc., You are able to sort them as High, Medium and occasional priority goals.
Evaluate just how much risk you really can afford : You are the very best judge on your own to select just how much risk you are able to undertake your investment funds. There are specific psychometric tests that you can use to determine your high risk capacity. The danger profiles could be Aggressive, Medium and Conservative.
Identify time period for the goals: You are able to divide the goals in line with the duration as Short, Medium and Lengthy term goals.
Identify lending options: Now in line with the above points, find out the lending options which suit your needs.
Investment planning – Details to ponder upon:
Dynamic process – Investment planning and Financial planning is really a continuous process. This isn’t a 1 time event. Your objectives and economic profile may keep altering. Accordingly, accommodate your investment funds.
Realistic – Attempt to set the aim amounts inside a realistic way. Consider various factors such as your future earnings growth, job stability, savings rate etc., The goals ought to be attainable.
Taxation – While identifying investment products, you might check if they’re tax efficient or otherwise. But don’t purchase them to save taxes. Consider buying them only when they meet your needs. Also, understand the tax adjusted returns for every product.
Re-balancing & Re-allocation – Not just your priorities change during a period of time but the financial market conditions. Tweak neglect the portfolios as reported by the altering conditions.
Diversification – Identify investments over the asset classes. Spread your risk. Don’t purchase one product category only.
I have faith that a lot of us chase just the returns and unnecessarily complicate the financial lives. Don’t simply chase returns but chase your objectives too.